Comments from IOUSA Forum

I was one of about 1900 people privileged to attend the Forum following the premiere of the documentary film I.O.U.S.A.

The film itself is terrific. You can see more about it (as well as the members of the Forum) at www.iousathemovie.com or on youtube. But for those of you who did not attend the Forum, here is my report on some highlights of the questions asked and answers given. I’ve put my own summary comments at the end.

Warren Buffett expressed an acknowledgement of the seriousness of the situation, but also his optimism for the future. He commented that he bought companies that had products so compelling they made money even if they were run by an idiot, because eventually they will. He paused and then added, “That applies to countries, too,” which drew laughter and applause. Buffett also said that since 1876 it has not paid to sell America short and we should not start now.

The head of the CATO Institute, William Niskanen, had several comments. He said our first challenge is to get the political leadership to acknowledge the problem. Whatever solution is devised must be bipartisan to succeed. Our most important capital is human capital, but our capital is becoming defective. The US ranks last in High School graduate achievement among industrialized countries. One of our deficits is in savings. We may have to consider mandating savings. (The implication here is that workers squander the money they make on things they don’t need, rather than workers don’t make enough money to have money left over to save.)

Someone called a trust fund an oxymoron—You can’t trust it and its not funded.

A woman asked about the outlook for Baby Boomers and Social Security. Here are some replies.

CATO/Niskanen: SS will be fine if we raise the retirement age. He also pointed to Chile of an example of the success of allowing private accounts in Social Security. Having actually read articles about this, I knew this experiment to be a failure. To his credit, Bill Novelli of AARP challenged Niskanen on his facts.

Buffett: Noted that the size of the economic pie will grow over time and the growth will help resolve some of the problems. Walker disagreed to a certain degree, noting that the numbers used in the charts and graphs were done in constant dollars (i.e. adjusted for inflation).

Peterson: The real challenge for the government to fund will be Medicare and Health Care, not SS.

Walker: 62% of the budget is on autopilot based on legal entitlement programs. We must control the costs of those programs so they don’t overwhelm the other 38%.

A young man asked what the panel thought the Presidential candidates should be saying about this issue.

Walker: Acknowledge the problem. Describe your plans for Budget controls, Tax Reforms and Health Care Reforms to control costs.

CATO: We must find a way to force our politicians to take a long term rather than a short term view.

Peterson: Our founders never intended the career politicians we have today who are focused on keeping their jobs by making people happy in the short term.

AARP: Admit the problems are complex, interrelated and toxic. Hold the politicians accountable. Toss them out if they will not make hard choices.

Peterson: We must have bipartisanship. That will only happen if voters demand it.

A woman named Hutchinson asked what would happen if the Chinese were to sell all the debt they owned of ours.

Buffett: Discussed the impracticality of selling our debt, i.e. getting out of dollars means buying something else like the Euro.

Walker: In theory, if that started to happen, then we would have to raise the interest rate we pay in order to keep our debt “sold”. This would raise the amount of interest we pay, which would in turn take money from other government needs, which in turn could cause us to borrow more money. It’s not what we want to do.

A woman named Nancy asked if there was anything an average American can do to solve these problems.

AARP: Take care of your health. Work harder to save instead of consume. Be a good citizen—Be knowledgeable of and participate in the political process.

CATO:  Stop expecting the government to ensure us against everything that happens to us. Part of the reason we have such a low savings rate is the expectation that government will take care of us, so we don’t have to save for a rainy day.

Walker: Realize the government has no money other than what it takes from individuals through taxation. Reward politicians who tell us the truth, even if its complex and hard to understand. Punish politicians who deal in bumper sticker slogans.

Peterson: Get educated and get involved. Save more.

Buffett: Invest in your own potential. Develop your own skills and make your own opportunities.

The moderator asked David Walker about his impressions from doing his Fiscal Wake Up Tour across the country.

Walker: Americans are a lot smarter than they are given credit for. Most Americans are less liberal than the Democrats we have in Congress and less conservative than the Republicans we have in Congress. As a result, they are highly frustrated with the results they are getting from Congress. For us to demand action, the pain of doing nothing must become greater than the cost of doing nothing. Doing nothing is what we’re doing now.

The panelists were asked by the moderator to make any final comments.

Buffett: This is still the best place in the world to be. Imagine if you were one of twins in the womb and the Almighty came to you and gave you a choice. One of you would be born in Bangladesh and never pay a dime of taxes your whole life. The other would be born in the United States, but to earn the privilege you must be willing to pay more taxes than your twin. My contention is that you would have one hell of a bidding war go on.

AARP: We have a program called Divided We Fail trying to overcome the polarization in our politics. Please support that program.

CATO: I’m pleased to be here as an economist. Economists are people who are good with numbers but who lack the personality to be accountants.

Walker: The first deficit we must address is the Leadership Deficit. If we can solve that, then we can solve all the others.

My own comments: Several of the panelists referred to the need to develop the political will to deal with our Fiscal crisis. My own assessment is this.

Our government is broken. The reason our government is broken is because we have polarized politics. Polarized politics is feeding ineffectual people into our system of government. If you want to fix our government so it can actually solve our problems, then we must fix our political process first. If you want to know what needs to be done to fix our political process, then read my book, my Blog and my weekly Ezine. Join in the discussion and be part of the solution, not part of the problem.