Movie Review: “I.O.U.S.A.”

August 22, 2008

Who 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:

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