I.O.U.S.A.nswers
By: BJ Lawson
We had a standing-room crowd at the I.O.U.S.A. premiere in Raleigh, North Carolina this evening. Two auditoriums were sold out — both the one sponsored by our campaign, as well as the regular showing. The movie provided an excellent overview of the “fiscal cancer” that David Walker, former head of the Government Accountability Office (GAO), has been courageously discussing for the past several years. The discussion about addressing these issues, however, is just beginning — and will be much more controversial.
If you missed the movie, there are some key excerpts available on YouTube, such as David Walker’s descriptions of our four deficits:
As an example of leadership deficit, consider how Congress has been abusing the trust of our senior citizens by raiding the Social Security trust fund every year:
So how big is our “fiscal hole”? David Walker explains:
After the movie, we watched a live Town Hall discussion from Omaha, Nebraska, moderated by CNBC’s Becky Quick and featuring panelists Warren Buffett, CEO of Berkshire Hathaway; William Niskanen, chairman of the Cato Institute; Bill Novelli, CEO of AARP; Pete Peterson, senior chairman of The Blackstone Group and chairman of the Peter G. Peterson Foundation; and Dave Walker, president & CEO of the Peter G. Peterson Foundation and former U.S. Comptroller General.
The best part about the event is that we had a solidly bipartisan crowd. As such, there was room for everyone to be offended: For example, some Republicans were offended that the Clinton years were painted with such a glowing brush, as spending restraint coupled with a growing economy caused the federal debt to decrease for a change (unless you count the fact that Congress spent the Social Security surplus, of course). Some Democrats were offended by the movie’s downplaying the effects of allowing the Bush tax cuts to expire — such a step will only deal with 10% of our fiscal hole.
There is, however, bipartisan agreement on two critical points:
- We need change in Congress. The biggest applause in our theater during the Town Hall discussion was after Pete Peterson’s assertion that our founders never intended a government run by career politicians. (David Price, take note. After 22 years in Washington and accumulating a healthy Congressional pension, you are a career politician.) Bill Novelli, CEO of AARP, also received resounding applause for his comment that our two party system is “toxic”, and partisan bickering is one of the biggest impediments to meaningful dialog.
- We cannot keep doing what we are doing. Current trends for public debt, private debt, foreign trade balances, and Medicare/Social Security obligations are unsustainable.
The second point was driven home by the movie, and clearly emphasized by David Walker during the Town Hall discussion. In fact, the oddest moment of the entire evening was when Warren Buffett began his comments by complimenting the movie as well-done, and then stating he was going to provide a more optimistic “Pollyanna” perspective. He then proceeded to make the claim that our overall situation is not that serious, since our massive future obligations can be paid for through “the pie getting bigger.” In other words, we can “grow our way out” of the problem.
At that point, the theater’s cognitive dissonance was so thick you could cut it with a knife, and it was clear that a showdown was just around the corner. David Walker did not disappoint, and adroitly yet diplomatically smacked down Warren Buffett’s erroneous assertions. After noting that he has tremendous respect for Mr. Buffett, Mr. Walker reminded everyone that the projections of looming bankruptcy discussed in the film already take GDP growth into account. Assuming traditional growth rates, we cannot grow our way out of this problem. Of course, if growth does not meet projected expectations, things could be worse, and sooner.
Importantly, the Town Hall discussion did attempt to spark some debate about how to fix these problems. Where debate did arise, however, its outcome was entirely too predictable. For example, William Niskanen, chair of the Cato Institute, proposes privatizing a portion of Social Security so that individuals can control their own retirement savings and seek higher returns than our insolvent Social Security system will provide. At the same time, he wisely counsels us to stop government bailouts — the government cannot, and should not, prevent businesses or individuals from making bad investments and losing money.
The counterpoint was provided by Bill Novelli of the AARP. He’s against privatizing Social Security — how do we prevent newly empowered savers from putting their nest egg into Freddie Mac, Fannie Mae, Bear Stearns, and Lehman Brothers stock? While Mr. Niskanen is wisely advising us to stop relying on the government to “bail us out,” how can the average American truly “save” when deposit rates don’t keep up with inflation, and beating inflation requires paying the financial services industry for the privilege of putting our savings at risk in volatile markets that have turned into casinos for the highly-leveraged and well-connected?
So how can we cut the Gordian knot? I can envision three ways to proceed:
First, we could try to address the problems within the confines of our existing money system and expected ongoing budget deficits. As David Walker pointed out, the government has no money. It can take money from you in taxes, only to provide benefits to you somewhere else. It can borrow money, but that condemns us to pay the money back, plus interest. It can print money through the Federal Reserve, but simply printing money to meet obligations didn’t work for the Weimar Republic, and isn’t working for Zimbabwe. Within our current framework, we need to cut spending, cut entitlement benefits, and raise taxes to more punitive levels.
Alternately, we could stop and immediately seek debt counseling: end deficit spending, enforce a balanced budget, and fund our entitlement programs by refinancing our existing federal debt over a longer period of time while being more intelligent about what promises we honor, to whom, and when. You can think of this as a self-imposed and somewhat-negotiated “bankruptcy plan” where we tell our creditors that the rules are changing a bit.
A well-documented plan of this type has been proposed by Texas CPA Davis Jackson. The summary videos below are worth watching:
There is a third path to consider, however, in addition to the above. Given the severity of our situation, it is worth asking some questions about our money system itself, its history, and who benefits from preserving the status quo. I was impressed that the movie provided some education as to the nature of our money system, and the role of the Federal Reserve’s monopoly in “managing” the money supply. Most importantly, the selected clip of John Stewart’s interview with Alan Greenspan provided a rare (if deeply embedded) moment of clarity:
Watch the segment from 2:25 to 4:33. John Stewart asks the key question — if we say we live in a “free market economy”, why do we need a Federal Reserve to set interest rates? Greenspan waxes poetically about the gold standard for a while, and then answers: “To the extent that there is a central bank governing the amount of money in the system, that is not a free market.”
So, then, I ask a rhetorical question that’s often at the heart of the “liberal” versus “conservative”, or “left” versus “right” debate. If our money, which is the foundation of almost every economic transaction, does not exist in a “free market” but is instead managed by a monopoly acting in its own best interest, can we claim that any part of our economy is actually free?
That question, briefly glimpsed during the movie, has been asked before. In fact, a hundred years ago the “money question” was a topic of active discussion. The following quotation is from the book High Cost of Living by Thomas Cushing Daniel, published in 1912:
I urge all voters to apply this crucial test to their representatives before supporting them.
Make them commit squarely and unequivocally to these questions. Do you believe Congress should exercise its sovereign power as provided in the Constitution of the United States to create money and regulate the value thereof and control the circulating medium in the interest of the whole people? Or do you believe this sovereign power should be transferred to Banks of Issue?
Their answers will prove conclusively whether they are with the people or against them.
Or do you believe that Banking Corporations should issue a credit substitute and through it control the money and circulating medium of exchange of the people of the United States in their own interest?
Watch your presidential candidate carefully and see that he commits himself clearly on this vital question. It will be a true test of his honesty and fitness for office. Admitted ignorance on the monetary issue should not excuse him. The subject is as old as our government, and if he does not know enough about it now to answer these test questions, he is not qualified to fill the position he aspires to, and should not ask your votes.
Asking basic questions about our money system opens up additional possibilities to advance prosperity and liberty. Most importantly, it gets us moving in a direction towards following the Constitution, and having a government that honors its commitment to serve the people as opposed to special interests.
Solving this dilemma will not be easy, but it is possible. Pete Peterson noted that despite best intentions and claims of “bipartisanship” and “compromise”, someone will be hurt as we work to address these imbalances. To advance a just and sustainable future, we need principled leaders in Washington who will advance a Constitutional government that levels the playing field, and repairs broken systems that punish average Americans for the benefit of a few.
What are your thoughts on the challenges, and potential solutions?
August 22nd, 2008 at 3:19 am
I.O.U.S.A….
Americans should be marching on D.C. by the millions with pitchforks in hand in protest of what the government has done to the economy and the nothing it plans to do about it. Yet they aren’t, primarily because they don’t understand the pro…
August 22nd, 2008 at 8:46 am
I agree that some issues were addressed and others were not. We need to focus on the following:
* Either allow competing currencies or restore the gold standard
* Hold our elected government officials accountable
* Eradicate apathy
* Educate the youth
See you all in Minneapolis!
August 22nd, 2008 at 9:08 am
Awesome summary Dr. Lawson! I hope everyone that is gonna vote in your district reads this blog. So they can make a well informed decision at the voting booth. I think that David Price might be packing up his office soon, real soon. Price and many other incumbents should be also. Look forward to seeing Lawson on the voting record list next year!
August 22nd, 2008 at 9:09 am
Thanks for hosting this event BJ. It was a great opportunity to see the movie. I hope the movie has a profound impact on the public.
August 22nd, 2008 at 9:50 am
It seems like we all know the fed is messing things up, but “we” are too few.
August 22nd, 2008 at 10:17 am
I agree with the marching-on-Washington-with-pitchforks remark. At this point in time, I actually regard that as a pretty mild reaction to the economic sevitude that has foisted upon us. The central bank and their handmaiden politicians have mortgaged us to such an extent that we and our children face generations of hardship in covering and repaying this incomprehensibly huge debt.
August 22nd, 2008 at 1:04 pm
The movie was great and well worth the $12.50 admission fee. Unfortunately most of the population won’t watch it….many will re-elect their incumbent politician who will do nothing about the tough choices that need to be made now…and many simply don’t care like the ones on this video
http://www.youtube.com/watch?v=7zsr0UpVjoE
August 22nd, 2008 at 1:36 pm
It’s a very important movie because it gives America the wake up call we needed. And its a topic that is crucial for our elected officials to understand. From watching CSPAN, however, its unfortunately clear that very few in congress do understand it.
The issues I have with the movie itself, and the Empire of Debt book for that matter, is that it is incongruous and the subject is poorly explained. I understand it very well, but certainly not from the book or the IOUSA movie.
http://www.geldpress.com/2008/08/iousa-review-falls-short-of-expectations/
August 22nd, 2008 at 4:56 pm
For me, the discussion was more compelling than the film and, as the panel suggested, the leadership deficit is a great place to start. The panel discussed how our pandering politicians are unlikely to address a difficult issue where the truth might be unpopular and results will take a long time to achieve. Oh yeah - and there was discussion about our do-nothing congress who, unlike our founding fathers, are now full time legislators with cushy benefits. Aargh
By hosting this event, BJ showed his willingness to address the real issues that we face and his interest in educating us - not only so we can support his efforts but so we can hold him accountable. What a refreshing change!
August 23rd, 2008 at 8:05 am
It is encouraging that we have a candidate who not only acknowledges the problem, but actually paid for his district to be educated. While most people still don’t “get it,” well done and highly publicized documentaries like this one can be a powerful force in educating the public and producing wide-spread calls for change. (”An Inconvenient Truth” and “Supersize Me” are two recent examples.)
As I see it, there are two issues at the heart of this matter. The first is that neither congress nor voters seem to have any mental correlation between the amount of money the government takes in and the amount it is allowed to spend. We absolutely have to change that perception. If we want more programs, the revenue has to come from somewhere. The second problem is in the assumption that the government should be providing these services in the first place. After working for one of the largest corporations in the US for the last 10 years, I can tell you that the bigger the company, the more inefficient…and those companies are trying to make a profit. When you take an organization as big as the US government, and remove the accountability to shareholders that large corporations face, you have a recipe for gross inefficiency, wasteful spending, bogus contracts, and corruption.
August 23rd, 2008 at 7:06 pm
The films purpose was to position Peterson, his organization, and friends as the experts on the debt problem. This enhanced credibility can then be leveraged to convince Americans that Peterson and friends should be trusted with the correct solutions. But, who are Peterson and company? And, why should we really trust him and his organization?
Peterson is the former head of The Blackstone group, which is an investment banking firm.. He is also the former head of Council on Foreign Relations (CFR). The CFR is head of the same Washington Establishment that gave us massive national indebtness and continues to encourage it via trade policy today.
http://www.bloomberg.com/apps/news?pid=20601088&sid=aSi411UWhgkg&refer=home
Robert Rubin left investment banking to join the Clinton administration, and later returned to investment banking.
And, the list goes on. Most of the people in the film have deep ties to either investment banking or the CFR which was founded by David Rockefeller of Chase Manhattan Bank.
Consequently, the main solution offered in the panel discussion benefits those same banking interests. Peterson argues for “forced savings accounts”. We have seen this before in the form of Social Security as forced savings for retirement that cannot be withdrawn at one’s choosing. But, this time the solution is designed to bailout the same big insider banks that caused our financial mess.
Where is the bail out? Right now many banks have a very bad balance sheet. Their greed has led them to make bad loans to governments, individuals, and businesses. Thus, depositing freshly confiscated funds into their banks will offset their losses.
A better solution is to allow the free market to work. Let the banks that engaged in poor decision making fail. Allow JP Morgan Chase to fail and you will make a big dent in saving America from a diabolical bank that works so hard to indebt Americans each and every day. Bail JP Morgan Chase out with tax money, or forced savings accounts, and that money will come out of your hide one way or another. Moreover, forced savings would institutionalize the big insider banks as our new feudal lords.
Finally, get rid of the Federal Reserve, which is nothing more than giving monopoly control of our economy to the banking cartel that has a powerful financial incentive to create public policy that encourage our government’s indebtness. Who, afterall, did you think received the interest payments on the national debt ?
Roxane Premont
August 24th, 2008 at 8:00 pm
I thought the movie was inherently flawed for a few reasons, some already addressed by Mr. Lawson:
1.) The Fed is clearly privately owned yet functions as our central bank. This is wrong and must change. The private Fed is inherently evil - any fiscal discussion that doesn’t expose the Fed is deficient.
2.) Increasing taxes of any type is not an option. Considering the “average” US citizen only gets to keep his income sometime in May after all taxes are considered, we already have de facto socialism in place.
3.) Fiat currency was never discussed. Since Pres. Nixon completely divorced the US dollar from the gold standard things have gotten progressively worse. The movie didn’t mention that the worst deficits have occurred AFTER Nixon’s administration. Historically every fiat currency has eventually become worthless- the US dollar will suffer the same fate if it remains backed by nothing except the “full faith and credit of the US government.”
4.) The movie also failed to mention the possibility of a balanced budget amendment or simply making a balanced budget law.
5.) The so called “deficit of leadership” is the desired result of the power elite that controls both parties. There are people like Ron Paul and Walter Jones in Congress, but their views are intentionality ignored and marginalized by their corrupt colleagues and the corporate press.
6.) The role of the “fourth estate” as a force to advance the two party fraud was not discussed.
7.) The movie did not expose the income tax as illegal. As Ron Paul has stated, we pay federal income taxes not because they’re legal but because the Feds have the guns.
8.) A much better movie to expose the real fiscal issues is “America: From Freedom to Fascism.”
August 25th, 2008 at 3:36 pm
Thanks for hosting the movie, Dr. Lawson!
I thought the movie was pretty well done but I agree with all of the complaints I’ve heard so far. Mainly I was disappointed that the film and the discussion after focused on fiscal policy without addressing monetary policy. Inflation, the falling value of the dollar and the private nature of the Fed are all factors that greatly influence the productivity and competitiveness of our country. If we’re going to make the pie bigger, like Warren Buffet said, we need to remove the restraints put on our businesses by our poor monetary policies.
August 25th, 2008 at 5:28 pm
Cindy,
If we follow the constitution, the gold standard and competing currencies are not mutually exclusive. The congress is authorized to coin money, and the states are prohibited from declaring paper currency to be legal tender. There’s nothing in the constitution to prevent private issuers of bank notes from offering whatever people are willing to use.
-jcr
August 27th, 2008 at 10:21 am
BJ Lawson’s talent lies in his ability to distill down the complicated monetary/fiscal issues in a format that anyone can understand.
I used to encourage my GOP and DNC friends to go to the Mises Institute site for all things monetary. BJ’s site has now become my go-to site…where I send new “recruits” for training on monetary policy and fiscal common sense.
August 29th, 2008 at 1:00 pm
All I have to say is go Lawson. You’ll will definitely win this race and I hope you send that message to all the other career or corrupt politicians that their time is up if they don’t get their act together. Good luck and THANK YOU!!!
August 31st, 2008 at 10:54 am
Anyone seen or heard any polls about Lawson’s chances? The way NBAF blew up in Price’s face I have believe there is a very large group of people who will be voting for BJ in November.
September 3rd, 2008 at 3:41 pm
[...] I.O.U.S.A.nswers [...]
September 16th, 2008 at 2:47 pm
This movie is obvious propaganda for the rich elite that sponsors the picture such as Blackwater whom would benefit if we all fall for their deceipt. This movie has no credibility because if fails to address many of the issues that actually go to the core of the problems.
such as:
1) Corporate crime for example it is well known that Health insurance is a big problem, but the movie fails to report the billions of dollars that Ins companies steal from Medicare/Medicaid. Billions in administrative fees etc…
2) Corporate Welfare of billions in tax cuts and loopholes that go to the same Corporations that paid for the film. USA prefers to tax the average person’s wage but corporate profits do not pay tax.
3) Wastefull Military budget by going to war with small countries that are no threat to Americans or our way of life. That is a big fat lie. Tones of contracts for the military industrial complex paid with our tax dollars. Halliburton, Blackwater, etc…
4) Engergy and oil companies stranglehold on huge tax incentives, no pollution tax.
5) How Wall street securities speculation is not taxed, but honest income is. If we taxed speculation we could have a good source of revenue and at the same time discorage speculators from questionable practices. We can see the result of no regulation of the financial system. Of course bailed out by who? The tax payer. Remember the government does not make any money. .
6) The rip off of the current monetary system, the federal reserve interest that we pay to borrow our own money.
They want you to believe that the problem is social security and medicare. That is a big fat lie…
THIS MOVIE IS NOTHING BUT PROPAGANDA FOR THE SAME PEOPLE THATARE RIPPING US OFF RIGHT NOW….. DON’T BELIEVE IT.. IF THEY REALLY WANTED TO TELL THE TRUTH THEY WOULD TALK ABOUT THE ABOVE ISSUES AND THEY DON’T.
September 21st, 2008 at 6:04 am
[...] Alan Greenspan noted that our money system is not a free market — the power over our money is centralized in the hands of the Federal Reserve. That fact, along with the Federal Reserve’s support for the inherently unstable process of fractional reserve banking, create the bricks that break our windows. [...]
November 13th, 2008 at 2:02 pm
This movie is really good at scaring you. Some of the projections are absolutely bone-chilling. But it largely overstates the problem — the deficit is currently at a manageable level of 3% of GDP. And we need to run a deficit in this economic downturn to ensure we don’t have skyrocketing rates of unemployment. The flim also ignores one of the best solutions to the “problem” — health care reform. If our health care system were as efficient as other industrialized nations, and if Medicare/Medicaid were able to take advantage of these lower costs, then our deficit problem would basically disappear. Check out the Center for Economic and Policy Research, they have a nice graphic that demonstrates this well: http://www.cepr.net/calculators/iousadeficit/calc_iousa_deficit.html