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Buffett: Politicians ‘Dead Wrong’

Warren Buffett has a message for presidential candidates and others who are down on the U.S. economy: You are “dead wrong.”

In his annual letter to shareholders released Saturday, the chief executive of Berkshire Hathaway Inc. reaffirmed his confidence in the future of the country, saying that America’s “golden goose of commerce and innovation will continue to lay more and larger eggs.”

Mr. Buffett took issue with politicians he said are leading Americans to believe that their children will be worse off than they are. “That view is dead wrong,” he wrote. “The babies being born in America today are the luckiest crop in history.”

The 85-year-old billionaire, who often describes his investment holding period as “forever,” is again taking the long view.

Mr. Buffett wrote that since his birth in 1930, real gross domestic product the standard measure of economic output adjusted for inflation has grown a “staggering” six times on a per capita basis. He added that even at the current growth rate of 2%, which has caused concern among some economists, GDP will outpace population growth over the next quarter century and lead to a 34.4% gain, or $19,000 per capita.

“Today’s politicians need not shed tears for tomorrow’s children,” Mr. Buffett wrote With his letter Mr. Buffett, a Democrat who supports former Secretary of State Hillary Clinton, has inserted himself in an intensifying debate among economists and politicians about the nation’s growth prospects.

Some mainstream forecasters, including the Congressional Budget Office, expect the economy to expand at an annual rate of about 2.5% this year and next. CBO forecasters say that even if that pace slows later this decade due to relatively muted growth in the nation’s workforce, the economy should expand more rapidly than it did in the years after the 2007-09 financial crisis.

Still, some economists are gloomier about the nation’s growth prospects because of a puzzling slump in productivity growth, the principal driver of changes in living standards. In a recent book, Northwestern University economist Robert Gordon chronicled the history of America’s industrial heyday and argued that advances in American standards of living between 1870 and 1970 aren’t likely to be repeated.

Titled “The Rise and Fall of American Growth,” the book says such growth reflected dividends from a series of sweeping innovations everything from indoor plumbing to antibiotics to air conditioning and refrigeration. The author sees little evidence of new innovations that will deliver additional gains on a similar scale.

Mr. Buffett said he isn’t having any of it. “For 240 years it’s been a terrible mistake to bet against America, and now is no time to start,” he wrote.

The investor said major productivity gains are still possible, including at U.S. companies. He praised investment firm 3G Capital Partners LP, with which Berkshire partnered on the purchase of Kraft Heinz Co., for its productivityboosting methods. The firm’s extreme cost-cutting at companies has been controversial, but Berkshire’s results have benefited.

Mr. Buffett has good reason to stand behind his words. Over five decades, the Omaha, Neb., native has transformed Berkshire Hathaway from a struggling textile mill into a massive holding company whose businesses sell everything from insurance and electricity to photo frames and boxer shorts. Berkshire’s diverse operations largely depend on the U.S. economy, giving Mr. Buffett a view into its health.

“He has a long range perspective in a short term world,” said Laura Rittenhouse, a corporate ethics and strategy adviser who has written about Mr. Buffett. “He creates wealth from opportunities that others dismiss.”

On Saturday, Berkshire reported a 21% jump in net profit to $24 billion and revenue of $211 billion for 2015. Since 1965, Berkshire’s book value per share has grown by nearly 800,000%, compared with an 11,355% gain in the S& P 500 stock index.

Mr. Buffett’s bullish case aligns him with President Barack Obama whom he supported in his presidential campaigns and his economic advisers, who say the U.S.’s economic expansion, while disappointing relative to other postwar expansions, is the envy of the world.

Many presidential candidates seem to disagree. Republican front runner Donald Trump uses the often repeated slogan “Make America Great Again.” Democratic aspirant Sen. Bernie Sanders has spent much of his time on the campaign trail talking about income and wealth disparity.

That mood has been captured in recent voter polls. According to a January WSJ/NBC poll of registered voters, fewer than a third believed the coming year would offer economic expansion or opportunity for their households. More than half said they were bracing for harder times.

Mr. Buffett said he, too, is concerned about widening income inequality. However, he doesn’t think as some presidential candidates do that the forces of cross border trade and technology, which have undercut growth prospects for less educated and poorer Americans, can be reversed.

Instead, he said policy makers must build new safety nets for “those who are willing to work but find their specific talents” less valued in the economy. “The answer in such disruptions is not the restraining or outlawing of actions that increase productivity,” he wrote. Americans wouldn’t have seen their living standards advance during the Industrial Revolution “if we had mandated that 11 million people should forever be employed in farming,” he said.