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Savings and loan: Former U.S. Treasury Secretary Paul O'Neill sounds the alarm.
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If scary myths are repeated enough, they start to be believed, which is why Wordplay director Patrick Creadon’s scary-seeming I.O.U.S.A. is likely to be taken as fact by a lot of people. Designed as a promotional film to boost a campaign being waged against federal debt by the Peter G. Peterson Foundation and the Concord Coalition, this is less a film than an argument — so much so that it’s hard to imagine many film critics, or audiences, without some knowledge of economic history being able to respond to it in any way except with sheer terror. Briefly, the argument goes like this: Deficits and debt are always bad, even immoral; therefore, the growing federal budget deficit, the national trade deficit and the nationwide failure to save money are ticking time bombs capable of destroying the country. The U.S., in the words of the film’s hero, former Comptroller General David Walker, is like Rome, collapsing from within from a toxic cocktail of unpaid debts, imbalanced trade, living beyond its means, and expanding government without a way to pay for it.
Walker is right only on the final point: Today’s federal budgets absurdly combine big programs with low taxes, which means inevitably that taxes must skyrocket or the federal budget must shrink. The film’s biggest boogie man is the Social Security meltdown — when the giant pool of retiring baby boomers cash in their chips, and the much smaller set of younger workers isn’t able to pay enough in, the system will break. But this is old news, as is the reality that Congress will have no choice but to reform Social Security sooner or later, along with those other big-ticket items, Medicare and Medicaid. The film’s biggest myth is that Americans don’t save, unlike, say, the Chinese. But Americans do save — a little in banks (like the Chinese), a lot in home equity and capital gains (like nowhere else in the world). So much so, as author Ken Fisher, one of the world’s most highly respected investors and stock market historians explains in his recent book, The Only Three Questions That Count, that Americans are actually the world’s best savers.
I.O.U.S.A. is stuffed with dazzling, spooky motion graphics and charts, one of which shows how our most disastrous president, Andrew Jackson, reduced federal debt to zero by the mid-1830s after the run-up caused by the Revolutionary War and the War of 1812. The film celebrates this, when in fact Jackson’s actions busted the national bank, triggering the so-called Panic of 1837 and a six-year depression. History repeatedly shows that, defying conventional wisdom, balanced budgets and surpluses reliably produce recessions, stock market declines and worse. (The downturn during Clinton’s surpluses was reversed only by an extraordinary tech boom, which had nothing to do with fiscal policy.) Like companies, governments need debt to function properly, as any bondholder knows. Debt is not only not the evil Creadon’s film depicts it to be, it’s essential. Our current debts and deficits? No worries. One graphic that I.O.U.S.A. doesn’t include is a national balance sheet of our assets and liabilities, which would illustrate that the former is more than double the latter. We’re in the black, and a film this deep in the red isn’t something to be scared of at all — or taken seriously.
I.O.U.S.A.| Directed by PATRICK CREADON | Written by CREADON, CHRISTINE O’MALLEY and ADDISON WIGGIN, inspired by the book Empire of Debit by WILLIAM BONNER and WIGGIN | Produced by O’MALLEY, SARAH GIBSON and OPEN SKY ENTERTAINMENT | Released by Roadside Attractions | Sunset 5
