November 12, 2008 -- “I.O.U.S.A.” takes on the impossible task of explaining to the American public the immense economic debt problem facing us. It makes a very good effort on trying to cover this enormous, important, complex issue in less than an hour and a half. Unfortunately, it takes longer than that to cover the basics, let alone the intricacies, let alone the solutions. But it is a good primer for those unfamiliar with the many aspects of American economic debt and it is a stirring call for action. What action? It doesn't really get into that. It also doesn't fully address the current national economic crisis which is going to require a couple of years of heavy deficit spending to solve. This film was made largely before the current crisis reached its peak (if it has reached its peak). What it talks about is in addition to, and much bigger than, the current global economic meltdown. Scary.

This non-partisan message is delivered by some of America's brightest, most dedicated, most patriotic leaders. It lays out the problem in a straightforward, no-nonsense way, without the ridiculous rhetoric (like “Supply Side Economics”) used by politicians. The film is built around a national “Fiscal Wake-Up Tour” conducted by former U.S. Comptroller Gen. David M. Walker. Other speakers include Robert Bixby of the Concord Coalition, Warren Buffett, Rep. Ron Paul, former Fed Chairmen Paul Volker and Alan Greenspan and former Treasury Secretary Paul O'Neill, who reveals the real reason he was fired by Bush and Cheney. O'Neill said Cheney told him “deficits don't matter.” The message of this film is that deficits do matter, and not just federal budget deficits, but trade deficits and savings deficits too.

The film covers four key components of the deficit problem, federal budget deficits, trade deficits, savings deficits and a leadership deficit. The film explained that federal budget deficits have been around since before the founding of the United States. The first deficit was the result of the Revolutionary War. Other deficits ballooned after the Civil War and every other war since. These debts were paid down after every war through World War II, but the United States has gotten lax about paying down its debt in recent years. The last time it paid down any debt was during the Clinton Administration. The federal debt has increased dramatically since the turn of the Century. American savings rates have been alarmingly low in recent years. This savings deficit means there is less money in the system to finance new industrial growth. In contrast to the free spending Americans, the film shows how a Chinese family of modest means manages to save 50 percent of their earnings.

The trade deficit is explained by noted financier Warren Buffett, who is accompanied by a cartoon depicting two islands, one of which, “Thriftville” exports more products to the other island, “Squanderville,” than it buys. Eventually the island that exports less products runs out of money and can no longer afford to import stuff, and its economy declines. Buffett and Alan Greenspan explain that trade deficits lead to ruin in the long run. The worsening trade deficit between the United States and the rest of the world, mainly China, has led to foreign countries holding a lot of American debt. That means these countries, mainly China and oil exporting countries, can dictate terms to America by threatening to liquidate the American debt they hold and thereby destroy the U.S. economy. America once forced England and France to stop their war in the Middle East in 1956 by threatening to liquidate English and French debt in this same kind of economic warfare.

The leadership deficit isn't an actual economic deficit in the sense that the other three deficits are. The leadership deficit is a political problem of how to get elected and stay in office when you have to cut government programs and raise taxes in order to balance the budget. Politicians now cut taxes and increase government programs, and still promise to cut the deficit at the same time, although this is impossible. When government cuts taxes and increases spending it increases the deficit. This what caused the national debt to balloon under the Reagan and Bush administrations. In order to cut the deficit, the government must increase taxes or decrease spending. Because of the massive size of the national debt, it has to do both. Neither approach is popular, both are doubly unpopular. Only an informed public and brave leadership can get us out of economic hole we've dug ourselves into.

The film briefly touches upon the problems of funding Social Security, Medicare and Medicaid, but doesn't really get into the complexities of the Social Security trust fund and how that fund has been raided. I'm a baby boomer. The money I've put into Social Security has helped to pay for my dad's retirement, which I am happy to pay for, that's the intergenerational contract of Social Security, but it has also been used to fund wars, build highways, build rocket ships, pay the salaries of government workers and pay for lots of other government programs. Most of the money I put into the Social Security trust fund won't be there for me when I retire, because it has already been spent, largely on government programs other than Social Security. It isn't a trust fund at all. It is a piggy bank that was smashed open 40 years ago. I am less than sympathetic for calls to reduce social security benefits just because our recent crop of political leaders, mainly Reagan and Bush thought that “deficits don't matter.” They are breaking the intergenerational contract represented by Social Security. People like me who don't want to be standing in a soup line 20 years from now had better do something about these deficits.

The film doesn't really go much into solutions, but some kind of massive reform is called for to encourage personal savings, to promote “green” energy industries, to eliminate federal budget deficits, to eliminate oil imports, to solve the health care crisis (and in the process eliminate the need for Medicare, Medicaid, the drug benefit and other programs we can't afford, and make the auto industry and other industries more competitive by them not having to pay for employee health care). As you can see, these problems are interrelated, and so are the solutions. This film is a call to action. If soup lines and over $50 trillion in debt doesn't scare you, what will? This film rates a B.

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Copyright © 2008 Robert Roten. All rights reserved.
Reproduced with the permission of the copyright holder.

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