I.O.U.S.A. - Wake Up!

Jen and I saw the film I.O.U.S.A. Thursday night.

The film is a sobering look at the debt-level and deficit-spending of the United States. The short story is that the United States government currently owes about:

$9,500,000,000,000 (9.5 trillion USD)

If you are a US citizen, your personal share of this debt is $31,600.

United States tax revenues for 2008 are approximately $2.4T USD and expenditures are about $2.8T USD. So, the U.S. will add at least $400B to our debt this year (note: saying 'at least' here, because a lot of the War on Terror is not included in the official budget). The most memorable line from the film for me was George W. Bush chuckling that he "got a B in economics, but an A in tax cuts." I really wish he'd studied harder because he took a budget surplus (Clinton did it with the help of Congress) and managed to double our national debt with 8 years of deficit-spending.

The public debt is important because the citizens of the United States have to pay it back. As the film points out, the accumulation of public debt is taxation without representation -- not just we, but our children will be saddled with this burden. The burden can only be relieved in two ways:

1. collect more tax revenue than what is spent; pay down debt
   
2. printing money

#2 is a really bad option because it will cause hyper-inflation and political unrest, e.g. 2008 Zimbabwe, pre-WWII Germany.

That leaves us with paying down the debt with tax surpluses. Saturday Night Live has done a funny how-to skit explaining how to do this.

A somewhat 'sideways' option is just to pay the interest. If we were to only pay the interest on the debt, about $237B in 2007, we are consuming ~10% of the federal budget to do it even at today's low interest rates. This money could have been spent on something more productive like development of renewable energy, returned to the people as lower taxes, or bringing back the unicorn.

Only buying stuff you can afford sounds a bit simplistic and a little un-fun, but it is sustainable.

But wait! There's more!

The unfunded liabilities of the social programs Medicare, Medicaid, and Social Security bump our debt up to the order of $53T (your personal share is $175,000). This number can and probably must change as this money has not actually been spent yet -- however, this is the current level of spending guaranteed by our current laws. As a country, we are going to need to decide how to fulfill our social obligations in a manner consistent with our country's ideals, varied as they are.

The town-hall discussion that followed the film had the following leaders:

• Warren Buffet (world's richest person)
• David Walker (former head of GAO)
• Pete Peterson (Blackstone Group, Pete Peterson Foundation)
• Bill Novelli (AARP)
  
• William Niskanen (CATO Institute)
  

in a lot of agreement on the broad strokes of how to fix the problems facing our social programs. The proposed solutions boiled down to focusing the benefits on those that really need them and then delivering those benefits efficiently. Means-testing benefits and putting the programs on a budget were suggested immediate, "given" steps, but the consensus recommendation seemed to be for a bi-partisan commission to recommend specific solutions to be enacted.

These discussions are an important starting point for fixing the fiscal ails of our country. I hope to see our Obama and McCain addressing these topics as we close in on the presidential election.