Warren Buffett, the chairman and CEO of Berkshire Hathaway, said on CNBC’s “Squawk Box” on Wednesday that he is more worried about the government spending too much money and hurting the economy than he is about the central bank’s interest rate decisions.

He said that inflation could damage the economic machine and that politicians tend to promise money to voters to get re-elected.

He also said that he was lucky to have enough shares in his company to keep his job and that he did not know how he would act if he was a member of Congress. He recalled his father’s experience as a congressman and said that he did not think Congress had improved its behavior since he visited it in 1942 and met with Speaker Sam Rayburn.

Government Spending Scare

The latest data on US inflation showed that consumer prices rose 0.1% in March and 5% from a year ago, below market expectations. The core inflation, which excludes food and energy, increased 0.4% and 5.6%, both as expected ¹. Energy costs fell and food prices were flat in March.

The Federal Reserve is expected to announce its policy decision later today, with markets pricing in a 65% chance of a final 0.25 percentage point interest rate hike at the May meeting. The Fed has raised rates nine times since December 2015 to combat rising inflation and support economic growth.

Some analysts believe that the Fed may signal that it is nearing the end of its rate hike cycle as inflation slows down and the economy faces headwinds from trade tensions and slowing global growth.

The government spending that Buffett is concerned about includes both mandatory and discretionary spending. Mandatory spending consists of benefit programs such as Social Security, Medicare, Medicaid, and other programs that are required by law ³. Discretionary spending consists of spending controlled by lawmakers through annual appropriation acts.

For fiscal year 2023, the President’s Budget proposes to spend $6.9 trillion, which is $1.2 trillion more than the estimated spending for fiscal year 2022. The Budget includes $3.7 trillion for mandatory spending, $1.8 trillion for discretionary spending, and $1.4 trillion for net interest on the debt.

Tax Reforms

The Budget (government spending) also proposes to invest in various areas such as infrastructure, education, health care, climate change, research and development, national security, and social safety net. These investments are more than fully paid for by tax reforms that ensure corporations and the wealthiest Americans pay their fair share.

The Budget projects that the deficit will decline from $2.3 trillion in 2022 to $1.8 trillion in 2023 and then gradually decrease over the next decade. The Budget also improves the long-term fiscal outlook by reducing debt as a share of GDP from 117% in 2022 to 107% in 2032.

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