>> i think... i think it's important that whatever is done restores a degree-- and we can't do it overnight, but restores to a degree people's faith in the fact that their government can work. now, i also think fairness is important and i think getting rid of promises that you can't keep is important. i don't think we should cut spending dramatically now i don't think that what i'm talking about on taxes solves the deficit gap at all. but i think fairness is important. i think having a sensible long-term plan is important and i think having it be believable is terribly important because people don't believe these out year things generally congress. they see too much of what's happened. >> rose: is part of this... being in the position that you're in you want to start a conversation about the realit of taxes. >> sure. >> rose: and the reality of balance and fairness. >> yeah. i think the american people deserve to be educated on what fellows like me are paying taxes, for example. but they have to be educated on the reality of future promises.

they have to be educated on the necessity of running significant deficits when the economy is weak. i mean, there's a lot of things in terms of economic educaon. but this is the time todo it. if we don't do it now, if these 12 members who have been appointed now to the supercommittee, if they come back with something that's a lot of mush, you know, the american public's had it. >> rose: and what happens to the country? >> it isn't good. it isn't good. the country will still ce through, believe me. we'll rise to whatever occasion demands eventually. but we are wasting so much in the way of potential output, in terms of the opportunities for people that we ought to get on with it. i mean, the job of government is to govern. >> rose: warren buffett for the hour. next. funding for charlie rose was provided by the following:

every story needs a hero we can all root for. who beats the odds and comes out on top. but this isn't just a hollywd storyline. it's happening every day, all across america. every time a storefront opens. or the midnight oil is burned. or when someone chases a dream, not just a dollar. they are small business owners. so if you wanna root for a real hero, support small business. shop small. additional funding provided by these funders: captioning sponsored by rose communications from our studios in new york city, this is charlie rose.

>> rose: we are in omaha, nebraska, for a conversation with warren buffett. like so many people i got up this morning in new york and read the "new york times" editorial page and i found the following column written by him. it is an op-ed which i called "stop coding the superrich." here are some excerpts. "our leaders have asked for shared sacrifice, but when they did the asking, they spared me and my megarich friends who learned what pain they were expecting, they, too, were left untoo muched while the poor and middle-class fight for us in afghanistan and while most americans struggle to make ends meet, the megarich continue to get our extraordinary tax breaks." buffett speaks directly to the newly designated 12-member supercommittee of congress ouining the stakes for the country.

he spoke to spending as well as taxes saying: then he turned to his theme of taxes on the rich. his argument is specific. for those making more than one million dollars-- they're 236, 883 of them in 2009, i would raise rates immediately on taxable income in excess of one million dollars including, of course, dividends and capital gains. d for those who make ten million or more-- there were 8,274 in 2009-- i would suggest an additional increase in rates. so there it is. at a time of great political debate about taxes and spending,

one of the richest people in the world looks at his country and people like him should pay more taxes. warren buffett joins know talk about his column, the u.s. economy, the global economy, the deficit and the debt and what he thinks we should do about taxes. i am pleased to have another conversation with my friend warren buffett. welcome. >> good see you, charlie. >> rose: all right. this is not a new idea. >> no, it's not a new idea. i've done this three times in terms of checking in my office and ery time i come out to be the low taxpayer but this year i got a little more upset than usual. >> rose: so you decided you wanted to write and express what central idea? >> well, we've been hearing about shared sacrifice. and believe me, the people out there know what they're talking about on that. i mean, there is sacrifice going on all over this country and we're talking about people makingacrices about the promises that have been made to them in the future on some entitlements. so i decided to look around and

see if any of my friends were being affected by shared sacrifice and they, like me, are enjoying these extremely low t rates and the very high percentage of these cases the very rich are paying less in the way of taxes than the people that clean their offices. >> rose: between a ten-year period, the rich... the rate they were paying has gone down and more of them have much larger taxable income. >> yeah, well, the i.r.s. publishes atistics. they've done it since 1992. about the top 400 earners in the country-- it's not the same every ar. those earners have had their income since 1992 quintuple. now, i don't know very many of our listeners who'd had their earnings quintuple. during that same period, their tax rates have gone down from 29 and a fraction percent overall to 21 and a fraction percent. >> rose:er also in favor of spending cuts. >> we have to, charlie. we are a very, very, very rich country. we've got close to $48,000 of g.d.p. per capita.

if you told me when i was a kid that that would happen i would have thought you lost your marbles. but we had... even a rich country has limits and we have promised things we can't deliver on and that's a mistake. but we're also in the process undertaxing the very rich. what i propose, incidentally, would not touch the taxes of 99.7%. i'm talking about .03% of the american public. but the people from a million dollars up i think should be asked to share in a little sacrifice we're being asked to share in. >> rose: what's the formula you're looking? >> well, what really gives the low rates to the very rich like me is the low tax on dividends and capital gains. if you take these rich people that the i.r.s. singles out, from 1992, they've almost had a tenfold increase in capital gains. they've had a ten-fold increase in dividends. and those are taxed at 15% and there's no payroll tax on it. now, the payroll tax accounts

for almost as much revenue to the government as the income tax. it's close. $800 billion plus on payroll taxes last year, about $900 billion on income taxes. that's where the money comes from in washington. and they don't get any payroll tax to speak of on any income. i've got my tax return he. (laughs) >> rose: we'll look at them in a moment. >> i get taxed on up to $100,000. and my superrich friends get taxed up to $100,000. and that tax hits the people in my office very, very hard. often they have a spouse working, so theyet taxed on up to $200,000, that payroll tax. and that's... this year we've had a waiver of two points but that's normally 15.3%. that alone is higher than the x rate on capital gains or dividends. >> rose: you point out that the average tax rate for people in your audience... in your... the average rate for people in your office is 36% of taxable income. >> 36%. and nobody's below 33%. and incidentally, the lowest

income person in theffice is higher than the 33%. they don't have the low rate. so from 33% to 41% they range and they average 36% and i'm in there with a fat 17.4% i think it is. >> rose: and why is that? >> well, taxes... if you make money with money, you get taxed very... at very low rates. 15% dividends in capital gains. no payroll tax. if you make money with muscle or hard work or sweat of your brow, you t taxed at ras that move on up. and most of the people,the middle-class gets taxed at rates of either 15% or 25% on their income tax, but then they get really hit hard on the payroll tax and that's what brings the rates in our office up to an average of 36% if you leave me out. >> rose: what has happened to the tax rate for the low 20es%? >> the poor don't pay any. there's 80 plus million actual taxpayers that pay tax. incidentally, some of the extremely wealthy don't pay, but that's just an aberration. no, the taxes... taxes are

falling... the high rates are falling on the middle-class and the upper middle-class. >> rose: the argument is sometimes made by people who believe that it is always good economic policy to reduce taxes that if, in fact, you reduce taxes you will create economic expansn and economic growth. people are go out and create jobs if they're not paying as much taxes. people if they're paying a higher tax wl not me adds many investments. >> well, i work with investors for 60 years. small ones, large ones superlarge ones. i have yet-- and i'v worked with capal gains rates of 39.9% and 36% and 25%, i have yet to here one person say to me "... if i call you in the middle of the night and say "i've g this hot investment idea." your reaction is not to say "no matter what t tax rate, forget it, i'm going back to sleep because the capital gainsates are too high." no, you're going to say "te me

name, quick, warren, before you change your mind." i have never had one person decline to invest with me. and i was running money 40, 50 years ago when rates were much higher and i never had one person to show the slightest reluctance to taken a investment idea and run with it. >> rose: what are the other reasons that it is essential to do now? >> well i think it is essential. i think people are very, very upset about how their government works and particularly how it worked during this raising the deficit ceiling period. so as i talk to people, they're very disillusioned. howard schultz of starbucks came out with an article just the other day on that. so i think... i think it's important that whatever is done restores to a degree-- and we can't do i overnight, but restores to a degree people's fah in the fact that their

government can work. i also think fairness is important and i thk getting rid of promises that you can't keep is important. i don't think we should cut spending dramatically now. i don't thinthat what i'm talking about on taxes solves the deficit gap at all. but i thinkairness is important. i think having a sensible long-term plan is important and i think having it be believable is terribly important. because people don't believe these out year things generally with congress. th see too much of what's happened. >> rose: is part of this... being in the position that you're in you wa to start a conversation about the reality of taxes. >> sure. >> rose: and the reality of balance and fairness. >> yeah. i think the american people deserve to be educated on wt fellows like me paying in taxes, for example. but they have to be educated on the reality of future promises. they have to be educated on the necessity of running significant deficits when the economy is weak. i mean, there's a lot of things in terms of economic education. but this is the time to do it. if we don't do it now... if these 12 members who have been appointed now to the

supercommittee, if they come back with something that's a lot of mush, the amecan blic's had it. >> rose: and what happens to the country? >> i isn't good. it isn't good. the country will still come through. we'll rise to whatever occasion dends eventually. but we are wasting so much in the way of potential output, in terms of the opportunities for people. but we ought to get on with it. i mean, the job of government is to govern. >> rose: let me go t the debt kreiling debate and talk about it for a moment. >> let's just say, charlie, that you and i agree after we left the studio here we were going go out to a track near here and i was going to get at one end with my car and you were going to get at the other end and there's a line down the middle and which ever one flinches loses his net worth the the other guy. do you want to play? what do you want to play depends on how crazy you think i am. so what do we do if we go out there. the engines are revved up, your net worth is on the line and i make these menacg gestures at

you. >> rose: you make me think you're crazy. >> absolutely. absolutely. and you're trying to make me think you're crazy. and we both get in our cars and we both think the other guy's crazy. so what do we do. right as the engines start, i throw out my steering wheel. now you believe me, right? >> rose: (laughs) >> well, boehner didn't throw out the steering wheel, mcconnell didn't throw out the steering wheel but a group behind them said "throw out the speaking wheel, mr. speaker and make those people realize we're not going to agree to anything unless we get our way." and if you have a sane perso dealing with somebody that you feel may be insane, by the point at when they draw the steering wheel you say "you lose." and the american people lost, incidentally. >> rose: then along came standard & poos and basically downgraded because they said it appears in the u.s. congress is dysfunctional and able to deal withish issue. you disagree the downgrade?

>> 100%. >> rose: but you understand why they made the decision? >> i understand why they did it. but mcgraw-hill owns standard & poor's. i bet if they have short-term money around it's in treasuries. i don't know that for sure but they would not be worried about it being in treasuries. >> rose: and that's, in fact, what happened. >> we can print money. there's 17 countries in europe that gave up the right to print money and, believe me, they don't want to give up the right to print money. >> rose: because they joined the euro zone. >> yes and now they have terrible problems because they can't print money. we can print money. we don't to worry about our government becoming dysfunctional but the printing press becoming dysfunctional. >> rose: so you are saying the united states can always pay its bills and it should not have its a.a.a. rating downgraded? >> that's correct. >> rose: what do you make of the chinese criticism? >> i'm sure they're enjoying in the a way. ll, i would critize, too, because if i were the chinese sitting with a trillion plus of u.s. govnment obligations one

way another, i would be very worried about what's going to happen to the purchasing power of that. i mean, i've got the right to get the trillion dollars back and i will get the trillion dollars back. the question is what will it buy at that time? and our government gives you the impression at times that they will restart a printing press. they'll resort to a printing press if necessary. and if they do enough of that, the value of the dollar goes down and goes down significantly. so if you hold a lot dollar- which the chinese do-- i can get getting unhappy about that. >> rose: do what do you think of the federal reserve's announcement they're going to keep interest rates slow in. >> well, that's a very, very dark statement. the fed is saying, when they say we're going to keep rates low until 2013, they say... they're really saying the economy isn't going to be very good until then. that's a... it's an unusual statement. >> rose: would you disagree wit it? >> i think there's a chance they're wrong, yeah. i think it may pick up before then. >> rose: you think the u.s. economy will pick up?

>> yeah, the u.s. economy. well, it's been picking up ever since the summer of 2009. right up until last month. i mean, i see figures on 70 plus businesses. what is unusual about this is we had a huge recession caused in large part by a husing bubble. you had 67% of the people in the united states own their own homes roughly, and those people who have a $22 trillion asset at the peak saw its value shrink dramatically. th affects two-thirds of the households in the united states. they that had that incredible impact on the economy and we won't come back big time until we've worked off the excess inventory it was created during our binge on house ago few years back. we are making progress on that everyday, every week, every month. i mean, we are producing less houses than we are households. >> rose: household formation has to increase beyond...

>> beyond housing construction. and that's been happening for a couple years and it's exactly what should happen. now, i read some article people talking about blowing up a few houses or something. if you blew up a million houses you'd probab be in balance now. i'm not advocating that. and if you started having households being formed by 12-year-olds you could speed up household formation. but we're not going to have that either. but we are going to have households being formed. that's baked into the demographic pie. >> rose: you are saying what's wrong with the american economic growth picture right now is housing and construction and... >> every one of our 70 something businesses are doing better quarter by quarter by quarter except those tied to housing. but housing is way bigger than construction workers. unemployment will fall significantly in my view when we get back up to a million housing starts because it won't just be construction workers, it will be our carpet workers where we've laid off 6,000 people, our brick workers. and go up and down the line.

so the big recovery... we've recovered our corporate profits. we've recovered in terms of getting the banks back in shape, banks are in good shape now. we've recovered in all kinds of areas. corporate america is doing fine in most areas. it's not doing fine in things tied to residential construction. that won't come back until we work off the excess inventory. but the inventory is not as... the amount of excess inventory is not as high as people think in my judgment and that's why i say it could be before mid-2013. >> rose: going down to 8% or something? >> i think when home construction is a million units or more running at that rate, i think we'll be at 7% or below. >> rose: you have a bet with peter orszag, the director of office of management and budget? >> yeah, but i'm talking settlement with him. >> rose: (laughs) what was the bet? >> the bet was by election time that it would be down to 7.3% and i thought housing construction would come back by that point and i may be wrong. i may be right but when... i

guarantee when housing construction gets back to a million units-- and it will go beyond that, it could en be a million two, we will have... unemployment will fall dramatically. >> rose: to 6% at some snint >> certainly below 7%. >> re: by 2013? >> oh, i think... i think it's likely to happen... the feder reserve disagrees with me and bernanke is a lot smarter guy about that than i am. but we are working it off. i mean, we have never had this low a level relative to the popution for as long as i've known the figures on. i mean, this is a huge correction of a bubble that popped. >> rose: and what is necessary to take place over the next two years in order to increase household formation and decrease the amount of construction? >> well, we're doing pretty well on the crease in construction. we have not done... >> rose: demand is a factor in that. >> demand is a factor and we artificially gave it a little boost when we went with the credit a year or two ago on

purchase of homes. i think it's a mistake to front end it. it just delays the eventual recovery. so if you're in excess of something... if i have too many purple dresses and i run a dress shop, i get rid of those dresses and start over with the dresses people want and i mark them down to whatever it tes. you could have a bunch of rich immigrants come in and they'd all need houses, for example. if you wanted to chae your immigration policy so that you let 500,000 families in but they have to have a significant net worth and everything, you'd solve things very quickly. naturally it's being solved. capitalism is solving this. but we're fortunate that japan has a declining population. if they get in excess of something it isn't going to get worked off. we have households being formed everyday. i've got a grandson getting married this weekend so we're foing them all the time. and we're forming name lot faster than we're building

homes. >> rose: and whave an economy based on domestic demand. >> sure. >> rose: whereas china is trying to shift around from an export demand to domestic. >> they will be a strong exporter for a long time. >> rose: when you look at economic growth first there's a job question but then the rate of economic growth, increase in g.d.p. how do you see that? >> i think it will be very good over time. i mean, we have the same things that have been working for us xxiii00 plus years. charlie, i was born on august 30 1930. that was the high day of the dow industrials in that year. it was 242. what happened the next couple years? 4,000 banks closed, the dow went to 4 1245shgs's like the present dow going to 2,000. my dad lost his job, we had the dust bowl here and everything. we're living six times better than now. the american system works. it works terrifically and it has occasional recessions.

we've probably had 15 of them since the country was formed and this was a particularly bad one because we had a bubble in the biggest asset around for the american public. >> you have made the point in 1779 or j right about then that the chinese population was lik 290 million. thamerican population was about four million and europe's was about 50 million and look what happened. >> look what happened. d we weren't smarter, we didn't work harder, we didn't have greater natural we resources, we just had a system that worked and they've been smart enough to catch on. >> rose: but there are interesting things as work as well. the demographics. so they have more domestic demand points in china because of their population or in india because of their population or in brazil and places like that. some will argue it's a much more competitive environment for the united states. while we may have a system, other people are learning from our system and they have built-in advantages that we don't have. >> rose: yeah, they've gotten smarter about things. i mean, if you go back 50 years in china, the chinese were just as smart then.

they worked just as hard but they weren't getting results. and now theye getting incredle results: but that's not bad for us. i mean, the world isn't a zero-sum game at all. we wt the rest of the world to prosper. we'll ll them a lot of things. most people don't realize it but ouexports as a percentage of g.d.p. have doubled in the last four 40 years. we have become better at exporting things. we just import better. >> rose: two big debates coming up in terms of this country and political season. one is about taxes which you are speaking to in this pie. the rich ought to pay for it. the other is the role of government. how do you see that debate? >> well, i think... i think if we get back on more or less the formula we had which was getting 18.5% or 19% of our revenues in taxes, we can spend 21% then, can run a deficit of a couple percent of g.d.p. on average over time because our country will grow and we have a lot more

debt capacity than we had back in 1790, just like i'm got more capacity than i had 50 years ago. so as your income grows, your population grows, your wealth grows you can handle more debt. but you can' let it keep increasing as a percentage of your income or wealth which is what we've been doing like crazy lately. so i don't mind a couple percentage point gap. 18.5% or 19% on revenues 2, 1 ereabouts on expenditure but that means we have to hit both sides. and we can't put ourself on a trajectory that takes the expenditure side up automatically as the years pass, which is what we've done with entitlements. >> rose: do we need another stimulus program? >> well, we've got the biggest stimulus program the world's seen virtually going on right now. that debate is really got somewhat ridiculous in my view, because stimulus... fiscal stimulus is when the government spends more than it's taking in. >> rose: so the deficit is our stimulus? >> the deficit is our stimulus. you can say a bridge someplace is part of that act, you can say

cutting taxes is part of it as was the case in our stimulus act. buthe stimulus is the government pouring more money out than it's taking in. and we have a stimulus going on that's 10% of g.d.p. which we haven't seenince world war ii. so we have a huge stimulus going on. nobody wants to call it a stimulus because it's gotten to be a dirty word. but we have a big stimulus. in my view, whether we have a 10% of g.d.p. deficit which is a huge stimulus or a 12% or 8% doesn't make much difference. i think we pushed monetary policy to a level, we've pushed fiscal policy to the limit but fortunately the most important thing in terms of this country ever coming out of recessions has been the natural workings of capitalism and i think you've seen that. >> rose: and you are saying that the table this day you don't see the likelihood of double dip recession because the other thing that needs to happen to make this economy strong as it is is new construction. >> yeah. >> rose: in the housing market. >> i would say there's only tw

things that cause me to be wrong on that in myiew. and i don't think either way... is people lose so much faith in government to handle things that they just... they talk themselves into a hugfunk in this country and the second thing could be if somehow the troubles of europe spilled over here. >> rose: confidence is an important thing. >> sure it is. >> rose: and there was damage to confidence based on what happened in washington. >> charlie, i own stock? a lot of companies. if i get upset about the management, what they're doing, do i lose confidence? yes. do i feel bad about investing with them? yes. you want to have... you've got to have confidence in your leaders. i mean, we went into world w ii with confidence in our leaders. it's vital. it looked like we were losing the war for six months but we never lost confidence in our leaders. and you have to believe in them and they have to give you reason to believe in them. >> rose: help me understand now what the danger is that we face. if things don't happen as well, if washington cannot get back on

track, maintain the confidence of the american people and at the same time me the right decisions because if that supercommittee doesn't do the right thing... >> yeah. >> rose: that's why you tell them... this is directed inart to that supercommittee to say, look, you've got to look at taxes really strongly here. >> if i can pick 12 readers for this, they're the ones. if you go back to september of 2008, you had a month when everything wasalling apart, freddie, fannie, you name it. what our leaders were saying to us then, the key players were saying we'll do whatever it takes. and i believed it. i knew they had the power to do whater it took and i believed they would do . now, the problem of "boston" now is that they f the come out and get on the sunday talks shows and say "i'll do whatever it takes" people don't believe them. they've got to see action and here they see something like the raising the deficit limit used

as a hostage for something of vital forns the united states. and you can use it as a hostage in terms of spending, you can use it as a hostage on funding for education or anything else. it isn't limited. people do not want to see the instruments of government used as weapons the whole idea of the law that's a shield not a sword. i mean, the minority has become the board? this respect. and i don't blame this on speaker boehner. i think that he... >> rose: he had members of the tea party... >> the people in the back room said to him "you're not going to have our support if you go in there and bend an inch on this." they said throw away the steering wheel. >> rose: you have also said that you guartee the there was one way to get people vote differently on this, you say unless y reduce the deficit to... >> 3% of g.d.p. >> rose: 3% of g.d.p., and it's

now 10%. unless you reduce it you're not eligible for reelection. if you had that facing them you would get a decision about these issues right away. >> tomorrow. but it's still tongue in cheek, arlie. because if you... during a huge recession like we had during an all out wartime period you don't want them operating with 3%. i mean, you need larger deficit bus you certainly need something less than that on average over time. but i just use it to illustrate that this is a world of incentives and we work on incentives in every way. education, business, every other place. and what i try to think of the incentives to get somebody who comes up for reelection in a year to do something where the policy cycle goes out five years or ten years, how do you do it when the policy cycle exceeds the electoral cycle? you've got to make sure the electoral cycle is in the equation. >> rose: what else do you want these 12 members of congress who are sitting on this supercommittee to think about?

beyond taxes and a balanced approach which is also what was recommended by bowles simpson, also recommended by e gang of six. >> it's incredible. here you have alan simpson ander skin bowles, you couldn't have two finer people. intelligent, good humored, opposite sides of the isle. they get together and get tom coburn and dick dur fwin sign on to something. >> a liberal democrat and a republican fm oklahoma. >> yeah,hey were putting the country ahead of their personal feelings and they worked for months and months and months and they criticized and i'm sure the hours they spent arguing over given things that they had to compromise on. they get 11 out of 18 to agree and it gets tossed aside. i thk it was a terrible mistake. simpson-bowles should gain momentum. when you get peopleho work like crazy, many months, person reputations at stake and everything else and you get coburn and durbin, that's... i give credit to both of them, equal credit. i think... i may not agree with tom coburn but think he's a

statesman. >> rose: he was prepared to take reductions in... >> absolutely. absolutely. >> rose: in corporate income tax. there is also this. the president's leadership. you have said on most social issues and on distribution of twelfth president and i are in sync. yes? >> yes. >> rose: what do you mean by that? >> i mean in terms of a woman's right to choose, in terms of not having the rich get by with lower taxes than the people in their office, there are a bunch of things that i agree with. there's limits to how much you can do in that. >> rose: what about distribution of wealth? >> i think in the last 25 years, the "forbes 400" has gone from a couple hundred billion of wealth to a trillion two or something like that. i mean you've had the income at the top americans quintuple, top 400 in the last 20 years. this is becoming a nation ofs have and have nots and supers have. listen, anybody that makes

$250,000, i don't consider them rich, particularly if they live in new york or l.a. or some place like that. >> rose: that's why you put the level at a million dollars. >> yeah. listen, you want everybody to be able to get ahead in this country and enjoy the fruits of at they do. >> rose: do you like being rich? >> (laughs) i've been poor; i've been rich. rich is better. >> rose: but the idea is that... >> no, no, it should be a land of opportunity and people that get rich, nobody's going to confiscate or anything of the sort but the distribution in this country, the market system has led to extremes. a guy that's wired like me... i don't have any special status in the this world. i'm not a great nurse, a great teacher may be much more valuable to society than i am. i'm wire sod i can figureut what things are worth. >> rose: allocate capital. >> i get super rich and somebody whose adenoids are in a certain arrangement gets rich but television makes a lot of people rich. lou gehrig held out for $25,000

in theate 30s and they benched him. he had a long struggle. television has made the .240 hitter bette than ted williams at .406. so there's a lot of serendipity. we... everybody in this country owes their good fortune in some way to the rest of the country. >> rose: there's your 2010 tax return. >> that's my 2010 tax return. >> rose: what will i see there? >> you'll see a lot of income. you'll citoal... adjusted gross income about $62 million. but then i gave... you're only entitled to deduct 30% of your contributionso i've got a chartable carry forward of $10 billion, i don't think i'm going to use it up. but then get to taxable income and i've got $39.8 million and you get down to tax and i've got $6.9 million. >> rose: that comes to what percent of taxable income. >> i think it comes to 17%. >> rose: and other people in your office are paying... >> 33% to 41%. nobody's below 33%.

>> rose:ow much of that has to do with the payroll tax? >> a lot because they all pay it. i pay it, incidentally, but it's $15,, now for me. $15,300 and it's$15,300 for all the people in the office pretty much and many of them have spouses where it's another $15,300 for the spouse. so for some of them it's $30 that's a lot of money to them. a lot. >> rose: you said you want the 12 most important people to read this. what else can be done to give it? >> well, i ho the "times" is a launching pad. i think it's a subject worth serious discussion and i already heard from somebody this morning that they're putting it on facebook. i never thought of social media as being a way... >> rose: 's getting a lot of distribution with 600 millio.. >> i think that the public is educated on what goes on. i think that representatives will follow throu to some

extent. i think some members of congress don't even understand that probably. i invite them to take their own tax return and make the same calculation i did and incidentally, i don't have a tax shelter. i don't have... i've never had a tax shelter. i don't do any of that kind of stuff. the congress has been my tax at visor. i mean, they're taking care of me. >> rose: you also make the point that in so many corporations that their biggestnvestment is not in plants and equipment it's in lobbyists in washington. so therefore they get deductions so that their effective tax rate is also much less whatever the maximum corporate tax rate is. >> yeah. well, that's true and they're entitled, incidentally, to try and... i mean, there's a big rule book up there and if the rule book has flaws in it, the thing to do is change th rule book, not count on everybody to be on the honor system. the rule back into what counts. i'm probably creating a lot of business for lobbyists now

because they'll be very busy defending the present situation. but i think it's the rule book that has to be looked at. >> rose: do we need tax reform? >> yeah, i think so but i think i would cure what i wrote about in the "new york times" this morning. that's very easy to do. >> rose: to do those two things? >> yea and that doesn't dove everything charlie, but it probably tops... it would be $50 million a year. now, everydy talks in terms of ten years so it would be $500 brl over ten years. but this doesn't close the gap. i want to move up toward that 18.5% or 19% and i hope we'll get a lot of it out of growth. but i think it's silly at this point to count entirely on that and i think we have to move expenditures down to 21% or thereabouts. >> rose: how do you measure president obama's leadership on this? because he could have done more to be in support of simpson-bowles. he could have been out earlier. >> i wish he had. both sides were afraid to uch simpson-bowles. that's pretty clear. it made too much sense.

they didn't want to be associated with it. i would say this. in terms of the deficit limit negotiations when the other guy throws the steering wheel out the window, off problem. if you and i get in those cars and i see you throw the sering wheel out, i give up, you win. >> rose: in fact, when you looked at the publican debate the other night and they asked them to raise their hand if they were in favor of a level of spending cuts which were... >> 10 for 1. >> rose: and everyby would not go f that. that was pathetic. i me, listen, i like republicans. i mean if you got democrats o some core issue they'd probably do something just as silly. but when they take that attitude they are really saying, you kno "i want to win this primary." they are saying the country be dammed, i want to win this primary. >> rose: and it means that a certain element of philosophy on taxation has taken control of the public debate within that party. >> it has because the primary

primaries push people to extremes. that's one of the problems we have in this country. they can't believe in their hearts-- all ten of them-- that a 10 for 1 ratio would in some wayer repbly harm the country. >> rose: you said you're prepared to make... as i raised earlier in this conversation specific spending cuts in entitlements, changing social security, trying to reduce the cost of health care whh is essential. >> charlie, on my tax return here you had george will on a few days ago and joshlg said he couldn't understand why he was getting social security. here it is. social security benefits, $32, 680. >> rose: you get $32,000? >> $32,680. and a portion of it is tax free. not a very big portion. >> rose: so you'd make i means tested? >> oh, i think it's... i thi the idea when we've got this very, very rich family this country a lot of us have troubles. 60 million people live in households where the income is

$21,000 a year or less. and i say to people who say we shouldn't raise taxes "just try that for a few weeks. just try it." and i think that when we're gointo have to do things that are a little tough on them, you have to come after some of u and it shouldn't be social security. it's deposited in my bank account every month without me even thinking about it. >> rose: where is the populist instinct in you come from? >> i was born lucky. i was bornn the united states of america. i didn't have anything to do with that. so i wonen the ovarian lottery. they go off to afghanistan. when some of my friends complain about their taxes i feel like let's continue this conversation of enormity and we'll just talk about this.

i really think this country works wonderfly on a marke system. we don't want to give it up. indeed, we have to control that market system in many ways. but it works. it works with the kind of incentes we have. it works we quality of opportunities. it's not perfect. we've tried it but the lucky ones still prosper incredibly disproportionately. i'm not for having some kind of a czar in washington besides what's proper but i do think somethinthat thinks about the 60 million people living at $21 a year or less in their household i think a rich, rich, rich society should think about them a little bit everyday. >> rose: that's the america you believe in. >> yeah, it is. i think it's the america most people believe in. >> rose: are you okay by dodd-frank that, in fact, that was their appropriate reform? >> i haven't read it, charlie. i think there's two things that

are needed to keep the financial system from going crazy. one is keeping some limits on leverage and we didn't do a job of that. >> rose: dodd-frank is devoted to that, isn't it? >> yeah, but congress, they couraged huge leverage of nnie and freddie, that's where the money was. the second thing is having the proper incentives for people at the top of important financial institutions. we saw institution after institution go to the government and say we're too important to this society that you can't let us fail. so pour in the money to atever's necessary and i'm going go off and be rich. i'm the guy that screwed it up. i think you've got to have down side, really drastic down side for the people that run financial institutions, big ones, to get into trouble. and we need those incentives and i don't think they've attacked that yet. that can be done through the board of directors. >> rose: too big to fail continues to exist. >> too big to fail always l always exist. there are there will always be

institutions that are too big to fail. they're deciding that europe is too big to fail. >> rose: i know that. but should those institutions be broken up? >> no, we decided the whole banking system was too big to fail when we put in the f.d.i.c.. we c't exist without them. so we have to do something to change the behavior of people at the top of those institutions so they have huge downsides. they didn't have down side. i'm not going to name names but those people did not have down side. they had down side to their reputation but they walked away with tens of millions of dollars so you can't that v that situation exist and expect great behavior:. >> rose: but has that changed? >> the incentives have not changed very much. but that isn't draconian enough for me. >> rose: i want to come back to omaha. >> great! >> rose: look at what the lessons of berkshire hathaway

is. the railroad's grown, everything's growing. >> pretty much,. >> rose: you are finding that you need to hire new people. >> sure. we're investing a record $7 billionthis year in capital invement, almost all of which is in the united states. that's at least a billion more than we've ever vested in the past. there's plenty of things to do here. >> rose: you have often said that in a time like this in which there are difficult times, that's the best time for you because you can have more opportunities to buy things that you think are of quality at better prices. >> no question about that. it's like buying on sale. last monday we spent more money in the stock market buying than any day this year. but it was... >> rose: buying stock. >> right. not business. but buying business is very infrequent. there's a lot of happenstance in that but you have to be ready to do it. >> rose: there's much discussion about buying another acquisition of transatlantic, i think it is. >> we made an offer about a week ago. that offer is expired now. (laughs)

we don't leave things out. >> rose: you don't like bidding wars, either. >> no, no. >> rose: but if you look at berkshire today it's different thsense that more of it is owning businesses 100% than it is owning stock. >> rose: and we've been ing that direction for 20 years but people are seeing more and more evidence of it but we employ 260,000 people and we have added to employment. >> rose: with the exception o homes and construction and carpet. the seco largest rea este agent and all that. >> yeah. >> rose: and that's the one thing... so berkshire in a sense offers an opportunity to look at where u.s. economic growth is. >> i can tell you how many people had dilley bars yesterday. (laughs) everything from dily bars to corporate aircraft: (laughs) >> rose: robert zell leg, the president of the world bank said this is a very, very international difficult time bauds what's happening in the

united states and in europe could very well be a warning sign. you seem to say, look, my success of my companies is different except for construction. >> rose: the united states has been improving. i mean, it went through... we talked about it, it was economic pearl harbor. i use that term. and we had a shock to our system that was colossal and if a few people hadn't acted right, even more so. but we have been coming back steadily. the mood has gone up and down more like thi as we've gone but everything i see in business, we've been coming back steadily since the summer of 2009 and continuing up through last month now can something happen that will interrupt that? i haven't seen it. journal a different story. >> rose: but puturope in the context of this, though. how could the sovereign debt crisis affect the rest of us?

>> the problem is i don't know. i... i don't know... i don't know what's goi to happen. i know 17 countries that join the european monetary union gave up the right to print their own money. that was a huge, huge decision. i hope the united states never does it. it changes the game... >>ose: to be in control of your own finances, in fact. >> yeah. and they linked themselves. they gave each other their credit cards and said let's all go out. and some behaved better than others. >> rose: should they dismantle the euro zone? >> i mean, it's very complicated. you have to decide one or two things. you've either got to decide that these members are actually going to get their act together, the ones that have troubles in a very major way because they need lots of money. they have to refund their old obligations all the time. so nobody has to lend money count-to-country a, b, or c. the united states, nobody lends money in thenited stat, we print it. but not over there. in greece... if greece owed

their money in drachma they'd have inflation and devalue but they wouldn't have a problem paying their bonds. they gave up that right. now,ither the weaker countries get theiact together in some major way-- and i think that's very, very difficult-- or basically the very strong companies, and we're talking germany, have to say i'm willing to take care of my brother-in-law that's been using credit card. >> rose: that's what they've said so far. >> well, they half said it. that's their problem. if you're having a run at a bank and you've got 10 people in front of it and no f.d.i.c. insurance, that line won't stay at 10. you're either going to get rid of those 10 have a hundred. in europe they've kept talking to 10 and a few more straggled up so they didn't get rid of the line andhen there's a run the line only gets longer unless it gets taken care of quickly. >> rose: but what are the consequences for the uted states and for asia?

i don't know the took place. that i don't think they're necessarily extremely dire. there have got to be consequences but i don't... europe won't goway. we're selling a lot of goods in europe. >> rose:itis a huge market. >> and they're not going to go away and the farmland isn't going to go away. it's just going to be an economic mess for a while. >> rose: you have said before to me and to others that berkshire is your canvass that you paint on. it's your masterpiece. >> well, i don't know about masterpiece, but canvass. >> rose: so what is it if you look at it today, berkshire, you find fault with? >> find fault with? >> rose: yeah. >> well, i've made plenty of mistakes along the way so i have a lot of brush strokes just give me whatever things to remo that i would do it. i folks make mistake and i'll keep making mistakes. >> rose: unless you take chances you won't make mistakes. >> and mistakes are part of the game. there's swinging a pitches

and... i don't want to sound... i feel good about berkshire. i mean, the people i'm associated with at businesses, we have a... we lay out o economic principles and i laid them out many, many years ago and we try to operate that way. doesn't mean we're perfection. you've got a company of 0,000 people, i guarantee you somebody's doing something i wish they weren't. you can't have a city of 260,000 people and have no jails. but overall i feel there's a culture that i don't think any other large... any large public company has and i think it's enduring because it's inculcated and the manager, the shareholder, the directors, everybody. so i fee that aboutberg shire. >> rose: would by wrong to suggest the thing you worry most about is whether after you are gonna that culture remains as it is? that you have in a sense made berkshire song enough to exist without you? >> yeah, i don't worry about that.

i worried about it over the years which is why i dade bunch of things at i think ensure that future. but that's always the estion. you've seen all kinds of great companies topple. >> rose: you once said to me and others you have to make your company idiot proof because at some point some idiot will run . >> that may be the case now. (laughs) >> rose: someone said the thing you worry most about is whether berkshire will be intact 20 years after you're gone. >> i don't worry about it, i care about it. and sinci care about it i put things in place which i think almost ensure that berkshire will be bet 20 years after i gone than now. >> rose: where is succession today? >> where is suck session in. >> rose: yeah. >> if i die tonight tomorrow morning it won't take the board an hour to announce... >> rose: who the c.e.o. is? >> absolutely. they know exactly who it is and they agree. >> rose: but it may change six months from now. >> it's unlikely. it could. that person could die.

>> rose: is there a list of people or oneern? >> there's several people but there's one person they know about. and there should be. i mean, there's no reason to have the board of directors start thinking about who the c.e.o. should be the day after the president or e.o. leave they've neglected their job if they do that. >> rose: was the sew kohl affair the thing that caused you most angst because it had to do with judgment of... >> it caused angst. i don't know whether it's the most in my business life but it was up there. >> rose: when you think about whatever legacy there is, your legacy berkshire hathaway beyond family and philanthropy. >> yeah, well it's... i'll settle for those. >> you quoted sir christopher ren who created st. paul's cathedral and if you go there the epitaph he has written for himself. >> i'll paraphrase it. if you seek my monument, look about you.

and i say that should be the... that's the way we should think about this country. this country a monument to what was done a few years ago and the people that have followed. it's incredible. back in 171790 you said i want to create a monument to this country i'm giving you and you'd envision the country of 2011. i don't think anybody would have dreamt big enough. i think this is something that... so i just... when i fly across the country that thought occurs to me that if you seek our founding father's monument, just look around you. >> rose: and you worry today that there's some threat to that. not because the system is not right, not because the stem is not strong enoughbut you worry that there are things happening that will make it less great if they are not address. >> i think we're being tested, charlie, yes.

but we were tested in the civil war. we were tested in the depression. we were tested december 7 of '41 december 7... september 11. this is one of them, we will surmount them but i just as soon get won the job of surmounting them now.

>> susie: google brings the bulls back to wall street. its $12.5 billion bid for cell phone maker motorola mobility sparks a triple-digit rally. >> tom: from the markets to main e