Billionaire Warren Buffett said unemployment will likely climb a lot higher depending upon how effective the US policies are, but he remains optimistic over the long term. Buffett said the American leaders need to support President Barack Obama's efforts to repair the economy because fear is dominating people's behavior and the economy has basically followed the worst-case scenario he envisioned. "It's fallen off a cliff," Buffett said Monday during a live appearance on cable network CNBC. "Not only has the economy slowed down a lot, but people have really changed their habits like I haven't seen." Buffett said the changes are reflected in the results of Berkshire Hathaway Inc.'s subsidiaries. He said Berkshire's jewelry companies have suffered, but more people have been willing to switch to Geico to save money on car insurance. He predicted that unemployment will likely climb a lot higher before the recession is done, but he also reiterated his optimistic long-term view: "Everything will be all right. We do have the greatest economic machine that man has ever created." Fear and confusion have been driving consumer and investor behavior in recent months, Buffett said. The nation's leaders need to clear up the confusion before anyone will become more confident, and he said all 535 members of Congress should stop the partisan bickering about solutions. Buffett said he believes patriotic Republicans and Democrats will realize the nation is engaged in an economic war. "What is required is a commander in chief that's looked at like a commander in chief in a time of war," Buffett said. Whatever the government does to help the economy will likely benefit some people who made poor financial decisions, but Buffett said Americans should realize that everyone is in the same boat. "The people that behaved well are no doubt going to find themselves taking care of the people who didn't behave well," Buffett said. The current efforts to help revive the economy are likely to produce inflation that could be worse than what the country suffered through in the late 1970s, Buffett said. But even though the US will have to pay for current policies with future inflation, Buffett said, the US government still needs to act. "We're in a big war, and we're going to use money to fight it," he said. Maintaining faith in America's banking system will be important to restoring the economy's health, Buffett added. He said Obama needs to make it very clear that consumers won't lose money in banks even if more fail. "If you don't trust where you have your money, the world stops," Buffett said. A little over a week ago, Buffett released his annual letter to shareholders describing the worst of his 44 years at the helm of Berkshire. The Omaha, Nebraska-based company reported sharply lower profit because of its largely unrealized $7.5 billion investment and derivative losses. Overall, Berkshire's 2008 profit of $4.99b., or $3,224 per Class A share, was down 62 percent from $13.21b., or $8,548 per share, in 2007. Berkshire's fourth-quarter numbers were even worse. Buffett's company reported net income of $117 million, or $76 per share, down 96% from $2.95b., or $1,904 per share, a year earlier. Buffett said he doesn't regret writing a commentary in the fall encouraging people to buy US stocks, but he joked that in hindsight he wishes he had waited a few months to publish the piece. Since that commentary appeared on October 17, the Dow Jones industrial average has fallen from 8,852.22 to close at 6,626.94 on Friday. Buffett stands by his overall advice that owning stocks over time will profit people greater than so-called safe investments. "Overall, equities are going to do far better than US government bonds at these prices," he said. Buffett said he doesn't regret investing $8b. of Berkshire's money in investment bank Goldman Sachs Group Inc. and conglomerate General Electric Co. last fall. Both companies gave Berkshire preferred shares paying 10% interest that Buffett said he doesn't think he could get now. Buffett also said on CNBC: That General Motors Corp. needs a new business plan to survive because its costs are too high, but it's difficult to predict how a solution will be reached. "You are in a terrible, terrible time period for the car makers every place." Berkshire has made several large investments over the past year and reduced its cash on hand to $24.3b. at the end of 2008. Buffett said that means Berkshire will likely write fewer insurance policies on catastrophic events in 2009 because he wants to make sure the company always has at least $10b. on hand. "My job is to be absolutely sure Berkshire doesn't need help from anyone in the worst of times," Buffett said. Any deal negotiated last summer made the sellers very happy and the buyers unhappy today. That's part of why Buffett said Dow Chemical Co.'s $15b. bid to buy rival chemical maker Rohm & Haas Co. has not been consummated. "The world has changed like nobody ever believed it would," he said. But Buffett said the $3b. Berkshire committed to the Dow deal remains solid if the two chemical companies can agree on how to close the deal. Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewelry, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.