If Republicans and President Barack Obama were to fail to reach an agreement to raise the nation's borrowing authority, that would be "pretty damn dumb," said billionaire investor Warren Buffett in a taped interview that aired on CNBC Friday. In addition to the upcoming October or early November deadline on the debt ceiling, the prospects of a government shutdown next month also loom. But Buffett, while critical of this type of partisan bickering, told "Squawk Box, "the market is not gonna fall apart, because [investors] expect Washington will only act irrationally for a certain length of time."

(Read more: Buffett: Stocks now 'more or less fairly priced') Republicans are looking at the debt limit issue and the waning government funding as leverage to push deficit-reduction plans. The GOP-controlled House is pushing through a stop-gap federal funding bill to avoid a shutdown, but it includes measures to gut the president's health-care law. Obama has vowed to veto any such legislation. Buffett said he sees health-care costs as a "huge problem for the country … but that's not the fault of Obamacare," because the spending trends have been in place for decades. "Health-care costs in this country are a tapeworm of American business," he continued. "Overall, the economy has a 17 percent-plus of GDP going to health-care costs." Buffett was interviewed alongside Bank of America CEO Brian Moynihan before a student forum at Georgetown University in Washington, D.C., on Thursday. On health-care costs, Moynihan said, "[Obama's] Affordable Care Act, the debate around it, has actually just focused business on how much this is really costing them."

The real economy Buffett said that three-quarters of his businesses under the Berkshire Hathaway umbrella are doing better. "Our furniture stores are up 8 percent or 9 percent ... carpet is strong," he added. "Our railroad carried 207,000 cars last week. That's the highest of the year. Our peak was 216,000 [cars] ... before everything hit the fan" during the financial crisis. Over at BofA, Moynihan told CNBC that American consumers are spending. "September so far is about 5 percent to 6 percent over last year," he continued, but acknowledged, "people wish this were going faster, but it's just a lot of work to take a huge economy like ours and get it completely back to where people want it, 3 percent-plus growth."