Movie Review: “I.O.U.S.A.”
August 22, 2008 – 12:56 amWho knew someone was working on a documentary following David Walker’s Fiscal Wake-Up Tour? I interviewed Walker for an article about the Tour earlier this year, during the period when much of this movie was shot.
Anyway, tonight there was a special screening at 8PM in select theaters across the nation (see the Trailer at the bottom of this post). All the theaters in Manhattan were sold out. So I schlepped to the nearest theater with seats, out in Queens. The showing promised a live talkback broadcast into the theater from Omaha where David Walker, Pete Peterson, Warren Buffett and the heads of AARP and the CATO Institute all spoke. The talkback was disappointing: it was hosted by Becky Quick (the Squawk Box anchor on CNBC) who fumbled her lines, asked poor questions, and was unable to keep the panelists on topic. But more on that later.
How was the movie? Good, but incomplete. Kudos to the director for not dumbing down the subject too much for the audience. There was substantive discussion about
- the current budget deficit,
- about the unfunded liabilities for Medicare and Social Security that threaten to wipe out ALL government spending (except those two and interest on the federal debt) by 2030,
- about poor personal savings rates and how that leads to dependence on foreign creditors to finance our way of life and
- about the trade deficit itself, which leads to still more dependence on foreign largess.
All of the above included some ingenious animation that explained the math behind the issues very clearly. For this reason alone, everyone who pays taxes should run to their movie theater to see this when it hits wide release Friday. Also the trade deficit section brought in Warren Buffett to narrate his parable about Thriftville vs. Squanderville, which I’ve published under the Tutorials section of this blog for some time. Audiences will find that appealing as well.
But the movie was incomplete……
Incomplete because it didn’t explain the crucial question: so what? Americans have been hectored for a generation about the huge federal debt. So why should they care about it now? Why is it so imperative to fix Medicare and Social Security? Walker is fond of his Roman Republic analogy, that it collapsed under the weight of fiscal imprudence and military overextension. But that doesn’t mean anything to the average American.
I got him to go into more detail about actual consequences in my interview:
“The worst case scenario,” Walker says, “is that we could suffer the same fate as Argentina.” The Argentine government went bankrupt in 2002 after running up massive debts during the 90s. Foreign capital fled the country, the banking system collapsed, inflation hit 80%, and unemployment reached 25% as the economy sank into a depression.
Add to that recipe sky-high interest rates which would hammer private economic activity. Regular people understand 15% mortgage rates; they understand 15% unemployment; they understand runaway inflation. Walker (and the filmmakers) simply warn of dire consequences but don’t enumerate any.
As far as what’s to be done, they argue ‘It’s up to you America, to demand more from your representatives!’ But they don’t point any fingers at specific politicians. At John McCain for proposing more tax cuts without any meaningful cuts in spending. At Barack Obama for proposing universal health care while misleading voters that simply letting the Bush tax cuts expire will pay for all of it (it won’t come close). And they don’t make the point effectively enough that there are no other issues besides this one. Education, retirement security, homeland security, investments in clean energy. All of the above are just ideas on a drawing board without cash to pay for them. And the federal government will simply run out of cash if entitlements aren’t reformed.
They blame politicians for being short-sighted, but really politicians are just responding to voters. As Buffett aptly pointed out: the policy cycle is longer than the electoral cycle. And while voters want everything, they aren’t prepared to pay for anything. So they vote in whichever guy says they can have it all.
The talkback afterward wasn’t great as the host couldn’t keep things on track. Also Warren Buffett unabashedly played Pollyanna, waxing enthusiastic about the future potential of the American economy, how its growth in real terms will help finance our way out of the deep fiscal hole we’ve dug for ourselves. This was totally unhelpful because he’s flat wrong. As Walker quickly interjected, all of the projections for Medicare and Social Security assume that the economy keeps growing. With real economic growth of 1% and health care inflation in the double digits, there’s no chance we can grow our way out of the government’s fiscal hole.
But the fact that the movie doesn’t detail what exactly is at stake doesn’t make it any less worthy of your $10. In fact, what makes this movie so valuable is it does articulate the numbers in a way that those unfamiliar with the issue will understand. For all of you who have been arguing about the primacy of fiscal irresponsibility this election—but have been unable to convince your friends it’s important—take them to this movie.
It opens today in 10 cities. Check your local movie listings.
Here’s the trailer:
Posted in Economy, government spending, politics, taxpayer issues |
30 Responses to “Movie Review: “I.O.U.S.A.””
Here is a production by the same demons who destroyed your life, killed America, and worse. The CFR makes a movie that idiots embrace while creating the initial problem that victimized the idiots. Yet the elmer dumb f’s of the world love the movie the CFR made. A movie making fun of the victim. Personally, after seeing how weak and pathetic the average person is - I side with the CFR.
By CalFord on Aug 22, 2008
Want to know how America picks it politicians…the same as they pick a rock star..”He/She has nice hair. I like the way they talk and dress. Well, doesn’t everyone like that person?” Please..Americans on the whole keep themeselves in the dark..other than worrying about the next paycheck..99% of the American public are UNAWARE of how anything around them works in regards to finance, economics, and even world events unless they are broadcasted on the 6 o’clock news..Americans know more about Brad Pitt and his brew than they do about the reality of where this country is headed..Good luck waking up the brain dead with this movie..no sex, no nudity, no violence..Shows you why they needed animation for its viewers..Buffet knows what he is dealing with…
By Ann on Aug 22, 2008
Buffett revealed what many had suspected for a while now, he has become removed from the average citizen and everyday life. For him to state that everything is rosy or will be because of the ingenuity, strength and diversity of the American people, was completely off topic. And, as to be expected the adoring fans in Omaha applauded his simple optimism. Even if Buffett is right his comments were entirely inappropriate for the forum last night. I couldn’t believe the callousness of his statements.
The movie nicely captures and explains the troubles ahead for the US. All Americans should view this movie. The movie points out, though, that Americans (and to be fair, really all citizens in all countries) will not act until the crisis hits home in a meaningful way. We are just about there.
By Bill C on Aug 22, 2008
You make a good point Bill. Perhaps the best comment in the whole movie was from that Des Moines journalist who said that in America, we only act once a crisis is upon us. I fear we won’t even do that this time because the crisis likely to hit will be a severe economic downturn when foreigners cut our credit line (or simply demand far higher interest rates to rollover our debt). The Fed would respond to that event by printing more money, deflating the dollar. That’s what leads to an Argentine style crisis: a massive debasement of the currency in order to pay off current debts.
CalFord: not sure what you’re talking about. Who’s CFR? This movie was produced by the Pete Peterson foundation.
By RolfeWinkler on Aug 22, 2008
Nice post Rolfe. I largely agree with your synopsis.
I also think Buffett was off in la-la land. I think the man embodies a contradiction that possibly addresses some of the points made above about why the CFR would produce such a thing: the symptoms of the problem are recognized, but not the causes.
The problem is not insolvency; that is just the outcome. The problem is centralized control of the core of the economy by a handful of elites. I include in this not only the Fed, but mega-banks and industrial corporations in bed with the government.
But if you’re an elite keen on engineering your vision of society, you’re not going to want to give up, or even acknowledge the role central planning has had in bringing about the current problems.
The two key pillars of this wrong-minded, high-level control are the Federal income tax and the Federal Reserve. The former robs the largest chunk of wealth from the country and directs it to the highest levels, most distant from voters, instead of locally, such that it is basically impossible to control how it is spent.
The second creates unlimited liquidity (inflation), and directs it primarily towards the government and powerful and privileged elements of the private sector (especially the money center banks).
Neither of these are susceptible at all to electoral control. That’s why the results keep getting worse.
The lack of understanding of this source for the problems leads to some truly frightening suggestions for solutions, such as *forcing* people to take a percentage of their income and give it to Wall Street, in compulsory savings programs. Not only is money coerced likely to be handled poorly (especially if it is highly politicized), but people aren’t going to be too happy about their investment results on the downswing of a credit bubble, and with baby boomers net cashing-out. Once again, the locus of power and the fundamental problems with the inflationary system are ignored.
The only common-sense suggestions I heard were to simply cut the benefits promised in the massive entitlements programs, making them need-based. That will be difficult to do unless inflation (especially in health care) is put under control, because otherwise the entire “middle class” will have a legitimate need for aid.
I would suggest we restructure the health-related tax code before making any changes to the medical welfare programs, to see what happens to prices. I bet if we made health care costs universally tax deductible (regardless of employment), and a cash-out-able benefit, they would come down dramatically.
But the most important things to do are get rid of the Federal income tax and sound money. Taxes, inasmuch as they have to be present, should be directed as locally as possible. People need to get past the road block of “but the government has to run our public infrastructure”. Folks, most of this country exists in the states, not in Federal enclaves, and the states are quite capable of raising their own revenue, since you and I live in them. Sure, we need national defense, but we don’t need to be spending more on it than the entire rest of the world combined.
Sound money is important because it is the only safe means of saving and wealth accumulation for the middle class. Neither the government nor financial managers can be trusted with the bulk of the country’s wealth over the long haul. Any compulsory or “quasi-compulsory” savings schemes are likely to fail (how can anyone POSSIBLY trust those who brought us the housing finance debacle?) The thing about sound money is that it tends to gain in value. Saving for retirement is a matter of putting aside a bit of free cash, and you have the option of storing it unsophisticatedly. You can still invest, but there is not a critical need to do so.
As Buffett said, society tends to create more wealth. But the only way to ensure that it gets fairly spread around is to have sound money (backed by gold and/or silver), so that same unit of money over time buys more good or services. This is the system that prevailed in the US until the Fed was founded in 1913. Since then, we’ve had far worse financial crises than we ever had beforehand. So what is the point of having this central control of interest rates and the money supply? None, other than benefiting the elites.
Without an understanding of the above, this country will thrash around in economic misery for decades to come.
By Aaron Krowne on Aug 22, 2008
Sorry, thats “get rid of the Federal income tax and IMPLEMENT sound money”, above
By Aaron Krowne on Aug 22, 2008
I have a second point of criticism about the movie related to what Rolfe just posted above: that the movie fails to explain how the crisis is here NOW. Note there was very little mention of the PRESENT financial turmoil. Basically the entire housing market has been backstopped by the government; is this not a material contribution to the “cost” side of the ledger?
The movie doesn’t really touch on non-budgetary appropriations, such as the $160B fiscal stimulus bill or numerous $100B+ Iraq war appropriations. Aren’t these relevant? For these and other reasons, the national debt is actually growing about twice the rate of the fiscal deficit!
Some of it also has to do with checks simply written on the Treasury, for “mystery defense spending” (that $2.5 Trillion Rumsfeld said couldn’t be accounted for). This is neither budgeted or appropriated!
This suggests we have a problem with the Treasury simply being open to all comers, like a parent signing every check in his or her check book and handing blank checks out to the kids. And all the neighborhood kids. And their parents.
This problem is coming to a head now, with the Treasury making some unprecedented statements along the lines of “we don’t know where we’re going to keep getting this money”, especially without unprecedented levels of support from foreign lenders.
So Walker is right — if there is even a slow-down in foreign lending to us, we’re in trouble.
Except, we’re in trouble NOW, not some time in the distant future. When the lending slows down in any significant quantity, either interest rates will have to rise sharply, or the Fed will have to begin some old-fashioned money printing, and inflation will really get out of control.
And this could be a mere months away, especially in an environment where we’re sparring with the likes of Russia and China.
By Aaron Krowne on Aug 22, 2008
What about corruption and fraud?
Did the movie touch on white collar crime or the trillions in pension funds that have been or are being destroyed?
Corporate malfeasance just keeps growing and the crimes have become more blatant.
It was pretty clever how they enlisted borrowers and brokers in their epic Ponzi scheme, but these peons had no control over the changes to lending guidelines or the ability to fund the loans.
Even those who ride on a little yellow bus knew how ridiculous lending guidelines became. The big question is how and why did it happen?
How did millions of Americans believe they could afford $3000 housing payments when they took home $3500. Why did so many brokers help them commit financial suicide? Why have we not seen more arrests? Heck, screw the arrests we just need disgorgement beyond what they profited for restitution.
Unless our citizens and our government can learn basic math we are destined to follow other failed empires. Unfortunately, our “leaders” appear to favor taking others down with us when we do fail.
By Michael Blomquist on Aug 22, 2008
Michael….I think there’s only so much they could cover in a 90 minute film. The housing bust will get its own documentary. I’ve no doubt many are already in production.
By RolfeWinkler on Aug 22, 2008
Michael,
I certainly think the corruption is connected to my point about centralization and control of the government by financial elites. We know now they elected not to put a stop to unsound lending. Why would they police themselves?
And Greenspan’s participation in the film at times as some sort of wisened sage talking about our need to save was terribly ironic, given that he also chose not to enforce lending standards, and equated home price appreciation with “savings”. Now he scolds us for not saving? All too convenient.
By Aaron Krowne on Aug 22, 2008
I found Greenspan’s inclusion a bit odd as well. Why would anyone save when Greenspan was holding interest rates at 1%? There’s too much of an incentive not too.
Still, this movie is a good start. There is no national conversation about our fiscal crisis. A movie like this can get the ball rolling.
By RolfeWinkler on Aug 22, 2008
Thank you, Mr. Winkler. The panel discussion at the end revealed a little too much, I think, about the participants’ motivations, especially Warren Buffett (waaay out of touch) and the AARP’s flak-catcher. Granted, Chile’s forced retirement savings programs are far superior to SocSec, but they are still illiberal in any number of ways, not least of which is that Chileans do not have full discretion as to how to invest their money. Better, as Aaron says, to simply save for retirement. Most of us are in 401ks or something that our employers “contribute” to as well, so no wonder that’s our vehicle of choice. (Just buy me some gold, alright?)
By Ike Hall on Aug 22, 2008
…waiting for “SUBPRIME! the musical”, with great catchy tunes like…”Ode to FICO” sung by the Its different this time chorus…:)
By Nick Gogerty on Aug 22, 2008
The US Social Security system will fall into debt within the next ten years, and is likely to run out of money over the next several decades. Without change, today’s young adults will be hit hard. It’s a structural problem that can’t be fixed with little tweaks. Now is the time to fix it.
We are producing a series of short internet videos to explain this issue to everyone.
Watch the first one here — http://www.youtube.com/watch?v=Zyvx_r4UB9Y
Learn more at http://savesonny.org/
By Sonny Campbell on Aug 22, 2008
Another point left out by the movie and the panel was that the REAL way to shrink the debt and get out of the problems we face is to REDUCE THE SIZE OF GOVERNMENT! Not just federal, but ALL LEVELS of gov’t. No more paid politicians. No more cushy retirement plans. No more IRS. No more Federal Reserve. Only Ron Paul tells it like it is. If people had used any intelligence in choosing president, they would have chosen Ron Paul, but as the earlier post said, people seem to choose their president like a popularity contest instead of dealing with the issues in a real world sense. Back to sleep with the sheep.
By John V. Galt on Aug 23, 2008
I also thought the movie was incomplete and lacking details. For example, the explanation of the $53 shortfall of unfunded government liabilities was rushed through in the movie. I also had a few issues with the movie, such as calculating the national debt as a percentage of GDP. This makes no sense to me. The national debt should be calculated as a percentage of government tax revenue, and the trade deficit should be calculated as a percentage of GDP. See the full review for more detail.
http://www.geldpress.com/2008/08/iousa-review-falls-short-of-expectations/
By Geldpress on Aug 24, 2008
I saw the movie and didn’t think it was all that great.
The old geasers, who talked at the end– except for warren buffen, were full of anxiety and thought that health care costs would “bankrupt our nation;” thus, they said: “giving 47 million people universal health care would only make budget problems worse.”
Of course, the audience was told to “save money” but nobody on the panel offered an explaination about why the stock market would bail us out when deficit spending would not; They also didn’t explain why the irrational exuberence of the DOW– which grew almost 400% during the clinton adminstration, was normal and a reason why we should kill social security and put everything into equities especially since inflated market caps and Enronish balance sheets don’t produce health care and, during the clinton administration, health care prices rose along with the stock market and that problem is still around today.
Greenspan did note in the movie that “a nation can only consume more than it produces for a short period of time.” The entire panel, though, seemed to ignore this comment and kept pushing equites since, according to one panelist, the government insures too many things; warren buffet was a bit more honest than most and said that the “pie will get bigger” but he didn’t empasize that this bigger pie would have fewer calories, due to inflation. another panelist blurted out that the current system wasn’t scaleable and that problem statement was entirely different than the question at hand.
Unfortunately, neither the movie nor the panel hinted that the Japenese economy tanked, despite their savings rate, since their savings were based on housing speculation! Hence, someone should have asked the panel: “why should I save if it didn’t make a difference in Japan?”
As a last comment, nobody really talked about city/state and federal pensions or that coporations deficit spend since they keep refinancing old debt which cannot be paid back.
Morover the panel of the well-to-do liked military spending and war; in the long run, they probably know that the military’s pensions and benefits will strangle it just like everyone else but the rich want their wealth protected!
In general, after seeing the movie and the panel discussion, I thought that the rich were trying to protect their wealth at the expense of the poor; that’s why David Walker is probably being ignored since, if the Titanic goes down, everybody should be aboard.
By orange head on Aug 24, 2008
We have two clowns running for president. I’ve been warning people since late 2005 about inflation and CPI, etc. No one listened. Ron Paul is being laughed at like he is a joke, and we have two spendy retard clowns running for president. Ron Paul is a joke ? The US is slipping bad, and the country seems to be chock full of retards, and those not retarded are suicidally greedy rapists scuttling everyone’s future for a quick buck - the saddest joke is the QUICK BUCK IS IN DOLLAR TERMS. Unreal.
By Mick Russom on Aug 25, 2008
Rolfe…
Saw the movie in DC yesterday. Agree that it was reasonably well done but fell short when it came to proposing solutions to the mess.
It seems to me the way out is a massive curtailment of entitlement benefits - especially around Medicare - and an overhaul of Social Security in which the rich pay more and the poor receive more, as opposed to the current system whereby we receive something roughly equivalent to what we put in.
On another note, do you have any idea what kind of medical cost inflation is assumed in calculating the unfunded Medicare liabilities? They’re an issue no matter how we look at them, but if we’re assuming 10% inflation to infinity then it’s possible that part of the federal balance sheet might be overstated. With US healthcare spending as a % of GDP already the highest in the world, it seems eventually we’ll figure out a way to get those costs under control and healthcare spending inflation should slow somewhat. That said, we’ve been expecting a slowdown for years now and it’s never really come, so who knows? Anyway, I’d be curious to know if you or any of your readers knows where to find the assumptions underlying those forecasts.
The blog is great.
Tony
By Tony R. on Aug 25, 2008
The problem is not some “elite” that “controls everything”. The problem is democracy, and the problem is nothing new.
I think what is truly amazing is that without any regard to this problem being noticed, analyzed, and researched in ancient Greece, to this day, people are “immune” from learning it, and will blame whatever else they can blame, but not the democracy itself.
When one observes this stupidity for a while, he/she may notice how his former desire to teach and help is slowly being replaced by digust, and from there to approval for plundering the “biomass”, as it is simply does not deserve any better.
Sad. This is America?
By cRavias on Aug 25, 2008
“Of course, the audience was told to “save money” but nobody on the panel offered an explaination about why the stock market would bail us out when deficit spending would not”
-orange head
OH, I’ve got to step up and make a critical distinction based on your comment. Investing is not saving. Saving is literally “not spending”. It’s the investment (gambling) mentality, wherein wealth is gleaned without working for it, that is one of the biggest problems with the economy.
Saving is living within your means, and keeping money aside for a rainy day. That means cash, on hand. The FDIC can’t bail everyone out, and “investments” are illiquid, and often uninsured anyways.
By Tesh on Aug 25, 2008
The movie was far better than the so-called town-hall meeting. It was as if Warren Buffett was saying, never mind those numbers you just saw, we live in America, the greatest country in the world! I wanted him to be quiet and let the others talk. Except for the AARP guy, who had no business being up there.
The movie made it clear that big change was needed, though it is true they didn’t prescribe anything specifically except that either revenue has to go up or expenditures have to go down (or both). But afterward, the panel assured everyone that nobody’s taking away their Social Security, their Medicare, their anything — that these programs just needed tweaking, not eliminating. I disagree. I think we need fundamental change.
The whole thing struck me as people talking out of both sides of their mouth.
By linda on Aug 25, 2008
Tony….Most of the estimates used in the Fiscal Wake-Up Tour come from the Congressional Budget Office. Here’s a link to a presentation on the growth of health care. Should answer all your questions.
By RolfeWinkler on Aug 26, 2008
“It’s the investment (gambling) mentality, wherein wealth is gleaned without working for it, that is one of the biggest problems with the economy.” -By Tesh
I agree with you 100%. That’s why I thought that the IOUSA movie was a let down; Moreover, union members won’t talk to me after I tell them that: “historically, unions will be thought of as a consumption movement.”
The silver lining is: with thinking like ours, the thoughts of the prophets make sense since, truly, we’re our own worst enemies.
By orange head on Aug 27, 2008
and “investments” are illiquid, and often uninsured anyways. - By Tesh
one of the panel members thought that the government insured too many things and that led people to make bad decisions.
CEO’s, of course– as well as congress, insure their retirement with guarenteed retirement benefits!
By orange head on Aug 27, 2008
For those of you who are reading this who have not seen the movie or were in on the premiere with the panel discussion:
You can still go see the movie, but not the panel discussion.
I was in the audience in Omaha. I did a summary of the panel discussion and posted it on my Blog at http://www.TheCenterStrikesBack.
My contention is the government is broken because our political system that staffs the government is broken. If you want to fix government, then the first thing to fix is the political system.
Two changes I recommend (among others)to fix the political system are the institution of instant runoff voting and allocation of electors within each state based on the popular vote. Those two changes will break the back of the duopoly of Republicans and Democrats.
By Larry on Aug 31, 2008
i think you’re right, orange head, about the CEOs thing.
By Dudeatron on Nov 6, 2008
I haven’t seen the movie, but i need to see it through your link ,orange head, but it isn’t working. its supposed to be a good movie!
By Dudeatron on Nov 6, 2008
COOL BLOG!
By Dudeatron on Nov 6, 2008