Thursday, November 20, 2008

I.O.U.S.A., One Nation, Under Stress, In Debt.

Last night I attended a special screening of a documentary film called I.O.U.S.A. The documentary was produced and directed by the award-winning team of Christine O'Malley and Patrick Creadon. Their most famous documentary is Wordplay which was a hit at the 2006 Sundance Film Festival. It was about the editor of the New York Times crossword puzzle and was the second-highest gossing documentary of 2006 and won several awards.

The screening of I.O.U.S.A. was presented locally by Nashville Public Television and Nashville Public Library as part of the Independent Television Community Cinema. Prior to the screening was a wine and snack reception and following the showing was a group discussion led by a panel of prominent Nashvillians.

Prior to the event, I enjoyed pleasant chic-chat with interesting people along with the wine and cheese and after the showing, enjoyed the lively discussion.

This documentary examines the rapidly growing national debt and its consequences for the United States and its citizens. People interviewed in the film include Warren Buffett, Alan Greenspan, Paul O'Neill, Robert Rubin, and Paul Volcker. I already knew some of what the film presented but did not know just how gloomy of a situation we face. With charts and grafts and historical context, this film put the financial problem of the US’s debt in perspective.

The debt of United States is 8.7 Trillion dollars or about 64% of our 13.5 trillion dollar GDP. The level of debt to GDP however is not the real problem, disturbing though it may be. The real problem is the unfunded obligations for social security and Medicare, which amount to $53 trillion and getting greater all the time. Under the Bush Administration the problem was made much worse due to the passage of the Medicare drug benefit. With budget deficits and recent financial bailouts we are digging a deeper hole daily.

In addition to this enormous debt obligation of the United States, we have a huge trade deficit. Much of America’s debt, unlike in the past when American debt was held by Americans, is held by foreign nations. Also, individual American households are collectively debtors. For most of our history, American households saved money; now, Americans are deeply in debt with more and more people living beyond their means.

This film paints a disturbing picture. At the conclusion of the film you are urged to call your congressman and tell them to “do something.” If I have a criticism of the film, it is that it does not tell you what to tell your congressman to do. I think the film is very good at defining the problems but is short on providing solutions. There are no easy answers. Many politicians call for cutting waste and ending earmarks or ending the war in Iraq. If we did all of this, it would only make a very small dent in the problem. It would only slightly slow the rate at which we are digging a deeper hole; it would not stop the slide into deeper and deeper debt. Cutting current spending will not get us out of this hole.

I am not sure anyone knows what the solution may be. Raising taxes to balance the budget may be counterproductive and actually result in a slowing economy and increase the debt and American would not toleration a repudiation of the benefits promised retiring Americans. With the first of the baby boomers ready to retire starting next year, we face a severe crisis. If we inflate the money supply to meet our obligations, that will also have dire consequences.

If this film event comes to your city, I urge you to go see it. The bad news goes down easier with cheese and wine and in the company of interesting people. Below is a link to a 30-minute version of the film: I.O.U.S.A.

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1 comment:

  1. It looks like an interesting film, and I look forward to seeing it (about as much as you can look forward to seeing a doom and gloom movie).

    On things I've read about the Great Depression, injecting money into infrastructure and jobs to bolster the economy seemed to be the impetus for a recovery. Your debt increases, but keeps you economically afloat. It seems nonsensical, but the period from '29-'32, the cutting spending programs method only exascerbated the problems of the "Crash".

    Either way, it's going to be an ugly answer that none of us likes.