I.O.U.S.A. (5 page)

THE MISSION

Defi cit reduction cannot be described as a sexy
topic. Unfortunately, it is hard to break through with
an unsexy message. It comes across as kind of like
taking a cold shower. We come along after the sexy
messages and cool people off.

— Bob Bixby, executive director,

Concord Coalition, in the fi lm
I.O.U.S.A.

The
I.O.U.S.A.
project has been one long, cold shower.

As Bob Bixby put it, it ’ s hard to break through with an unsexy message. But we ’ ve been trying. The fi lm and the book are the culmination of nearly fi ve years of work. When we began, the potential diffi culties of a growing national debt and a struggling currency — both abetted by negligence on the part of the nation ’ s policy makers — were far from the media headlines.

3

cintro.indd 3

8/26/08 11:36:28 PM

4 The

Mission

Words like
subprime, mortgage - backed securities,
and
infl ation
barely piqued the interest of the average American. Gasoline and food prices appeared to be stable. The stock market

appeared to have recovered from the tech bust and was on its way to new record highs. It looked like house prices would be going up forever. Interest rates were dropping. Despite the wars in Iraq and Afghanistan, Americans were generally positive about the outlook for the economy and their own prospects within it.

But we had our suspicions.

Along with much of the Western world, the United States is entering a demographic transformation to an older society.

But we ’ re doing so at a bad time. Health care costs are rising dramatically. The nation has a falling savings rate. Together they make a very bad combination for the economy. But, as with any extravaganza, it ’ s hard to get people to see that the party ’ s over.

■ ■ ■

In the fall of 2005, after two years of research and writing, Bill Bonner and I published
Empire of Debt,
a look at the history of rising debt in all levels of American society. The federal government had been, and still is, running historic defi cits in the federal budget. The national debt was growing at a pace never seen in the nation ’ s history. While the Bush administration waged increasingly unpopular wars overseas, Congress — and, by extension, the American people — was depending more and more on foreign lenders and tapping the Social Security and Medicare trust funds to pay its bills. The national savings rate was about to go negative. And the current account balance — the nation ’ s balance sheet with the rest of the world — was entering historically negative territory as well.

On the surface, the stock market and housing were growing nicely, indeed. Underneath, a review of the numbers told an entirely different story.

cintro.indd 4

8/26/08 11:36:37 PM

The Mission
5

We didn ’ t know for sure, but suspected the mortgage market was likely to show the fi rst cracks of a system under stress.

We forecasted an implosion in that market and an ensuing recession led by a slowdown in housing, which so many Americans had begun to rely on as their principal source of wealth. As such, we thought it would be a good idea, if a tad impertinent, to send the book
Empire of Debt
to all the members of Congress at their home offi ces. We sent a copy to the Federal Reserve and another to the White House. At the time, we were under the impression no one in Washington was paying attention. As long as U.S. dollars were rolling off the presses at the Bureau of Engraving and Printing, the record seemed to show no one was inclined to worry.

One serendipitous moment would prove us wrong.

On November 14, 2005, the very day we were stuffi ng cop-ies of the book into manila envelopes,
USAToday
ran a cover story featuring a press conference that David Walker, then comptroller general of the United States, had given before the National Press Club.

“ The United States can be likened to Rome before the fall of the empire. Its fi nancial condition is ‘ worse than advertised, ’ ” the newspaper said, quoting Walker. “ It has a ‘ broken business model. ’ It faces defi cits in its budgets, its balance of payments (the trade defi cit), its savings — and its leadership. ”

That we were mailing a book which effectively drew the same analogy seemed like more than a small coincidence. Little did we know how important Mr. Walker ’ s list of “ four defi cits ”

would become to this project. As you ’ ll see, they would provide both the context and framework we were looking for to help bring a diffi cult, complex, and unsexy message to a wider audience.

■ ■ ■

Before we even had a title for
Empire of Debt,
I got snowed in for several days doing research at Brad and Julie Wiggin ’ s cintro.indd 5

8/26/08 11:36:37 PM

6 The

Mission

condo in Sugarbush, Vermont. I ’ d taken a slew of reading material and one documentary along with me, Daniel Yergin ’ s
The Commanding Heights.
Yergin ’ s work follows the ideas of two of the twentieth century ’ s most infl uential economists, John Maynard Keynes and Friedrich A. von Hayek, during the course of their prolifi c lives.

Surrounded by the deep snow, and sitting amidst those books, I used the fi lm
Commanding Heights
as a diversion. Call me a masochist. By the second run through, I was impressed with the way the fi lmmakers had woven together similar themes to our own. They ’ d even turned economics into an entertaining program for television.

Several months later, the publication of
Empire of Debt
drew moderate interest from the media. We were featured briefl y in the
New York Times
magazine. ABC News put us on their 4:00 A.M. slot. The
Economist
listed us as one of their

“ must reads ” for 2005, based on sales from Amazon.com . The book even made it on to the
New York Times
business list. But the housing boom was nearing its peak. Most of the media viewed our work with a jaundiced eye.

Recalling the snowed - in episode in Vermont, I decided at that point, naively, that turning
Empire of Debt
into a documentary would be a good idea. Wouldn ’ t it be easier to hand a friend a DVD and say, “ You have to watch this movie, ” than a 400 - page economic tome on the history of debt in the United States? You ’ d think so. But making a movie, it turns out, involves a few more moving parts than writing a book.

After a few false starts, we got lucky and found the team that would ultimately pull the project together. Jon Carnes, a reader of our
Daily Reckoning
e - letter, responded to an informal proposal of the fi lm we ’ d written up. Jon, who had founded Eos Funds, a fi rm providing research for hedge funds, had recently invested in a production company in Hollywood. Jon said he ’ d met some producers through the process and could introduce us if we were serious. That relationship lead us to Sarah Gibson, who produced a fi lm featured at the Sundance Film Festival in cintro.indd 6

8/26/08 11:36:37 PM

The Mission
7

2006, where she met Patrick Creadon and Christine O ’ Malley, who were also at Sundance with their fi lm
Wordplay,
a documentary about the
New York Times
crossword puzzle.

The O ’ Malley - Creadon team didn ’ t come to the project lightly. It took several, fi ve in fact, serious phone conversations and a few face - to - face meetings to help them see we were serious about taking a rather complex and dry economic subject and making it fun and entertaining enough for a wider audience.

Eventually, Patrick and Christine grew interested in the challenge. “ We didn ’ t think we could fi nd a more challenging subject for a fi lm than crosswords, ” Patrick would later tell an audience of
Wordplay
fans in Los Angeles, “ until we decided to make this fi lm about the national debt. ”

With the team assembled, and a fair amount of the budget already on the line, we went to work. Among the fi rst tasks involved in making the documentary was to assemble a hit list of the folks we ’ d like to interview for the project. Naturally, David Walker ’ s comments regarding the fi nances of this country resembling Rome before the fall of the Empire put him at the top of our list. Having been engaged in the Fiscal Wake -