I.O.U.S.A. (8 page)

C h a p t e r 1

THE REAL STATE OF

THE UNION

I would argue that the most serious threat to the
United States is not someone hiding in a cave
in Pakistan or Afghanistan, but our own fi scal
irresponsibility.

—David Walker, former comptroller

general of the United States

On January 28, 2008, the forty - third president of the United States, George W. Bush, gave the fi nal State of the Union address of his presidency. During the speech, he was interrupted 72 times by applause. Curiously, the president only broached the nation ’ s defi cit once, briefl y, and then only to reassert the administration ’ s pie - in - the - sky projection that it will be reduced to zero by 2012.

The president asserted his administration ’ s premise that tax cuts would spur economic growth and that growth would, in turn, help the nation “ grow ” its way out of debt. Yet, even by Congress ’ s own measures, as of late January 2008, the 15

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16 The

Mission

yearly defi cit for that year was already on track to increase by $219 billion. It in fact ended the year at $482 billion more than twice the projection. Those fi gures don ’ t include off -

budget spending for the wars in Afghanistan and Iraq. Nor do they include the so - called economic stimulus checks the president and Congress passed out to American consumers in the spring. The economy in the meantime had been teetering towards recession — no “ growth ” at all — for nearly two years.

During the speech, the President used the word
debt
once, despite the fact that the national I.O.U. had already crossed the $9 trillion threshold in the same month. By the time the Bush administration leaves offi ce in January 2009 it will have tacked on another trillion.

A complicit Congress has already given the green light for

Debt Ceiling:

The maximum

such a debt burden by raising the
debt ceiling
to $10.6 trillion.

borrowing power

On July 26, 2008, Congress snuck the increase into the Federal
of a governmental

Housing Finance Regulatory Reform Act of 2008, which was
entity; this limit

passed to bail out giant mortgage enablers Fannie Mae and
is set, and can

Freddie Mac and to help victims of bank foreclosures.

therefore be raised,

by Congress.

A short review of contemporary history reveals that the State of the Union is nothing more than political theatre. Congress has interrupted every president with partisan applause since the addresses made their television debut during the Eisenhower administration. We combed the archives looking for examples of leadership in tough economic times but found little more than sound bites and vacuous promises:

“ We must try to break this calamitous cycle. ” President Eisenhower was referring to the huge explosion in our debt during World War II.

“ We will continue on the path to a balanced budget. ”

Then President Johnson put his stamp of approval on Medicare benefi ts, one of the most expensive programs in federal history.

“ We have been self

- indulgent, ” President Ford chided

Congress in 1975.

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Chapter 1 The Real State of the Union
17

“ and now the bill has come due . . . . The State of the Union is
not
good. ”

“ We must act today in order to preserve tomorrow.

”

President Reagan looked earnest, but he grew the debt more than two and a half times — from just under $1 billion to $2.6 billion.

“ We will solve problems, ” George H. W. Bush (number 41) said before failing to keep his promise not to raise taxes,

“ and not leave them to future generations. ”

“ We need a spending discipline in Washington, D.C. ” said President George W. Bush (number 43) to wild applause on January 28, 2008.

As we have seen, Congress and the presidents bask in the heat of TV camera lights, but behind the scenes — in the committee rooms and oak - paneled bars of Washington D.C. —

it is clear that the process for managing the nation ’ s fi nances is badly broken. When Bush 43 came into offi ce in 2001, the federal debt was $5.6 trillion. He ’ ll leave the next president —

and every other American citizen

— nearly twice as much.

Meanwhile, the real state of the union — or at least the popular perception of it — can be seen by rifl ing through the headlines of the nation ’ s mainstream media:

December 4, 2007: “ Economy moves to fore as issue for 2008 voters, ” writes the
Wall Street Journal
.

March 4, 2008: “ Record High for Oil Socks Economy ” states the
Chicago Tribune
. Gas prices, too, have been weighing heavily on consumer balance sheets.

May 16, 2008:

“ U.S. Consumer Confi dence at Lowest

Since 1980. ” reports the
Financial Times
, noting that 1980

was the last year in which concerns about infl ation played a major role in a presidential election.

June 30, 2008: “ Expect U.S. economic woes to linger into 2009, ” warns the
Christian Science Monitor
.

July 1, 2008:

“ It ’ s a Murphy

’ s Law Economy,

” says

the
Baltimore Sun
, referring to the bursting housing c01.indd 17

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18 The

Mission

bubble, suggesting that “ whatever can go wrong ” in the economy “ will. ”

Beginning with revelations that the investment bank Bear Stearns was nearly insolvent, in the summer of 2007, the average citizen learned new terms like
subprime
and
infl ation
and woke up to the fact that something wasn ’ t right with the economy.

Enter our fi rst protagonist.

The Fiscal Cancer

“ Who is David Walker? ” Steve Kroft asked on CBS ’ s March 4, 2007, episode of
60 Minutes
, “ and why should we care? ”

GAO:
This non-

According to Kroft, “ He ’ s the nation ’ s top accountant —

partisan agency

is the audit,

the comptroller general of the United States. He ’ s totaled up the
evaluation, and

government ’ s income liabilities and future obligations and con-investigative arm of cluded that our current standard of living is unsustainable unless
the U.S. Congress

some drastic action is taken . . . and he ’ s not alone. ”

and is in the

In his capacity as the comptroller general of the United
legislative branch

of government.

States, David Walker was head of the U.S. Government
It exists to help

Accountability Offi ce, better known as the GAO. The offi ce is
improve the

in the legislative branch of government and, as Walker stated in
performance and

the documentary
I.O.U.S.A
, is charged with “ improving trans-accountability

of the federal

parency, enhancing government performance, and assuring
government for

accountability for the benefi t of the American people. ”

the benefi t of

Three months before the

60 Minutes
episode aired,

the American

we ’ d had the opportunity to meet with Mr. Walker and
people, according

came to see that we shared similar concerns for the state of
to its most

recent mission

the economy. Over the next year of fi lming and producing
statement. At the

I.O.U.S.A.,
we talked to him in numerous locations around
helm of the GAO

the country. This fi rst interview was at his offi ce at the GAO in
is the Comptroller

Washington, D.C.

General of the

“ I was set to be career military, ” says Mr. Walker. “ I had
United States,

which is a 15-year

appointments to the Naval and Air Force Academies but I
position appointed

couldn ’ t go at the last minute because I had a bad left ear
by the President.

and it kept me out of my military career. I knew it was only c01.indd 18

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Chapter 1 The Real State of the Union
19

a matter of time before I decided to serve my country in some way. And I ’ ve been fortunate to have three presidential appointments — one from Reagan, one from Bush 41, and this one from Clinton. It ’ s been a pleasure and an honor to serve my country. ”

Today, however, for Mr. Walker, service to his country includes issuing a dire warning. “ We

suffer from a fi scal cancer, ” he asserted
“We suffer from a fi scal cancer,”

Walker asserted on CBS’s
60 Min-

on
60 Minutes
. “ It is growing within
utes.
“It is growing within us and
us and if we do not treat it, it could
if we do not treat it, it could have
have catastrophic consequences for
catastrophic consequences for our
our country. ”

country.”

Fiscal cancer? Sounds grave.

What ’ s he talking about?

Let ’ s see. When we began making the fi lm the federal debt was $8.7 trillion, and as mentioned in the beginning of this chapter, that number is growing daily at a rapid rate.

With a number this big, it helps to compare it to the overall size of America ’ s economy, or what economists call the
gross domestic product
(GDP). In February 2007, when our federal debt was $8.7 trillion, our GDP was around $13.5 trillion
Gross Domestic

Product (GDP):

in size. That meant that our federal debt was about 64 percent
The total market
of our GDP. This level of debt to GDP ratio is not the real
value of goods and
problem. It ’ s where we are headed that matters.