I.O.U.S.A. (6 page)

Up Tour, he accepted a meeting with us.

To our surprise, during our fi rst meeting David revealed he ’ d read
Empire of Debt
and enjoyed it — even if he didn ’ t agree with everything in the book. We learned we shared an interest in economic and political history.

From the director ’ s perspective, Patrick ’ s talent is clear. He convinced us that if were we to be successful in telling a complicated story to a general audience, we ’ d need a “ real ” human story to help carry the viewers ’ interest. After a few tense, but fruitful, days in a classroom at the American Film Institute, Patrick ’ s alma mater, we grew increasingly interested in David Walker and Bob Bixby as the lead protagonists of the fi lm.

They, in turn, grew more interested in working with us.

Readers of this book will likely expect a screen - by - screen

“ making of ” of
Empire of Debt.
But because of the challenge cintro.indd 7

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8 The

Mission

we faced turning that story into a fi lm, what we have now is something quite different. Indeed, the
I.O.U.S.A.
project took on a life of its own. And thus, as you ’ ll no doubt read in the credits, the documentary was “ inspired ” by the book. After our fi rst meeting with David, we seized on the “ four defi cits ” he had outlined in his Fiscal Wake - Up Tour as a solid structure for telling what may be most important story of our generation.

The fi lm and this book are largely an exercise in literary economics and consequently different from most of the writing we do in our daily letters, or in our other books, for that matter. As we ’ ve seen from our discussions, interviews, and chance encounters across the country, the average citizen doesn ’ t have a clue about economics or the challenges we face as a nation. On average, most think Social Security and Medicare, the wars in Iraq and Afghanistan, managing the

“ money supply, ” or keeping the government afl oat, are somebody else ’ s job — an “ expert ” in Washington or in New York.

In order for people to feel empowered to institute change, we decided to travel the globe and go visit them. Of course, the fi lm took us to New York and Washington, D.C. But it also took us all over North America — Los Angeles; Vancouver; Omaha; Concord, New Hampshire; Ames, Iowa. It took us overseas to Shanghai, Beijing, London, and Paris.

We interviewed two former Fed chairmen, two former Treasury secretaries, one former commerce secretary, and two former presidential candidates. We talked to the two ranking senators on the Senate Budget Committee and the fi rst director of the Congressional Budget Offi ce.

We aimlessly wandered through the marbled halls on Capitol Hill, each of us carrying a different piece of camera or lighting equipment. In the same fashion, we politely slipped through security at the nation ’ s largest bank. Likewise, we jab-bered our way through conversations with the richest man in the world, several best - selling fi nancial authors, leading policy makers, bankers, economists, entrepreneurs, and civic leaders. We badgered journalists and editors of leading fi nancial cintro.indd 8

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The Mission
9

publications. For 18 months, we bounced our ideas off other fi lmmakers, writers, and producers.

Everywhere we went — to a fault, some would say — we asked the proverbial “ man on the street ” what he thought about our mission, the economy, his lot in life.

In the end, what we learned and, by extension, what you ’ ll read in this book, can be boiled down to one statement: No one agrees 100 percent on what the solutions are for the problems we face as a nation. But that we ’ ve lived beyond our means for too long is obvious to everyone. “ There is no free lunch, ” Robert Rubin told us in the executive offi ces of Citibank. We agreed with him.

■ ■ ■

While we have included some numbers and charts to illustrate what we expect will happen if the nation ’ s four defi cits are not addressed, to keep the story interesting, we focused on

people — the people who are making important decisions about the economy and the fi nances of the federal government.

Who wouldn ’ t want to hear, for example, Paul O ’ Neill, the 72nd Treasury secretary of the United States, tell us, in person, his account of the day Dick Cheney, then vice president, told him “ Reagan proved defi cits don ’ t matter, ” or later when he got fi red for “ a difference of opinion ” over the Bush tax cuts. What Reagan proved was defi cits don ’ t matter if you, the electorate, don ’ t hold them, the offi ce holders, accountable.

Having written a chapter entitled “ The Fabulous Destiny of Alan Greenspan ” in
Financial Reckoning Day
(Wiley, 2003), we didn ’ t know what to expect when we interviewed him.

But we found his explanation for why interest rates remained so low during the 18 years of his tenure as the chairman of the Federal Reserve very interesting. The end of the Cold War, he said, and the fall of the Iron Curtain had created a demand for capital in the East that kept interest rates low in the West.

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10 The

Mission

We met with Robert Rubin, the 70th Treasury secretary of the United States, at the Citigroup executive offi ces where he was presiding, only fi ve months before the subprime crisis began in earnest. But Mr. Rubin told us, calmly, how diffi cult it was to reach “ political coalescence ” when the Clinton administration showed a federal surplus on the budget “ for the fi rst time in roughly 30 years. ”

Warren Buffett joined us in an unassuming meeting room at his Berkshire Hathaway headquarters in Kiewit Plaza in downtown Omaha. Initially, we believed we only had 20

minutes with him; however, when he entered the room he told us he “ wasn ’ t doing anything else today. ” By the end of the interview we had exhausted our list of questions and had over an hour of fi lm with him.

The point of this particular literary exercise is simple.

We wanted to show what Alice Rivlin, the fi rst director of the Congressional Budget Offi ce, meant when she said,

“ People may think somehow that decisions are made by other people far away, but in a democracy that ’ s not really true. It is your representative in Congress or in the Senate that is infl uencing what happens — so it ’ s pretty important for people to pay attention to it. ”

■ ■ ■

As the conditions of the once - vibrant U.S. economy began to take a turn for the worse, the American people seemed to be paying more attention to the country ’ s fi scal challenges. And when the debt crisis gained mainstream attention with the near default of Bear Stearns in July 2007, the
I.O.U.S.A.
project took another turn. By mid - September, we were forced to throw out the whole fi lm as we ’ d conceived it to be up to that point … and start again. The crisis we had been expecting was no longer “ going to happen ” but was, in fact, happening right then. We could read it in the headlines every morning before getting settled in the editing bay.

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The Mission
11

Having gone back to the drawing board, we were shocked when
I.O.U.S.A.
was among 16 out of 935 fi lms to be selected for competition at the Sundance Film Festival in Park City, Utah, in 2008. At the festival it became clear that the audience was in tune with the fi lm ’ s message, as it sold out every screening and we received standing ovations.
Variety,
the fi lm industry magazine, likened the fi lm to
An Inconvenient Truth
for economics. Kenneth Turan, fi lm critic for the
Los Angeles
Times,
called it the “ scariest fi lm at Sundance. ” Michael Sragow of the
Baltimore Sun
lauded our project as having come from a

“ new breed of documentary fi lmmakers. ”

We subsequently took the fi lm to Dallas; Philadelphia; Jacksonville, North Carolina; Oregon; and Silver Spring, Maryland. At each festival the fi lm was received with critical acclaim. We screened at the Maryland Film Festival, in our home town of Baltimore, with the help of festival director Jed Dietz, whose offi ce is a stone ’ s throw away from our own. Jed was instrumental in helping us navigate the early phase of the project. Again, we were encouraged by the audience ’ s response. By this time, we began to notice new faces in the crowd. Former senators and members of previous presidential cabinets arrived and took part in question and answer sessions. We hope they were paying attention.

David Walker, as he explains in the Foreword, was inspired by the fi lm ’ s reception. He was persuaded to resign his post at the Government Accountability Offi ce (GAO) to head up the Peter G. Peterson Foundation. His fi rst act at the Foundation was to acquire the fi lm from Agora Entertainment, the production company we founded to produce the fi lm, and subsequently to orchestrate the distribution of the fi lm.

Through the Peterson Foundation

’ s efforts, the fi lm

opened in 400 theatres around the country on August 21, 2008. The premier itself was held in Omaha, Nebraska, with a live simulcast satellite feed featuring Warren Buffett, Pete Peterson, and David Walker. During the two weeks following the event, the fi lm was screened at the Impact Film cintro.indd 11

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12 The

Mission

Festival, and was one of four selected for viewing at both the Democratic and Republican national party conventions.

The timing of the debut of the fi lm on the national scene and the release of this book couldn ’ t be more appropriate. Over the course of the project, the national debt alone has provided ample proof of what negative compounding can do to a balance sheet. At the time we were mailing
Empire of Debt
to Congress, and David Walker was sounding the alarm at the National Press Club, the national debt stood at $4.7 trillion. We didn ’ t want to believe the $8 trillion the Levy Institute projected by 2008.

Unfortunately, their projections fell signifi cantly short. On August 31, 2007, the debt hit $8 trillion. As
I.O.U.S.A.
debuted in theatres in August 2008, the debt spiraled over $9 trillion.

The promises on the books for all of the federal obligations, including Social Security and Medicare programs, already exceeds $53 trillion

— a number so monumental it makes

understanding the scope of the obligation next to impossible.

To meet its current obligations, the U.S. government racks up another $1.86 billion of debt every day. In very simple terms, every citizen already “ owes ” over $32,000. By 2010, that fi gure will be $38,000. By 2017, Social Security will no longer run surpluses and, thus, will no longer help fund the government’s other activities. From that point forward, the debt compounds negatively—and in dramatic fashion.

What ’ s at stake? The U.S. government is going broke. At this rate it won ’ t be able to do what you believe it can do. One study, conducted by the National Center for Policy Analysis (NCAP), suggests that without meaningful increases in government revenues and reform of the entitlement programs:

• By 2012, the federal government will stop doing 1 in 10

things it ’ s doing now.

• By 2020, the federal government will stop doing 1 in 4.

• By 2030, the federal government will stop performing half of the services it provides.

• By 2050, Social Security, Medicare, and Medicaid will consume nearly the entire federal budget.

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The Mission
13

• By 2082, Medicare spending alone will consume nearly the entire federal budget.

At the current rate, it ’ s inevitable: Most Americans are going to have to rethink what they expect from their government. Do politicians need to be held accountable for the promises they make during election campaigns? Seems like a natural. But individuals need to take responsibility for their own fi nancial future, too. Planning better, saving, and investing wisely in private life will make it easier for policy makers to make diffi cult decisions regarding the fi nances of the government.

■ ■ ■

We have set this book up in a different fashion than
Empire of
Debt
or
Demise of the Dollar.
The fi rst part, “ The Mission, ” can be read almost as if it ’ s a play — a tragicomedy of sorts. It ’ s a primer if you ’ re seeking a basic understanding of the nation ’ s biggest economic challenges, both public and private.

If you ’ d like to dig a little deeper, we ’ ve printed the full transcripts of all the interviews we conducted in the second part, “ The Interviews. ” There is no shortage of ideas, fi ery discussion, and infl ammatory statements. Some readers will want this book to be an attack on one party at the behest of the other. Still others will want us to throw Molotov cock-tails at the Establishment and suggest the United States government is a failure and deserves what it has coming. In this book, as in the fi lm, we do neither. We reserve those activities for other more appropriate locales.

Together, the book and fi lm do provide a unique slice of contemporary economic history in the United States early in the twenty - fi rst century. With any luck, we ’ ll make fi scal responsibility hip in Washington again and inject the themes of the book and the fi lm into the national conversation well before and long after the 2008 election.

Or maybe we should just wait for the next bubble.

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