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Fiscal Wake-Up Tour

James A. Baker III Hall

The cost of the multiple government bailouts and other economic measures to combat the current financial crisis is well over $3 trillion and increasing rapidly. This figure, however, pales in comparison to the funds needed to bail out the U.S. government. In fiscal year 2008, the government"s annual budget deficit totaled $455 billion, with that figure projected to potentially increase to over $1 trillion in 2009. The total national debt stands at $10.8 trillion as of Sept. 30, 2008, while the government"s total fiscal exposure, which includes explicit liabilities the government is legally obligated to fulfill, is more than $53 trillion. Continuing on the path of fiscal irresponsibility is no longer viable and could have dramatic consequences in the next 20 years if actions are not taken to balance the federal budget. Strong and principled leadership is needed to correct the United States" structural budget problems, which threaten to significantly reduce the welfare of future generations. The Concord Coalition believes that an engaged, informed and involved public is key to resolving the nation"s fiscal challenges. The Fiscal Wake-Up Tour"s mission is to cut through partisan rhetoric and stimulate a more realistic public dialogue about our nation"s fiscal future and what the costs might be. Our elected leaders in Washington, D.C., know there is a problem, but they are unlikely to act unless forced to by their constituents. The tour began as a series of public forums around the country and now includes in-depth local committees to further focus attention on our nation"s daunting long-term fiscal challenges.  

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David Walker - Fiscal Wakeup Tour

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Former US Comptroller General David Walker CPA, now President of the Peter G. Peterson Foundation, describes the nation's fiscal picture and outlines hard choices that will have to be made to maintain the Federal government's solvency and credit rating.   Introductory remarks by Gov. Jim Douglas. Following his presentation, Mr. Walker joins a panel to discuss Vermont economic and fiscal issues, including Prof. Art Woolf, David Coates CPA, and Auditor of Accounts Tom Salmon CPA, moderated by Mary Alice McKenzie. This latest in the Sheraton Economic Series was sponsored by the Ethan Allen Institute , Lake Champlain Regional Chamber of Commerce, Vermont Business Magazine, Vermont Tiger, and the Vermont Economic Newsletter, and is hosted by the Sheraton Burlington Conference Center.

• Production Date: 08/19/2010
• Catalog Number: none
• Archive Number: 8719
• Series: none
• Length: 02:32:11
• Town: Vermont
• Geography: National
• Event Type: General
• Content Type: Other

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Penn to Host Fiscal Wake-Up Tour

WHO: The Concord Coalition David M. Walker, president and CEO, Peter G. Peterson Foundation; former comptroller general of the United States Alice Rivlin, director of economic studies at the Brookings Institution; former director of the U.S. Office of Management and Budget and vice chair of the Federal Reserve Robert Bixby, executive director, The Concord Coalition Stuart Butler, vice president, domestic and economic policy studies, Heritage Foundation WHAT: Fiscal Wake-Up Tour WHERE: Houston Hall, Hall of Flags WHEN: Tuesday, Oct. 14, 6 p.m. The Fiscal Wake-Up Tour is a national series of town-hall forums focusing on the country's long-term fiscal challenges. The Tour aims to explain in plain terms why budget analysts of diverse perspectives are increasingly alarmed by the nation's fiscal outlook. The Fiscal Wake-Up Tour has been profiled on "60 Minutes" and in a recent documentary featuring Penn students, “I.O.U.S.A.” The event is co-sponsored by Penn’s Annenberg School for Communication ; the Political Science Department , Fels Institute of Government and Fox Leadership Program in the School of Arts and Sciences ; and the Wharton School Business and Public Policy Department at Penn.

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Fiscal Wake-Up Tour

While we are primarily focused on the $700 billion for the government financial bailout, a Fiscal Wake-Up Tour reminds us that we also have $9 trillion of national debt to pay for. Three members of the Tour join us with their perspectives on how the United States needs to be more fiscally responsible. ROBERT BIXBY is Executive Director of The Concord Coalition. ALICE RIVLIN is Director of the Greater Washington Research Program at The Brookings Institution and was a vice chair of the Federal Reserve Board. STUART BUTLER is Vice President for Domestic and Economic Policy Studies at the Heritage Foundation. Listen to the mp3

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I want to lead, i want to learn, register for the newsletter, resource library, budget, deficits, and debt, demographics, defense and national security, other programs, retirement security, taxes and revenues, infographics, you are here, concord coalition executive director robert bixby & ceo of the comeback america initiative david walker launch nationwide “fiscal solutions tour” in washington, d.c..

Douglas Holtz-Eakin, Bill Novelli, and Isabel Sawhill Will Join in Tour Visits to Half a Dozen Cities Across the Country This Fall

WASHINGTON –The Concord Coalition and The Peter G. Peterson Foundation today launched a national “Fiscal Solutions Tour” to foster informed public dialogue about possible answers to the nation’s daunting fiscal and economic challenges over the next decade and beyond.

At public forums this fall in six cities around the country, top public policy experts will offer diverse perspectives on options for defense and domestic spending cuts, Social Security and Medicare reforms, improvements in the health care system, better and fairer tax policies, and tougher budget controls in Congress.

Many of these options are being considered by President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform as it works on recommendations to Congress and the administration. Those recommendations are due Dec. 1.

The public policy experts who will speak on the solutions tour include:

Robert L. Bixby, executive director of The Concord Coalition

David M. Walker, CEO of the Comeback America Initiative and former U.S. comptroller general

Douglas Holtz-Eakin, president of The American Action Forum and former director of the Congressional Budget Office

Bill Novelli, professor, Georgetown University, and former CEO of AARP

Isabel Sawhill, senior fellow, Economic Studies, Brookings Institution, and former associate director of OMB

The tour will be conducted by Concord with support from the Peter G. Peterson Foundation. The forums are not intended to advance a specific set of solutions, but to provide the public with a balanced perspective on the many different possibilities.

“Although politicians this fall are talking a great deal about the current federal deficit, the real problems we face are the huge deficits that are projected a few years down the road – long after the economy has fully recovered from its current difficulties and our military commitments in Afghanistan and Iraq have been scaled back,” Bixby said. “Fortunately, the country has options that could put it on a more sustainable course -- one that would make our country stronger rather than weaker for coming generations. The Fiscal Solutions Tour is designed to help people around the country understand the choices and trade-offs that will be involved in such an effort, and to encourage a vibrant public discussion about how we can move forward.”

“As part of America’s ongoing efforts to lay the groundwork for sustained economic growth, we must come together to find sensible, workable solutions to achieve fiscal responsibility,” said Walker. “Given the sheer magnitude of the fiscal challenges we face, a narrow or ideologically driven approach will not work. All options need to be on the table and we need to adopt a plan of action soon. In doing so, it is critical that we engage the American people in this process in order to ensure its success.”

The programs this fall follow up on “The Fiscal Wake-Up Tour,” a highly acclaimed effort in which public policy analysts of diverse perspectives explained why they were increasingly alarmed by the nation’s longer-term fiscal outlook. Between 2005 and 2009, the Wake-Up Tour visited more than 70 cities across the country and was the subject of the documentary film “I.O.U.S.A.”

The initial Fiscal Solutions Tour schedule for this fall:

• Thursday, September 23 – San Francisco, California
• Friday, September 24 – San Jose, California
• Thursday, September 30 – Des Moines, Iowa
• Thursday, October 7 – Portsmouth, New Hampshire
• Friday, October 22 – Philadelphia, Pennsylvania
• Friday, November 12 – Chicago, Illinois

The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility. Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as its co-chairs and former U.S. Secretary of Commerce Peter G. Peterson serves as president. For more information, visit www.concordcoalition.org .

About PGPF Founded by Peter G. Peterson with a commitment of $1 billion, the Foundation is dedicated to increasing public awareness of the nature and urgency of key fiscal challenges threatening America's future and to accelerating action on them. To address these challenges successfully, we work to bring Americans together to find and implement sensible, long-term solutions that transcend age, party lines and ideological divides in order to achieve real results. For more information, see www.PGPF.org

Expert Views: Fiscal Commission

National debt clock.

Fiscal roadshow warns of trouble ahead

David M. Walker sure talks like he’s running for office.

“This is about the future of our country, our kids and grandkids,” the comptroller general of the United States warns a packed hall at Austin’s historic Driskill Hotel. “We the people have to rise up to make sure things get changed.”

But Walker doesn’t want, or need, your vote this November. He already has a job as head of the Government Accountability Office, an investigative arm of Congress that audits and evaluates the performance of the federal government.

Basically, that makes Walker the nation’s accountant-in-chief. And the accountant-in-chief’s professional opinion is that the American public needs to tell Washington it’s time to steer the nation off the path to financial ruin.

From the hustings and the airwaves this campaign season, America’s political class can be heard debating Capitol Hill sex scandals, the wisdom of the war in Iraq and which party is tougher on terror. Democrats and Republicans talk of cutting taxes to make life easier for the American people.

What they don’t talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

There’s a good reason politicians don’t like to talk about the nation’s long-term fiscal prospects. The subject is short on political theatrics and long on complicated economics, scary graphs and very big numbers. It reveals serious problems and offers no easy solutions. Anybody who wanted to deal with it seriously would have to talk about raising taxes and cutting benefits, nasty nostrums that might doom any candidate who prescribed them.

“There’s no sexiness to it,” laments Leita Hart-Fanta, an accountant who has just heard Walker’s pitch. She suggests recruiting a trusted celebrity — maybe Oprah — to sell fiscal responsibility to the American people.

Walker doesn’t want to make balancing the federal government’s books sexy — he just wants to make it politically palatable. He has committed to touring the nation through the 2008 elections, talking to anybody who will listen about the fiscal black hole Washington has dug itself, the “demographic tsunami” that will come when the baby boom generation begins retiring and the recklessness of borrowing money from foreign lenders to pay for the operation of the U.S. government.

He’s dubbed his campaign the fiscal wake-up tour.

To show that the looming fiscal crisis is not a partisan issue, he brings along economists and budget analysts from across the political spectrum. In Austin, he’s accompanied by Diane Lim Rogers, a liberal economist from the Brookings Institution, and Alison Acosta Fraser, director of the Roe Institute for Economic Policy Studies at the Heritage Foundation, a conservative think tank.

Their basic message is this: If the United States government conducts business as usual over the next few decades, a national debt that is already $8.5 trillion could reach $46 trillion or more, adjusted for inflation.

A hole that big could paralyze the U.S. economy; according to some projections, just the interest payments on a debt that big would be as much as all the taxes the government collects today.

And every year that nothing is done about it, Walker says, the problem grows by $2 trillion to $3 trillion.

People who remember Ross Perot’s rants in the 1992 presidential election may think of the federal debt as a problem of the past. But it never really went away after Perot made it an issue, it only took a breather. The federal government actually produced a surplus for a few years during the 1990s, thanks to a booming economy and fiscal restraint imposed by laws that were passed early in the decade. And though the federal debt has grown in dollar terms since 2001, it hasn’t grown dramatically relative to the size of the economy.

But that’s about to change, thanks to the country’s three big entitlement programs — Social Security, Medicaid and especially Medicare. Medicaid and Medicare have grown progressively more expensive as the cost of health care has dramatically outpaced inflation over the past 30 years, a trend that is expected to continue for at least another decade or two.

And with the first baby boomers becoming eligible for Social Security in 2008 and for Medicare in 2011, the expenses of those two programs are about to increase dramatically due to demographic pressures. People are also living longer, which makes any program that provides benefits to retirees more expensive.

Medicare already costs four times as much as it did in 1970, measured as a percentage of the nation’s gross domestic product. It currently comprises 13 percent of federal spending; by 2030, the Congressional Budget Office projects it will consume nearly a quarter of the budget.

Economists Jagadeesh Gokhale of the American Enterprise Institute and Kent Smetters of the University of Pennsylvania estimate that by 2030 Medicare will be about $5 trillion in the hole, measured in 2004 dollars. By 2080, the fiscal imbalance will have risen to $25 trillion. And when you project the gap out to an infinite time horizon, it reaches $60 trillion.

Medicare so dominates the nation’s fiscal future that some economists believe health care reform, rather than budget measures, is the best way to attack the problem.

“Obviously health care is a mess,” says Dean Baker, a liberal economist at the Center for Economic and Policy Research, a Washington think tank. “No one’s been willing to touch it, but that’s what I see as front and center.”

Social Security is a much less serious problem. The program currently pays for itself with a 12.4 percent payroll tax, and even produces a surplus that the government raids every year to pay other bills. But Social Security will begin to run deficits during the next century, and ultimately would need an infusion of $8 trillion if the government planned to keep its promises to every beneficiary.

Why is America so fiscally unprepared for the next century? Like many of its citizens, the United States has spent the last few years racking up debt instead of saving for the future. Foreign lenders — primarily the central banks of China, Japan and other big U.S. trading partners — have been eager to lend the government money at low interest rates, making the current $8.5-trillion deficit about as painful as a big balance on a zero-percent credit card.

In her part of the fiscal wake-up tour presentation, Rogers tries to explain why that’s a bad thing. For one thing, even when rates are low a bigger deficit means a greater portion of each tax dollar goes to interest payments rather than useful programs. And because foreigners now hold so much of the federal government’s debt, those interest payments increasingly go overseas rather than to U.S. investors.

More serious is the possibility that foreign lenders might lose their enthusiasm for lending money to the United States. Because treasury bills are sold at auction, that would mean paying higher interest rates in the future. And it wouldn’t just be the government’s problem. All interest rates would rise, making mortgages, car payments and student loans costlier, too.

A modest rise in interest rates wouldn’t necessarily be a bad thing, Rogers said. America’s consumers have as much of a borrowing problem as their government does, so higher rates could moderate overconsumption and encourage consumer saving. But a big jump in interest rates could cause economic catastrophe. Some economists even predict the government would resort to printing money to pay off its debt, a risky strategy that could lead to runaway inflation.

Macroeconomic meltdown is probably preventable, says Anjan Thakor, a professor of finance at Washington University in St. Louis. But to keep it at bay, he said, the government is essentially going to have to renegotiate some of the promises it has made to its citizens, probably by some combination of tax increases and benefit cuts.

But there’s no way to avoid what Rogers considers the worst result of racking up a big deficit — the outrage of making our children and grandchildren repay the debts of their elders.

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Bixby briefed journalists in September 2021: Budgets, Debts and Deficits .

Robert L. Bixby is executive director of The Concord Coalition, a nonpartisan organization that encourages fiscal responsibility in Washington and helps educate the public about the federal budget and the need to protect our children and future generations from excessive government debt.

Bixby joined Concord in 1992 and served in several positions, including policy director and national field director, before being named executive director in 1999. He has served as a member of the Bipartisan Policy Center’s Debt Reduction Task Force (the Domenici-Rivlin commission), which produced a model plan for comprehensive fiscal reform.

He frequently speaks around the country on the nation’s fiscal challenges and possible bipartisan solutions, including greater government efficiency, tax reform and improvements in the entitlement program. He has testified at congressional hearings and been interviewed by news organizations around the country. Bixby has appeared on ABC, NBC, CBS, PBS, CNN and Fox News.

He and The Concord Coalition’s “Fiscal Wake-Up Tour” were also featured prominently in the critically-acclaimed documentary film “I.O.U.S.A.”

Bixby has a bachelor’s degree in political science from American University, a juris doctorate from George Mason University School of Law, and a master’s degree in public administration from the John F. Kennedy School of Government at Harvard University. Before joining Concord, he practiced law and served as the chief staff attorney of the Court of Appeals of Virginia.

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Step One: Addressing Health Care Costs

Subscribe to the economic studies bulletin, isabel v. sawhill isabel v. sawhill senior fellow emeritus - economic studies , center for economic security and opportunity @isawhill.

September 17, 2009

Editor’s Note – As part of her participation in the Concord Coalition’s Fiscal Wake Up Tour, Isabel Sawhill explains why addressing rising health care costs has to be the first step in solving the nation’s long term fiscal problems.

I’m Isabel Sawhill, a senior fellow at the Brookings Institution and a member of the fiscal wake-up tour. The federal budget is on an unsustainable path Right now, we have deficits that are virtually unprecedented. Now, that is as it should be, as we are in a very depressed economy and government has had to be the spender of last resort. So the big deficits we are running right now are not the real problem. The real problem is the continuing red ink we will have as a result of the aging population and rising health care costs.

Why are deficits so bad? First of all, if we don’t address them we are simply courting another economic crisis. Second, because we are borrowing so much of the money from foreigners, we are becoming dangerously dependent on other countries to keep our economy running. Third, we are passing on a mountain of debt to our children and grandchildren. And finally, we are paying an enormous amount of our taxes just on interest on the national debt.

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Indira Lakshmanan, Dayna Bowen Matthew, Richard V. Reeves, Isabel V. Sawhill

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The Heights, Volume XC, Number 13, 12 March 2009 — Fiscal Wake-Up tour champions responsible federal financing [ARTICLE]

Fiscal Wake-Up tour champions responsible federal financing

By Darren Ranck Heights Editor

In light of present-day economic troubles and in an effort to prevent future monetary crises, Boston College hosted the Concord Coalition-sponsored Fiscal Wake-Up Tour. Held in the Irish Room, the lecture entitled "Comparative Catastrophe: America's Current and Future Crises" discussed the economic difficulties current college students will face as national debt increases. The event was hosted and moderated by Joseph Coutlis AlShanniek, CSOM '09, who invited the touring group to campus nearly a year ago. "It's wonderful having some of the greatest minds in the world discuss [economic policies] because they're setting the base for students at BC and other students worldwide to address these issues because nobody's addressing them," Al-Shanniek said. "It's really quite sad because we're the ones who will be so affected by it as students searching for jobs starting this May, trying to raise our families in the future, and, eventually, retire." With a panel discussion composed of David M. Walker, former United States comptroller general, Robert Bixby, executive director of Concord Coalition, Stuart Butler, vice president for domestic and economic policy at The Heritage Foundation, and Belle Sawhill, vice president and executive director of economic studies at the Brookings Institution, the event covered

what the Concord Coalition calls the four deficits: budget, savings, trade, and leadership. Each deficit currently faces disadvantages brought about not by the recession, but economic institutions such as Social Security and Medicare, Walker said, making a particular point about the lacking leadership deficit. "Whether it's in government or private sectors, too many people are living for today; too many people are doing what they want rather than what the country needs," Walker said. "Not enough people are making the tough choices needed to make a better tomorrow, and that's where we are today." The leadership issues coupled with the increasing debt due to necessary elder organizations has influenced the need for a provocation to college students, the panelists said. "Imagine that your parents took out a mortgage on your house, and then they died," Sawhill said. "They hadn't paid off your mortgage, and they said to you, 'You've got to pay this mortgage.' That's, basically what we're doing. This generation's taxes are going to be a lot higher to pay the cost that we're incurring now because we're not being good stewards of our resources." "When you're in the prime of your work years, there won't be the opportunities, there won't be the economic growth, and you'll have to pay much higher taxes to keep us in Social Security and Medicare," Bixby said. The panelists made particu-

lar note of foreign policy issues and said that America has the highest bill trade deficit in the world at $800 billion with the United Kingdom trailing in a distant second with $200 billion. Furthermore, America's habitual borrowing of money from the OPEC oil countries and China, countries not particularly friendly with the United States, is beginning to influence foreign policy, Sawhill said. "People need to understand that we're losing hold on our economic destiny." The panelists said students should engage in more discussions of such economic matters in an effort to create greater discourse and action against the possible monetary threats of the future, threats that Al-Shanniek claims Congress finds a burden. "Young people have to be on the frontline of demanding change because you all will pay the price and bear the burden if elected officials fail to lead, and so far, they've failed to lead," Walker said. "They've been laggards, not leaders." Sawhill said that steps should be taken to help the economy not just during times of recession, but in a manner that will keep future generations of out debt. "We're talking about the longer term after the economy has recovered to its normal state, and we're talking about starting now to put measures in place that will assure that once the recession is over, we will have some fiscal responsibility built into policies," Sawhill said. "We can walk and chew gum at the same time." ■

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CNN Live Event/Special

`I.O.U.S.A.,' AMERICA'S MONEY CRISIS

Aired January 11, 2009 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ALI VELSHI, CNN ANCHOR: One nation under stress, in debt. It's the slogan of the critically acclaimed documentary "I.O.U.S.A." Hello, everyone, I'm Ali Velshi. CHRISTINE ROMANS, CNN ANCHOR: I'm Christine Romans. Welcome to this special CNN event, "I.O.U.S.A.," AMERICA'S MONEY CRISIS. In the next two hours, we're going to bring you the film, along with important perspective and solutions for America's mounting debt. VELSHI: And answers to some important questions. Is it fair to expect our grandchildren to pay for the money that this generation has spent? Will you be able to retire when the time comes? We'll get you answers to those questions. ROMANS: Here to help us do that, Alice Rivlin, noted economist and former director of the Office of Management and Budget. She joins us from Washington, D.C. VELSHI: With us here in studio, former Secretary of Commerce Pete Peterson. He's also the founder of the Peter G. Peterson Foundation, which sponsored the movie. David Walker is the president and CEO of the Peterson Foundation, and he's a former U.S. comptroller general. And Bill Bradley is a former U.S. senator and presidential candidate, and he's a managing director of Allen & Company. ROMANS: We wanted to bring you this film so you can see it for yourself. It poses important questions about our national security, our leadership, and many warned there's only way very short window to reverse these trends. Here's "I.O.U.S.A." (BEGIN VIDEOTAPE) UNIDENTIFIED MALE: I will argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan, but our own fiscal irresponsibility. UNIDENTIFIED MALE: The president of the United States! (CHEERING AND APPLAUSE) RONALD REAGAN, 40TH PRESIDENT OF THE UNITED STATES: These United States are confronted with an economic affliction of great proportions. RICHARD NIXON, 37TH PRESIDENT OF THE UNITED STATES: America may be headed for a recession. GERALD FORD, 38TH PRESIDENT OF THE UNITED STATES: And I must say to you that the state of the union is not good. NIXON: We are engaged in a long and hard fight against inflation. JIMMY CARTER, 39TH PRESIDENT OF THE UNITED STATES: Our trade deficit is too large. FORD: Part of our trouble is that we have been self-indulgent. And now the bill has come due. REAGAN: Unless we act forcefully and now, the economy will get worse. NIXON: But I pledge to you tonight that the full powers of this government will be used to keep America's economy producing. (APPLAUSE) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: What we need is spending discipline in Washington, D.C. FORD: And thus restore balance to our economy. LYNDON JOHNSON, 36TH PRESIDENT OF THE UNITED STATES: We will continue along the path toward a balanced budget. GEORGE H.W. BUSH, 41ST PRESIDENT OF THE UNITED STATES: Once it's balanced, we will start paying off the national debt. BILL CLINTON, 42ND PRESIDENT OF THE UNITED STATES: And now we are on course for budget surpluses for the next 25 years. JOHN F. KENNEDY, 35TH PRESIDENT OF THE UNITED STATES: A stronger nation and economy requires more than a balanced budget. CARTER: Only a true partnership between government and the people can ever hope to reach these goals. REAGAN: We must act today in order to preserve tomorrow. G.W. BUSH: We must solve problems, not leave them to future generations. G.H.W. BUSH: We won't leave it to our children and our grandchildren. CLINTON: We must not go back to unwise spending. DWIGHT EISENHOWER, 34TH PRESIDENT OF THE UNITED STATES: We must strive to break the calamitous cycle... FORD: ... and help dispel the uncertainty that so many feel about our economy. G.W. BUSH: And tonight that cause goes on. God bless. (CHEERING AND APPLAUSE) UNIDENTIFIED MALE: What hit the economy first was a housing slump. UNIDENTIFIED MALE: Fears spread to Wall Street. UNIDENTIFIED MALE: Consumers tightened their purse strings. UNIDENTIFIED MALE: The U.S. Federal Reserve cut its key interest rate by half a point. UNIDENTIFIED MALE: The I-word, inflation, is coming to the fore. UNIDENTIFIED MALE: Major developments on the lending crisis in the U.S. UNIDENTIFIED MALE: Oil and gold prices are spiking. STEVE KROFT, CBS CORRESPONDENT, "60 MINUTES": Who is David Walker and why should we care? He's the nation's top accountant, the comptroller general of the United States. He has totaled up the government's income, liabilities, and future obligations, and concluded that our current standard of living is unsustainable unless some drastic action is taken. And he's not alone. DAVID WALKER, FMR. U.S. COMPTROLLER GENERAL: I'm David Walker, comptroller general of the United States. I'm head of the U.S. Government Accountability Office, better known as the GAO. We're in the legislative branch of government. Basically we're about improving transparency, enhancing government performance, and ensuring accountability for the benefit of the American people. I was set to be career military. And I had appointments to the Naval and Air Force academies, but I couldn't go at the last minute because I have a bad left ear and it kept me out of my military career. I knew it was only a matter of time before I decided to serve my country in some way and I have been fortunate to have three presidential appointments, one from Reagan, one from Bush 41 and this one from Clinton. It has been a pleasure and an honor to serve my country. We suffer from a fiscal cancer. It is growing within us, and if we do not treat it, it could have catastrophic consequences for our country. UNIDENTIFIED MALE: How big is the federal debt? UNIDENTIFIED MALE: I don't know. I'm guessing quite a bit. UNIDENTIFIED MALE: I wouldn't know that. UNIDENTIFIED FEMALE: Like $3 million? UNIDENTIFIED FEMALE: I know it's in the billions. UNIDENTIFIED FEMALE: I have no idea. UNIDENTIFIED FEMALE: In the billions or trillions. UNIDENTIFIED MALE: I know it's a heck of a lot more than it was probably 10 years ago. UNIDENTIFIED MALE: Well, take a stab at it. UNIDENTIFIED MALE: Sixty-nine billion? UNIDENTIFIED FEMALE: It's probably huge. UNIDENTIFIED MALE: What if i told you it was $8.7 trillion? UNIDENTIFIED MALE: That's pretty crazy. UNIDENTIFIED MALE: Wow. UNIDENTIFIED MALE: It shouldn't be that way. UNIDENTIFIED MALE: Eight-point-seven trillion dollars, just how much money is that? With a number this large, it helps to compare it to the overall size of America's economy, what economists call the gross domestic product or GDP. In February 2007, when our federal debt was $8.7 trillion, our GDP was around $13.5 trillion. That meant that our federal debt was about 64 percent of our GDP. This level of debt to GDP is not the real problem, it's where we're headed that matters and it's projected to get much worse in the future. In addition, as you'll find out soon, this $8.7 trillion number is only a traction of our nation's total fiscal challenge. ROBERT BIXBY, EXEC. DIR., CONCORD COALITION: Chairman Conrad, Senator Gregg, and members of the committee, thank you for inviting me to discuss solutions to the nation's long-term fiscal challenges. I'm Robert Bixby and I'm the executive director of the Concord Coalition. It's a nonpartisan organizations, it's a grassroots organization, and we advocate fiscal responsibility. Well, our current fiscal policy is unsustainable. Most people from the left or the right agree on that. They may disagree on how to deal with it but most people think that eventually the fiscal policy of the country is headed over a cliff. This is the federal budget for 1988. It's jam-packed with numbers and it has got some descriptions in the beginning of the programs that the president was pushing. Here is the budget for 2005, or a couple of years ago. The main budget document has -- it has got some numbers in it. It has pictures. There's a lot of color pictures in it and glossy paper and things. It's not what it used to be where you just had numbers and some descriptions of the programs. It's kind of a metaphor for what has happened with -- with federal government. DIANE REHM, HOST, "THE DIANE REHM SHOW": Here we go. If you just joined, David Walker, who is comptroller general of the U.S. is here in the studio with us. For the past few years you have gone around the country on what you've called Fiscal Wake-Up tours. Tell us what those are and why you're doing this. WALKER: There's a coalition of groups that has come together. The key players are the Concord Coalition, the Brookings Institution, the Heritage Foundation, and myself as comptroller general of the United States. We have many other organizations that are involved as well, but those are the four cornerstones. What we're doing is we're going outside the Beltway to state the facts and speak the truth to the American people, to help them understand where we have been, where we are, where we are headed because my view is the only way that elected officials are going to make the tough choices is if the people understand the need for these choices and will not punish them for doing what's right for America's future. The facts aren't Democrat or Republican. The facts aren't liberal or conservative. The facts are the facts, and, you know, there's broad-based agreement among the Fiscal Wake-Up tour participants that span the political spectrum that our financial situation is worse than advertised, that we need to act, we need to act soon because time is working against us. (END VIDEOTAPE) (COMMERCIAL BREAK) (BEGIN VIDEOTAPE) WALKER: Well, we've lost our way, quite frankly. Let me tell you how we got to where we are. UNIDENTIFIED MALE: Today's federal debt is the sum of all of our annual budget debts and surpluses going back to the beginning of our federal government. Our war for independence created much of our early debt, and by March 4th, 1789, the first day of our federal government, our national debt was $75 million, which was about 40 percent of our economy. This terrified our founding fathers and they acted quickly to pay it down. We didn't stay there for long. The Civil War not only had a huge human cost, it brought the United States to the brink of bankruptcy. However, like before, we paid our debt down quickly. In 1913 the Federal Reserve system was created to help manage the nation's money supply and to oversee national banks. That year was also the birth of the modern income tax. World War I was supposed to be the war to end all wars. Several years later, the Great Depression brought with it an extreme economic hardship for millions of Americans. FRANKLIN ROOSEVELT, 32ND PRESIDENT OF THE UNITED STATES: This Social Security measure gives at least some protection to 30 million of our citizens. UNIDENTIFIED MALE: It is insurance that you and your employer have bought and paid for. UNIDENTIFIED MALE: World War II was a time of sacrifice. And while the government took on unprecedented levels of debt, Americans bought savings bonds that financed our winning the war. UNIDENTIFIED MALE: And now, ladies and gentlemen, Mr. Humphrey Bogart. HUMPHREY BOGART, ACTOR: Our fighting men have just won history's greatest victory for freedom. Buy bonds for their future and for your own future. UNIDENTIFIED MALE: It's official. It's all over. It's total victory. UNIDENTIFIED MALE: The large military and social spending practices of the 1960s and '70s were two key factors that led to a major economic downturn by the end of the 1970s. The 1980s saw the rise of supply side economics. UNIDENTIFIED MALE: It's morning again in America. UNIDENTIFIED MALE: Reaganomics. PHIL DONAHUE, TELEVISION HOST: You're the trickle-down theory guy. ARTHUR LAFFER, ECONOMIST: I'd bet my reputation on it. UNIDENTIFIED MALE: The controversial Laffer curve proposed that lower marginal tax rates would eventually generate higher tax revenues. The theory did have its critics. G.H.W. BUSH: Let me just give you a difference that I have with Governor Reagan on taxes. It's what I call a "voodoo economic" policy. REAGAN: For decades we have piled deficit upon deficit, mortgaging our future and our children's future for the temporary convenience of the present. G.H.W. BUSH: Read my lips, no new taxes. UNIDENTIFIED MALE: The debate over supply side economics continues to this day, but what is not debatable is that the federal debt exploded in the 1980s. A fundamental shift had occurred. America was becoming addicted to debt. Never before in our history had so much debt been created during an era of relative peace and prosperity. Yes, the Cold War ended, but it came at an extremely high price, and people from across the political spectrum were becoming very alarmed. PETER G. PETERSON, FMR. SECRETARY OF COMMERCE, 1972-1973: We are now borrowing 22 cents of every dollar that we're spending, and in effect what we're doing is we're slipping this huge hidden check for our free lunch to our children and our grandchildren, and you ain't seen nothing yet. (END VIDEOTAPE) (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: America faces four serious deficits today. The first is a budget deficit. The second is a savings deficit. The third is a balance of payments deficit, of which the trade deficit is a subset. And the fourth and most serious of all is a leadership deficit. (END VIDEO CLIP) ROMANS: A clip from the acclaimed documentary, "I.O.U.S.A.," the focus of our special program America in crisis. Let's talk about leadership. Former President Clinton left office with an annual budget surplus. President Bush will leave behind the biggest deficit in American history. And now President-elect Barack Obama warns of more trillion dollar deficits to come. VELSHI: Well, the new president has to spend a lot of money that we don't have to stimulate the economy right now. So let's get right to it. Alice Rivlin is a noted economist and former director of the Office of Management and Budget. She's in Washington. ROMANS: With us in the studio is former Secretary of Commerce Pete Peterson, he is also the founder of the Peterson Foundation, which sponsored the film. Former U.S. Comptroller General David Walker as well as former U.S. senator and presidential candidate Bill Bradley. David Walker, I want to start with you. Since this film was made even the situation has worsened in terms of our debts, our obligations, and what size that is compared with the American economy. WALKER: It has. For example, the film noted $8.7 trillion and 64 percent of GDP in February 2007. Now it's about $10.7 trillion and 75 percent of GDP. The film talked about $410 billion deficit for fiscal '08. It was really $455 billion and now we're talking trillions for several years going forward. VELSHI: Alice Rivlin, you know, your job -- your former job was one where you come in and you've got a budget to deal with. Now if somebody had to come in and take over my budget, the first thing they would look at is the revenue that I bring in, the amount of money that I bring in, the amount that I spend. And if there's a shortfall, something has to be adjusted. You have to either bring in more money or you have to spend less. Clearly, the person who -- the people -- the very smart people who are dealing with budgets right now have got to be looking at the same situation. What is the logical response when you look at the -- the budget situation, when you look at our debts and you look at our deficits? ALICE RIVLIN, FMR. DIR., OMB: I think the logical response right now is to keep two things in mind at the same time. One is with the economy in recession, we will have big deficits and we should have, because the government needs to stimulate the economy to get out of the recession. But we need to keep the long run in mind at the same time and not just keep it in mind, do something about it. The big threat to the federal deficit down the road, and not so far down the road, is the entitlement programs, especially Medicare, Medicaid, and Social Security. Medicare and Medicaid are rising so rapidly that they will be bigger than the whole federal budget in a few years if we don't do something. And Social Security is also a problem. So the new team has got to keep these two things in mind and do something about the long run. They could fix Social Security quite easily. They could take strong steps to bring down the rate of increase of medical care spending for all of us. Those are important things to do even while we stimulate the economy. ROMANS: Bill Bradley, you're someone who has tried to run for public office successfully and also you've run for president. It's very difficult to tell people we might have to rein in your living standards, or we might have to increase your retirement age and still get re-elected. Is that why we have a leadership problem on this issue, because these are painful, big issues that keep getting put off until after the next election? BILL BRADLEY (D), FMR. U.S. SENATOR: That's true. And I think the American people are now ready for two things. They are ready for a politician who will put country ahead of party and tell people the truth. And the truth you just heard about our fiscal circumstance. And it worsens every day. And, yes, we do have to do something to stimulate the economy, but we have to think of the long term as well. And when we figure stimulating the economy, the question is, how are you going to do that? Are you going to make investments that last for a lifetime or are you going to simply give money to people that they spend or they save, and the next year you won't have anything to have for it except a bigger budget deficit? VELSHI: Pete Peterson, you were a former commerce secretary. You have been involved in this fight about deficits for many, many years. In this year that we have just passed, in 2008, when people who really may have started the year not interested in talking about money at all, end of the year, everybody was talking about money. ROMANS: And they want to know more about how we got here and what's happening. VELSHI: But why didn't this -- why wasn't this a campaign issue? Why weren't people saying, this is what I'm going to do, as Alice Rivlin said, for the long term to get this country out of the debt that it's in? Why did it not happen now of all times? PETERSON: Well, you know, I'm going to probably say something that's contrarian. It's awfully easy to blame the politicians. And lord knows they deserve a lot of blame. But, you know, someone once said that it's the role of the public to make it safer to do the right thing. And we have become a culture, I think, that wants it all and it wants it now and doesn't want to pay for it. Shared sacrifice used to be an American principle. What have we been asked to sacrifice? I ask you to go back even to Lyndon Johnson, and Bill will remember, he got into a lot of trouble for fighting the Vietnam War and for adding some social programs. And he was accused of wanting "guns and butter." What do we want? We want guns, we want butter, and we want tax cuts. So an important part of the responsibility here has to rest with our public, and that's why Dave and our foundation and this film is out to make the public aware that their future and their kids' future is really imperiled. Because if Washington hears, as Dave suggested, in clear, unequivocal terms, they're in there to get re-elected. And if we can somehow make the politics such that doing nothing, which is what we are now doing, is politically more painful than confronting these problems, then we will start having some effort. Now, the other approach is a bad crisis, and as the film explains, the crisis will make the current crisis look like petty cash. ROMANS: You know, David Walker, here's the tough thing for this new administration, because you have this long-term crisis that has been brewing and we have been talking about for some time. And then this other crisis that is very dangerous happening right now. And to try to get ourselves out of the current financial crisis, we have to almost worsen the other one. We have to spend big, spend quickly, and really explode these deficits. If... (CROSSTALK) VELSHI: Right. The thing that we are talking about solving. ROMANS: Right. How does Barack Obama and his economic team walk that tightrope? WALKER: First, it's not a long-term crisis anymore. We're in a recession. We're going to have to take some steps to get the economy going. We face some unprecedented crises we have to address. Deficits and debt levels are going to go up in the short term. That's understandable. That's the way that it is. But our objective should be not just to strengthen the economy for today, it's to strengthen the economy for tomorrow as well. And, therefore, we need a timely, targeted, and temporary stimulus program, things that are prudent, that help invest in our future. And we need a process in place that once we turn the corner on the economy, we can make some tough choices on statutory budget controls, Social Security, health care, tax reform, to make sure that we avoid a super subprime crisis associated with the meltdown of the government's finances. We cannot allow that to happen. VELSHI: You know, in carrying on with Pete Peterson's idea, I want to ask you, Alice Rivlin, we are talking about how bad the debt and deficit -- the debt crisis can become. Do our viewers understand -- do the viewers of the movie understand what the consequence of such a crisis is? I mean, if we've got to 75 percent of GDP already with our debt, what's 100? RIVLIN: Well, the problem is that we have to borrow this money from somewhere, and for the last few years, we have been borrowing a lot of it, in fact, most of it from people in other countries, especially the Chinese, the Japanese, and other countries around the world. They're not going to go on lending us money unless they think we've gotten our house in order. So I don't think we can even wait for the recovery of our economy to show the world that we are going to take these future deficits seriously. And that means doing things like fixing Social Security. We could do that right away. It wouldn't endanger the current problem at all. It wouldn't make it worse because you would not be hurting people who are currently retired. But you could fix the system so that it doesn't keep adding to our future liabilities, which are the real problem and the real reason we may not be able to borrow more money unless people think we're on top of this problem. VELSHI: You know, this is what gets this panel revved up. And we want to talk about that when we come back. When you start talking to these folks about the danger of owing everybody in the world money. ROMANS: That's right. VELSHI: These consequences go far beyond financial. It goes far beyond your bill -- your tax bill. ROMANS: And when your interest payments on that debt become so great that it hobbles your ability to grow your economy or grow your government. Everyone is staying with us. What if your parents charged up a mountain of credit card debt, used borrowed money to lived their lifestyle and then passed it on to you? VELSHI: Well, that's exactly what the government is doing right now. And you will feel the impact of this problem if it isn't addressed soon. You're watching a CNN special event, "I.O.U.S.A.," AMERICA'S MONEY CRISIS. (COMMERCIAL BREAK) (BEGIN VIDEOTAPE) BIXBY: It's a lot like dieting. A budget is a diet. The only way you can really lose weight is to get more exercise or to eat less. There are really only two ways that you can balance a budget. You can cut spending, or you can raise taxes. And people don't necessarily like those hard choices, so they look for easy solutions. The Budget Committee, sort of think of it as mom and dad sitting around the kitchen table at the beginning of the year figuring out what we can afford, and everybody comes up to them with their ideas about the new things that the family needs and they have to sort of look at how much income they're going to have and how much they can afford to spend. Well, the family hasn't been doing too well. We have been running deficits of $200 billion to $300 billion, which is quite a bit of money. We're involved, all of us here at this table in the Fiscal Wake- Up tour, Dave Walker is involved in that as well, and we have been going around the country holding town hall meetings and talking to the local media. And we are finding the public seems to be willing to hear the tough choices. What they want to make sure is that you're serious about them. I think everybody realizes that that sort of family budget is unsustainable over the long term and the family is going to be in a lot of trouble. UNIDENTIFIED MALE: In the last 40 years, we've had 35 budget deficits and only five budget surpluses. But, remember, we've been running large annual surpluses in our Social Security program for years. These surpluses are spent every year to help pay other bills in the federal government. Without the Social Security surpluses, our real track record on deficits looks a whole lot worse. SEN. KENT CONRAD (D-ND), CHMN., BUDGET CMTE.: This is something that's utterly unsustainable. And, remember, all of that has happened before the Baby Boomers retire. And the Baby Boomers are not a projection, they're born. They're out there. They are going to be eligible for Social Security and Medicare, and yet we can't pay our bills now. UNIDENTIFIED MALE: In less than 10 years, Social Security will be paying out more than it takes in and it will only get worse as Baby Boomers retire in larger and larger numbers. By 2017, Social Security will not be helping to reduce our overall deficit. It will be adding to it. Our enormous Medicare deficits and other federal spending that also lie ahead will only make this situation worse. SEN. JUDD GREGG (R-NH), RANKING MEMBER, BUDGET CMTE.: The only issue that's more severe than this would be the idea that an Islamic fundamentalist would get his or her hands on a nuclear weapon and use it against us. Beyond that, there's nothing that's more severe than this. This issue represents the potential fiscal meltdown of this nation and it absolutely guarantees if it's not addressed that our children will have less of a quality of life than we've had. That they will have a government they can't afford, and that we will be demanding so much of them in the area of taxes that they will not have the money to send their kids to college or buy that home or just live a good quality life. (END VIDEOTAPE) (COMMERCIAL BREAK) (BEGIN VIDEOTAPE) WILLIAM BONNER, AUTHOR, "EMPIRE OF DEBT": Jefferson went on record saying that it was immoral for one generation to load up the next generation with debt. In private life, we don't do that. A person goes to his grave and his debts go with him, more or less. But in public, we do. In public we have this system whereby one generation can spend money before it has been earned. And it spends the money and then somebody has got to pay that money in the future and that somebody is the next generation. To me it is an immoral situation, and it's not just immoral, it is just fundamentally wrong and mean for one generation to spend the next generation's money. UNIDENTIFIED MALE: America! You won't have any of these if you don't start learning about the debt! UNIDENTIFIED MALE: You are a prisoner to the national debt! (CROSSTALK) UNIDENTIFIED MALE: I know, I am scaring people. That's the point, man. It's a scary issue. UNIDENTIFIED MALE: (INAUDIBLE) away from us then (INAUDIBLE). UNIDENTIFIED MALE: Oh, good. YONI GRUSKIN, CONCERNED YOUTH OF AMERICA: When we thought of the idea of starting CYA, the goal was to be the face of the generation that is going to be affected by the national debt and to kind of try to put a human touch to it. UNIDENTIFIED MALE: All I have got to say is talk to your congressman, talk to your senator, talk to the G-D president. We've got to fix this problem. MIKE TULLY CONCERNED YOUTH OF AMERICA: It stinks. Our parents talk our ears off from the time we're 10 about financial responsibility. This is what you have to do. Don't get into credit card debt. You have to pay for what you buy. You have to save your money. And then the politicians who are supposed to represent your values and represent what you want, they are doing the same thing. They are telling you one thing and doing another thing. UNIDENTIFIED MALE: Would you like to go out an date with me? No. Would you like to learn about the debt? Yes. TULLY: You kind of want to look at them and say, how can you not realize that this is going to damage our future? CHRISSY HOVDE, CONCERNED YOUTH OF AMERICA: I mean, this situation is comparable to my parents incurring serious credit card debt before I was born and through my entire lifetime, and then expecting me to pay for it at some point in the future. And that's insane. UNIDENTIFIED MALE: We're not playing. We are not in a play. We are serious. TULLY: Whenever you talk to someone about the problem, they're always like, yes, that's really interesting. That's awesome. That's about it. It's hard to really, really get kids inspired. But I think we're starting to do that. We're starting to get a lot of interest, especially with the 2008 elections and the youth starting to realize that they do have a voice, that kids are now starting to take the extra step. And that's really nice to see. It sort of gives you hope. HARRY ZEEVE, NATIONAL FIELD DIR., CONCORD COALITION: The Concord Coalition has never taken a position on big government versus small government. The point is we're running a completely schizophrenic tax and spending policy right now where we've got a big government spending program, a small government tax program, which is a recipe for deficits as far as the eye can see. You know, this isn't the most sophisticated chart you're ever going to see but it illustrates the problem. UNIDENTIFIED MALE: Our federal financial problem is worse today than it was in 1992. But back then the media, business leaders, along with Ross Perot and Paul Tsongas made fiscal responsibility a key issue during the presidential campaign. The country woke up, recognized the challenge and demanded change. (END VIDEOTAPE) (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: In less than 10 years, Social Security will be paying out more than it takes in and will only get worse as Baby Boomers retire in larger and larger numbers. By 2017, Social Security will not be helping to reduce our overall deficit, it will be adding to it. Our enormous Medicare deficits and other federal spending that also lie ahead will only make this situation worse. (END VIDEO CLIP) VELSHI: OK, but don't worry about that. Don't worry about that. Because Alice Rivlin just said that we can solve this easily. David Walker has said the same thing. We're bringing you the acclaimed documentary "I.O.U.S.A." There are some dire predictions here. Social Security set to pay out more than it takes in, in less than 10 years from now. ROMANS: And what this means is the promises your government is making, it can't possibly keep. Alice Rivlin, workers are either going to have to work longer, retire later? We are going to pay more taxes to pay for those benefits? What are the solutions and how do we get there? RIVLIN: I think the solutions are some combination of all of the things you just mentioned. We're certainly going to have to work longer. When Social Security was set up, people didn't live long beyond retirement. Now we do. We live years and years, sometimes decades, beyond retirement. And we will have to work longer. We are also healthier, of course. VELSHI: How long do you think we should have to work until -- or what's logical? RIVLIN: Well, it depends on what you do. If you're in -- if you're in construction and you depend on your back and your legs, you may not be able to work as long as people like me, who basically depend on talking and thinking. But we need to rearrange our system so that people who absolutely need to retire early can, but are also eligible for retraining and things that they can do that are different. And most people are going to have to work longer, certainly into their 70s as the longevity continues to increase. ROMANS: Is it political suicide to tell people, vote for me, I'm going to make you work longer? Is this why we can't fix this problem, Bill? BRADLEY: You know, I don't think so. I remember back in 1982, I was a new senator. I came in, there was a real Social Security crisis. I did Social Security forums all over my state of New Jersey. And what happened is when people heard of their senior citizens, I thought they were going to say, do anything but cut our benefits. Well, they know their children pay taxes and ultimately you have to do a little bit of everything. You have to cut some benefits and pay some taxes. If you did four things, you could make Social Security solvent for 75 years. If you phased in retirement age from 67, where it is now, to 70 by 2099, that would be the first. Second, if you took 2 percent of the 6.5 percent individual part of the Social Security tax and applied it to all of income. Third, if you did something called "changed CPI," which is a CPI that reflects how people behave, when times are tough, they buy cheaper goods. And third (sic), if you brought state and local employees over a five-year period, new workers into Social Security, you would be solvent for 75 years. WALKER: But I think the key is, we need to solve the problem for more than 75 years. In 1983, the last time we did Social Security reform, the checks weren't going to go out within a matter of weeks. We don't have that clear and compelling crisis that's facing us right now. So we need to do it before we reach that. At the time they did the reforms back in '83, they only solved it for 75 years and now here we are back again. We can make it solvent, sustainable, secure, and more savings-oriented by doing a number of things. People who are retired today aren't going to be affected. People who are close to retirement won't be affected much. But one of the things we have to... VELSHI: Who is the first group that's going to be affected? What age of people should be worried about it? WALKER: Well, younger people. Younger people are going to be affected. So let's say 60 and below, 55 and below, that will have to be a political decision. But where we can phase in these changes, let's keep in mind this, the government is not telling you when you have to retire. The government is telling you when are they going to subsidize you when you do retire. You know, Social Security was never intended to be the sole form of retirement income. It was intended to be combined with private pensions, personal savings and other things. Government policy needs to encourage people to work longer for economic growth, for fiscal policy and, frankly, in many cases, for the individual's own well-being. VELSHI: Pete? PETERSON: I think it should be said about Social Security reform that we have to look back at the Bush proposals and why they ran into fundamental difficulty. I think there were at least two. The underlying theme seemed to be that we're going to have private accounts, and the implication was that they're going to replace Social Security. I personally think that would be a terrible mistake because I think the Social Security system is an inherent part of the social safety net of America. Our job, it seems to me, is to make Social Security solvent. And a very good case can be made for private accounts, but it shouldn't be taken out or borrowed by the government. It should be an add-on system so that people get more when they retire. Now, we all have our favorite Social Security proposals. And what we all agree on is any number of them are sensible and palatable if we get at it in a hurry. ROMANS: With the Social Security argument, I mean, it has to be done quickly. We need to fix this immediately. RIVLIN: This is the right moment to fix it, I think, because it's only getting worse and the reason this is the moment to fix it is that the argument for substituting private accounts for Social Security has very little traction at the moment, given what has happened to the stock market. So that one gets ruled off the table. The other options are all good ones, and we can find a combination that will fix the problem. We should do it now because that sends a signal that we are really fiscally responsible. ROMANS: All right. Everyone, thank you, Alice Rivlin. You know, if budgeting is like a diet, this country is about to break the scale. VELSHI: Why the richest nation in the world can't get its act together when it comes to our bottom line. You're watching "I.O.U.S.A.," AMERICA'S MONEY CRISIS, right here on CNN. (COMMERCIAL BREAK) (BEGIN VIDEOTAPE) CLINTON: We come here today, Democrats and Republicans, to celebrate a true milestone for our nation. In a few moments, I will sign into law the first balanced budget in a generation. ROBERT RUBIN, FMR. TREASURY SECRETARY, 1995-1999: The politics of sound fiscal policy are very difficult because the natural inertia in the political system, if you will, is toward federal programs, most of which are very useful. And, therefore, the inertia is toward spending on the one hand and tax cuts on the other hand. But if you're going to have sound fiscal conditions, you have got to both constrain your spending and you also have to provide for adequate revenues. And what ultimately is involved are very difficult tradeoff decisions involving federal programs and what the American people want their government to do and then providing the means to pay for it. I left Treasury in July of 1999. In 1998 the federal government of the United States had a fiscal surplus for the first time in, roughly speaking, 30 years. And the projections forward, based on the fiscal policies then in place, were for continued surpluses for long, long into the future. And I thought that what had happened was -- actually, I wouldn't say what I thought, what had happened is a political coalescence had occurred or developed around maintaining fiscal discipline, which is a very difficult thing to do politically because it requires spending constraint and adequate revenues. And I thought we were on that track. UNIDENTIFIED MALE: It happened this week, something few of us thought we would ever see. The national debt clock was turned off at noon last Thursday, having outlived its purpose. While the national debt has hardly disappeared, standing someone in the $5 trillion range, it is slowly winding down, having dropped by over $100 billion since the first of the year. (BEGIN VIDEO CLIP FROM "SATURDAY NIGHT LIVE") CHRIS PARNELL, COMEDIAN: Did you know millions of Americans live with debt they cannot control? That's why I developed this unique new program for managing your debt. It's called "Don't Buy Stuff You Cannot Afford." (LAUGHTER) AMY POEHLER, COMEDIAN: No, let me see that. "If you don't have any money, you should not buy anything." Hmm, sounds interesting. STEVE MARTIN, COMEDIAN: Sounds confusing. POEHLER: I don't know, honey, this makes a lot of sense. There's a whole section here on how to buy expensive things using money you saved. MARTIN: Give me that. And where would you get this "saved money"? (END VIDEO CLIP) UNIDENTIFIED MALE: How much money do you guys have in your savings account? UNIDENTIFIED MALE: A couple hundred bucks. UNIDENTIFIED MALE: About $1,000 maybe. UNIDENTIFIED FEMALE: Are you talking about money-wise? UNIDENTIFIED FEMALE: I end up using most of the money in my savings account. So it's doesn't really like work as a savings account. Like, I'm not actually saving anything. I'm just storing it there. UNIDENTIFIED FEMALE: I think most people can say that they live paycheck to paycheck. I think a good majority of us do. (END VIDEOTAPE) (COMMERCIAL BREAK) (NEWSBREAK) ROMANS: Welcome back to our special program I.O.U.S.A., AMERICA'S MONEY CRISES. I'm Christine Romans. VELSHI: And I'm Ali Velshi. We're bringing you the acclaimed documentary, I.O.U.S.A. It's a film that lays out as simple as possible America's addiction to debt. ROMANS: Is this country like Rome before the fall, drowning in debt and desperate for financial leadership? VELSHI: Watching the film with us and adding their expert analysis, Alice Rivlin, noted economist and former director of the Office of Management and Budget, and she joins us from Washington, D.C. ROMANS: With us here in the studio is former secretary of Commerce Pete Peterson. He's also the founder of the Peter G. Peterson Foundation, which sponsored this movie. David Walker is the president and CEO of that foundation and former U.S. Comptroller General. And Bill Bradley is a former U.S. Senator and presidential candidate and now a managing director of Allen Company. VELSHI: But, first, let's get back to the movie, I.O.U.S.A. (BEGIN VIDEO CLIP) GREENSPAN: The concepts of sacrificing and building for a better tomorrow have been pushed aside by our live for today, easy credit and consumption-oriented society. Many Americans have never seen a rainy day, and, therefore, simply choose not to save for one. This is a major problem because savings result in increased investment, additional research and development, a stronger economy and an improvement in our overall standard of living. Is America's low savings rate today strictly a matter of personal choice, or are there also other forces at play here? Dr. Paul. REP. RON PAUL, (R) TEXAS: Good morning Mr. Greenspan. I understand that you did not take my friendly advice last fall. I thought maybe you should look for other employment, but I see you kept your job. I'm pleased to be back, though, because at least you remember the days of sound money. In the early '70s, due to the breakdown of the monetary system, it excited me enough to want to speak out. The concern that sound money economists has is for the supply of money. If you increase the supply of money, you have inflation. I know Wall Street likes it, and the economy likes it when the bubble is getting bigger but I think it's harmful. (UNIDENTIFIED MALE): Inflation is very simple. When government arbitrarily out of thin air prints money, creates money and credit out of thin air. And when I talk to many teenagers, grade schoolers, they seem to have no problem comprehending the fact if you just create a lot of money; it will be like monopoly money and won't have value. GREENSPAN: You are raising an issue a significant number of people have been raising over the years and for which quite frankly we are not quite sure what the answers are. (UNIDENTIFIED MALE): Alan Greenspan was the chairman of the Federal Reserve board. I see the Central Bank and Federal Reserve System as having this tremendous power over money and credit. Greenspan, or any chairman of the Federal Reserve who is more powerful than even our president, because he has so much control over the economy. Many countries have bitten the dust through inflation, even in ancient times. This is a very serious problem, and the biggest fear will be that if the fed creates too much money, we're going to have a crash of the dollar. PAUL: And for three years, you've never been once in the target range. You know, if I set my targets and I perform like that as a physician, my patient would die. (END VIDEO CLIP) (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) (UNIDENTIFIED MALE): In any event, the more money you have relative to the amount of goods, the more inflation you have, and that's not good. So -- (UNIDENTIFIED MALE): So we're not a free market then? There is an invisible, there's a Ben everybody leapt hand that touches? (UNIDENTIFIED MALE): Absolutely. You're quite correct. That is not a free market and most people call it regulation. (UNIDENTIFIED MALE): And so when you lower the interest rate and drive money to the stocks that lowers the return people get on savings in the bank? (UNIDENTIFIED MALE): Yes, indeed. (UNIDENTIFIED MALE): So they've made a choice we would like to favor those who invest in the stock market and not those who invest in a bank that helps us? (UNIDENTIFIED MALE): That's the way it comes out but that's not the way you should think. (UNIDENTIFIED MALE): I would like to open a savings account. Alan Greenspan told everyone to raise a teaser rate and then raise the rate 17 times and Bernanke is being an academic. There is no time to be an academic. Listen; open the door to the fed window. He has no idea how bad it is out there! He has no idea! He has no idea! (UNIDENTIFED FEMALE): Kramer -- (UNIDENTIFIED MALE): I have talked to the heads of almost every single one of these firms in the last 72 hours, and he has no idea what it's like out there! None! My people have been in this game for 25 years and they are losing their jobs and these firms are going to go out of business and he's nuts! They're nuts! They know nothing! (END VIDEO CLIP) ROMANS: Wow. VELSHI: You get a sense of who he thought was to blame, at least for part of the crises. ROMANS: That's right. Passion, outrage. Plenty of blame to go around for the current meltdown. Jon Stewart put former Fed chairman Alan Greenspan on the spot while Jim Cramer takes a heated swipe at his successor, Ben Bernanke. VELSHI: Where does the blame really lie? Back with us is Alice Rivlin, Pete Peterson and David Walker and Bill Bradley. And in a break a few minutes ago, I have to share this with our viewers, you made the point David that we can spend a lot of time talking about blame but you would like to think where we are going from here. But I the guess for the American public at this point having lost 30, 40, maybe 50 percent in their investments in this last year and then learning a great deal about the dire straights that the country is in, they would like to know where we point the finger. WALKER: The fact is the regulators and overseers did not do their job. We will have to have reform. Clearly the risk management in the private sector as well as the government failed to work. We can spend this entire program talking about who's to blame but I don't think that would be productive. The real key is how can we learn lessons from what happened? What do we need to do to minimize the possibility of it happening in the future? You have fiscal policy, which is the deficits and the debt. And I will tell you what happened there, I think. In 2002, the statutory budget controls that were in place that helped us to go from large and growing deficits to large and growing surpluses expired, and since then, Washington has been totally out of control. And, frankly, the Fed and others really didn't do enough to oversee especially a lot of these new synthetic instruments that are out there now that are huge. ROMANS: And, Bill, here we have this near-term problem trying to fix that exacerbates what is not a long-term problem but a condition and crisis that's brewing on our books; it's almost an impossible situation. You can see why people are hungry to figure out who to place the blame on. And you can't -- is it Congress? Is it the regulators? Is it us for allowing this to go on and living beyond our means? It starts to become a really big, big thing to get your head around. BRADLEY: Well, let's think of it this way. What if you bought a house you couldn't afford and then when you got the value high, you borrowed on that so you could consume? What if banks lend money to you and didn't care whether you could pay because they're going to take those loans and securitize them and sell them. And that's what happened. ROMANS: Right. BRADLEY: And the result is that you have a lot of people out there who are very vulnerable to the winds of economic change. And right now they're being hit very hard. And I look out there and I say the key thing in the short term is to deal with the crisis that David mentioned. One type of instrument, credit default swaps. Credit default swaps in total are larger than the total economy of the world. Global GDP. That is how dangerous these instruments are. VELSHI: Theoretically they may be insurance against all of these mortgages that were repackaged and sold, that was the insurance against them going bad. BRADLEY: But when we get to the issue of fiscal responsibility, which is where Dave is, I think there are two things -- there are just two facts we ought to focus on. One is a tax cut is not a tax cut. Unless you pay less, I pay less, and our kids have to borrow less. It's not a tax cut if we get a tax cut and we send the bill to our children with higher deficits. ROMANS: Right. BRADLEY: Second, if you look at the U.S. military budget, if we cut the U.S. military budget by 10 percent, we would still be spending more than the defense budgets of all of the following countries -- Russia, China, Japan, India, Germany, and England. So we want to deal with entitlements and we have to do so with certain urgency, but we also have to look at not giving profitable tax cuts and also addressing a burgeoning military budget. VELSHI: Alice Rivlin, I want to ask you something. What role do we have? We know that we as individuals, our viewers, had a role in the credit crisis because we borrowed a lot of money and some of us couldn't pay it back and the rest of us are paying a price for that. What role, if any, do we have in this debt crisis? What did I do to get us into this mess? RIVLIN: Well, I don't know what you did specifically, but collectively we have not demanded fiscal responsibility from our government. We have not listened to the people who said we are promising too much in the future, more than we can afford at current tax levels. We just thought, I'm paying too many taxes so we ought to cut taxes. VELSHI: And I will vote for the person that tells me that's going to happen. RIVLIN: Exactly. We have been irresponsible collectively, but I think the media doesn't get off free either. They often don't explain very clearly that this is a country which is living beyond its means and building up debt for the future and must change. VELSHI: And that's part of why we are doing this here. Pete, you were making this point earlier that Alice Rivlin is making. Perhaps the blame we all share is not putting the pressure on the system to say, could you please solve this problem? Could you really please solve this problem and solve it soon? PETERSON: The other thing that's going on because we've got a political system where we say there's no such thing as a free lunch, but we keep eating it, you know, as though it were there. Our politicians come up with some single answers, and you might wonder why we put so much emphasis on entitlements in the long term. We were told in the campaign that earmarks would take care of, you know, a lot of this problem, waste and fraud. Other people have whined and groaned about the Bush tax cuts. Nobody proposes getting rid of all of them just for fat cats like me, you know. And then they would say, well, when we get rid of the Iraq war, everything's going to be fine. Dave has talked to us to be sure I get them right, but if we did all three of those now, all three, not one of them, all of the tax cuts, you end the war, you get rid of all of the earmarks, it only covers 15 percent of the long-term problem we're focusing on. ROMANS: Dave, let me ask you something and I want to get to Alice, too. I have been covering this for a number of years when I would say to economists, well-known economists for investment banks and banks, I would say, what about these deficits? I would be frankly, they would dismiss it and they would say, we don't need to worry about those deficits because the United States is a gold standard and we are the biggest, most dynamic economy in the world. Just look at the Clinton years. We can turn these things on a dime. You shouldn't worry about that. Here we are in near-term crises though where deficit spending is supposed to help you accept that deficit spending is the norm. What about all of the people along the way who have been saying and probably advising politicians, that -- we defy the economic rules? America is somehow special. These rules don't apply to us. WALKER: Deficits do matter over time, especially if they are large, growing and structural in nature. It's understandable to run deficits in times of war, in times of recession or depression, or in times of national emergency. But unfortunately, this country has become addicted to deficits and debt, whether it's peace time or war time. We had a huge structural problem before the recession, before the bailouts, before all of these crises, and now it's worse, all right. So the fact is we need to do what we have to, to turn the economy around in the short term, to get past the immediate crises. We'll get past it. We will. But we need to avoid the much bigger crises, which is our structural problem. VELSHI: Alice Rivlin, do you agree with that? RIVLIN: I do. And those economists for investment banks you were listening to have lot a bit of credibility recently. So let's come back to the people who are seriously worried about the liability of the United States down the line. Where are we going to borrow all of this money? How vulnerable will we be to the people that we are asking to lend it to us? And how do we solve this problem? There are only two ways to solve it, you stop spending as much in the future or you reform your tax system so that it can raise more money without -- without raising rates all the time. VELSHI: It was the urgency of this. A drop of 40 percent in the stock market and more than 1 million jobs lost and home prices to drop before everybody realized we were in a crisis. This one still feels a little while away. We have been running up our national debt, but who are we borrowing from? And how are we going to pay them back? ROMANS: Our out-of-control debt has now become a matter of national security. (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) (UNIDENTIFIED MALE): When I say trade deficit, do you know what that means? (UNIDENTIFED FEMALE): Deficit usually means something like a disorder or something, so something is wrong with it. It's not good. (UNIDENTIFED FEMALE): It's the money that the United States owes. Wait a minute. (UNIDENTIFED FEMALE): I have no clue. Sorry. (UNIDENTIFIED MALE): I have no idea. (UNIDENTIFIED MALE): I think it's something along the lines that you borrowed more than you spent. (UNIDENTIFIED MALE): Is the trade deficit with other countries maybe? (UNIDENTIFED FEMALE): So if we have a trade deficit, we're importing more than we're exporting. (UNIDENTIFED FEMALE): OK. There it is. (UNIDENTIFIED MALE): In 2007, China had the largest trade surplus in the world, and who was dead last? The United States of America. (UNIDENTIFIED MALE): Oh, what a guy WARREN BUFFETT: I've always liked business. I've always like investments. I've always like economics but I'm a disaster if you ask me, you know, what happens to a split atom or what happens to a cell within the body. So different people are wired different ways. A few years ago I wrote an article for "Fortune" on sort of the parable of squandering of Thriftville. Which was to show people the difference in large trade balances. Economics tends to put people to sleep and I thought maybe by creating a couple of islands with inhabitant's quite widely different activities, that it might get across the point that otherwise they get lost on. The thrust is that if you own a lot of property, island in this case, you can trade it off for the things that you eat, consume every day, and you can do that for a long time. But eventually you run out of property and then you have to work a whole lot harder to provide your own needs but also to pay back for the debts you have incurred. Short-term actions have long-term consequences. Sometimes people don't think about in the short run. In the last few decades, but extenuating in the last six to eight years, this country has started consuming considerably more than it produces. Because we're so rich, we can do it for a long time and we can do it on a large scale, but we can't do it forever. Eventually you run out. It's like a credit card. My credit's pretty good at the moment. And if I want to go out and quit working and have no income coming in and keep spending, I can, first of all, sell off the assets I have and then after that, I can start borrowing on my credit card and I've got a good reputation. I could do that for quite a while. But at some point I max out. And at that point, I have to start producing a whole lot more than I consume in order to clean up my debts. In this country, we have seen imports increase from 5 percent of GDP to, what, 17 percent or so of GDP in the last 35 or so years and yet we have 4 1/2 percent unemployment and we have a very, very prosperous country. So it's a good thing for us. What is not good is the imbalance between imports and exports. The rest of the world is buying more and more of our goods. But at an even greater rate, we're buying more and more of those. That's not good. More trade overall is good as long as it's true trade. If its pseudo trade where we are buying and not selling, I do not think that's good over time. (UNIDENTIFIED MALE): If you're buying more than you're selling, which is what a trade deficit is, eventually your trading partners are going to own a lot of your wealth. When they are not buying your goods and services with this money, they will be looking for ways to invest it. Running large and inconsistent trading balances can be problematic, especially when a country has a low savings rate and its government needs to borrow more money every year to pay its bills. (UNIDENTIFIED MALE): When the federal government needs to borrow money -- (UNIDENTIFIED MALE): Yes. (UNIDENTIFIED MALE): -- Do you know how they do that? (UNIDENTIFED FEMALE): Don't know. (UNIDENTIFIED MALE): No. I don't. I don't know. (UNIDENTIFED FEMALE): That is a very good question. I'm under the assumption that everyone else borrows money from us, so -- (UNIDENTIFED MALE): There's going to be some giant global repo man that's going to come by in like 2012 in like disguise. It's been quite a while. You're way late. You have interest piling up. We're going to take all of your blonde people. I'm sorry. (END VIDEO CLIP) (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) (UNIDENTIFIED MALE): In the past, when we had large budget deficits, our government turned to Americans to bail them out. And after World War II, basically all of the federal debt was owed to Americans. Today, our high budget deficits, our low personal savings rate and large trade deficits have caused us to become increasingly reliant on foreigners to finance our debt and provide capital for investment. There's nothing inherently wrong with this in the short term, and the truth is America lends money to other countries. However, as our reliance on foreign lenders increases every year, one might ask, what are the longer-term consequences? China's probably the biggest global economic story that there is going right now. It affects everything from big business, Wall Street, to down home America. Chinese people are worried about the same things that are Americans are worried about. They're worried about their healthcare, they're worried about their retirement. They are worried about boosting their own income. What scares a lot of Americans about China's growing prowess and the $1 trillion-plus in foreign exchange reserves is a lot of that money is invested in U.S. Treasury bonds. A lot of people worry that somehow China is going to all of a sudden ask for its money back and walk away from the U.S. economy. You know, one wouldn't exist without the other one, and I think increasingly the relationship between China and the U.S. is growing tighter, at least economically. DOUG KRAMER, KRAMER METALS: We are a scrapping processing facility. That means that we buy the material and process it in a form that mills, steel mills, aluminum mills, copper and brass mills, foundries, can consume in their furnaces to produce new metal. The material goes to China, it goes to Korea, Thailand, starting to ship in Vietnam, India, some into Japan. It's consumed by what would otherwise be a U.S. mill, now that material is going to foreign mills. We have killed our industrial base. We have killed or are killing what made us a great nation. We're giving it to China, to India, to all of the other nations of the world to produce our goods, and we're a net importer when we should be a net exporter. The only thing we're net exporting is scrap. (BEGIN GRAPHIC) In 2007, the largest U.S. export in China was electrical machinery. Nuclear machinery was second. Scrap metal was third. (END GRAPHIC) SEN KENT CONRAD (D), NORTH DAKOTA: It took 42 presidents 242 years to run up a trillion dollars of U.S. debt held abroad. This president has more than doubled that amount in just six years. Last year we borrowed 65 percent of all of the money that was borrowed in the world by countries, 10 times as much as the next biggest borrower. That's why this debt is jumping so dramatically, and it just fundamentally threatens our long-term economic security. If we don't deal with this, our children and grandchildren are going to have a much different life than we have enjoyed. We'll be in such deep hock to the rest of the world, we'll be dependent on the kindness of strangers. We'll be dependent on other countries continuing to loan us vast amounts of money. (BEGIN GRAPHIC) America's Top Three Foreign Holders of U.S. Government Debt (2007) China Japan Oil Exporters (END GRAPHIC) UNIDENTIFIED MALE: If 15 or 20 years from now two percent or three percent of the GDP is being paid abroad merely to service the debts or the ownership of assets that have been incurred because we're over consuming, that will be politically unstable. (COMMERCIAL BREAK) QUESTION: Do you think there is a risk of a recession? How do you rate that? GEORGE W BUSH (R), UNITED STATES PRESIDENT: You know, you need to talk to economists. I think I got a B in Econ-101. I got an A, however, in keeping taxes low and being fisky -- fiscally responsible with the people's money. (BEGIN GRAPHIC) A Brief History of the 21st Century 2008. January, 1 2000, Federal Debt: $5.6 Trillion Dollars. George W. Bush is declared the winner of the 2000 election. One of his first priorities is pushing a large tax cut. September 11, the attacks put the U.S. on war footing. Wars in Afghanistan and Iraq cost hundreds of billions. (END GRAPHIC) BUSH: The battle of Iraq, the United States and our allies have prevailed. (BEGIN GRAPHIC) Three major tax cuts have been passed by 2003. May 1, 2003, Federal debt: $6.5 trillion. Through Bush's first term, the Fed cuts interest rates 12 times. The dollar begins a long, steep decline against other currencies. Cheap credit floods the housing market. Many home buyers grab risky, non-fixed mortgages. The war drags on. Bush's popularity plummets. He signs into law Medicare-D, an expensive drug benefit program. Bush wins re-election on November 3, 2004. Federal debt: $7.4 trillion. The Bush Era. (END VIDEO CLIP) (END VIDEOTAPE) (BEGIN VIDEOTAPE) UNIDENTIFIED FEMALE: His rather direct way of presenting ideas has stirred up controversy since being sworn in as Treasury secretary on January 20, 2001. There is no doubt O'Neill has a very difficult job. PAUL O'NEILL, U.S. FMR SECRETARY OF TREASURY: President Bush 43 asked me to come back to the government and be the secretary of the Treasury, which I did for 23 months before I got fired for having a difference of opinion. UNIDENTIFIED FEMALE: For the record, the white house is saying that Treasury Secretary Paul O'Neill, and top economic adviser Larry Lindsey, tendered their resignations voluntarily. O'NEILL: The vice president said the president decided to make some changes and you're one of the changes. And what we'd like to do is have you come over and meet with the president and basically say that you decided to go back to the private sector. You know, for me to say that I decided to leave the Treasury is a lie, and I'm not into doing lies and so that was it. I went back to my office, latched up my briefcase and went down to the parking space that's reserved for the secretary of the Treasury, got in my car and drove back to Pittsburgh. Well, you know, it's a first in my life. I had never been fired before. I'd only had been promoted to ever higher levels of responsibility. But you know, it was OK with me because I would have really been uncomfortable arguing for policies I didn't believe in. I argued during the second half of 2002 we should not have another tax cut, that was not a popular view and in fact it led to a conversation with the vice president where he basically told me that we don't have to worry about deficits, which I got to tell you was really a shock to me. You know, when we, the Bush 43 administration, took over, we had something over five, maybe $5.6 trillion over national debt. Today, I think the number is $8.3 trillion. That is not an innocent change, it's a monumental change in the debt service that we have to do in addition to and on top of all of the other things that our country needs to do. You know, I think we only need to look at the fate of other countries who have lived beyond their means for a long time. You inevitably get into trouble. When you get extended to the point that you can't service your debt, you're finished. UNIDENTIFIED MALE: If you look at what's happened to great Republics in the past, they generally have not fallen because of external threats, they've fallen because of internal threats. Let's look at Rome as an example, which is the longest standing Republic in the history of mankind. The Roman Republic fell for many reasons, but three seem to resonate today: Decline moral values and political civility at home, overconfident and overextended militarily around the world, and fiscal irresponsibility by the central government. You know, we need to wake up, recognize reality and make sure that we start making tough choices sooner rather than later and that we're the first republic to stand the test of time. GREENSPAN (voice-over): Some people think that we can solve our financial problems by stopping fraud, waste and abuse or by canceling the Bush tax cuts or by ending the war in Iraq. The truth is, we can do all three of these things and we would not come close to solving our nation's fiscal challenges. Here's how bad our situation really is -- we already have approximately $11 trillion in total liabilities, including public debt. To this amount, you need to add the current unfunded obligations for social security benefits of about $7 trillion. Then add Medicare's unfunded promises, $34 trillion, of which about $26 trillion relates to Medicare parts A and B and about $8 trillion relates to Medicare part D, the new prescription drug benefit which some claimed would save money in overall Medicare costs. Add another trillion dollars of mis miscellaneous items, and you get $53 trillion. Our country would need $53 trillion invested today, which is about $175,000 per person, to deliver on government's obligations and promises. How much of this $53 trillion do we have? Zip. By the time today's college graduates are ready to retire, 40 years from now, the only things our government will be able to pay for are interest on the Federal debt and some social security, Medicare, Medicaid benefits. All other parts of the Federal government will be closed and out of business. What about taxes? (BEGIN GRAPHIC) 2005 average household income, federal tax rate 42 percent (END GRAPHIC) We would have to raise Federal tax burdens across the board more than two times today's levels to close the financing gap. Some politicians complain when any tax increases are mentioned. We're facing a more than doubling of Federal taxes if we continue down our present path. Remember our debt to GDP? By the year 2040, our GDP will be twice the level of the records at the end of World War II, and it skyrockets after that. Who's going to lend us money then? No matter what you personally believe should be done to address our nation's deficits, the magnitude of our problem is much bigger than people understand. Let's assume for a moment that all earmarks and special interest pork barrel spending were eliminated. They only represent about one percent of our annual Federal spending. What if all three Bush tax cuts expired in 2010? That would only address about 10 percent of our Federal financial hold. And what about Iraq? Even if the war ended in 2009, the total estimated cost of the war over time is less than three percent of our total financial problem. Our budget, savings, trade and leadership deficits individually are bad enough, but in combination, they create a toxic mix that threatens our country's and our families' futures. As the baby boomers retire in large numbers, this tidal wave of spending will reach our shores and we are simply not prepared for it. And trust me, it can swamp our (INAUDIBLE) of state. Unlike many problems facing our country, this one is ours alone. We can and we must solve this one. The question is, when will we? As our nation's founders said, it's really up to us, we the people. (END VIDEOTAPE) (COMMERCIAL BREAK) VELSHI: All right, so you and my share each of the national debt, $184,000. ROMANS: And counting. VELSHI: I don't have that available right now. ROMANS: I don't either. And most Americans don't have that kind of money available to pay off their share. So, where do we go from here? Watching the film with us is Alice Rivlin, Peter Peterson, David Walker and Bill Bradley. Incredibly important, Bill, to talk about the geopolitical issues, here, as well. We just heard in that most recent part of the film that this is something that has national security implications, no doubt. BRADLEY: There no question, as you saw in the example, this is the United States putting the screws to England when they invaded the Suez Canal. This was not exactly a country we didn't have a good relationship with. Imagine a circumstance going forward where a large part of the national debt is held by non U.S. residents. If we owed it all to U.S. residents, we pay or taxes, the first thing that's paid is not defense, not education, it is interest and the interest goes to Americans. But in this case, the first that comes in of taxpayers' money goes to pay foreigners in terms of interest on the debt. You get to a point, if you continue to run these giant budget deficits, where foreigners look at this and say, look, that's going to mean inflation and our dollar investments are going to be less, we're leaving the dollar. And as soon as they leave the dollar, the only chance we have is dramatically increasing interest rates and throwing the economy into recession, and ultimately the card is held not by an American, but by a non-American. ROMANS: But, it's in their best interest for us to do well economically if they own most of our debt, too. VELSHI: But Pete, you brought up the point, so there's one aspect of why it's dangerous to have other people holding all the debt. But Pete, you talk about other implications and (INAUDIBLE) just decision making. PETERSON: I would hope the one thing that would come out of this program is to get the American people to fully understand that there is a crucial relationship between economic security and national security. And if we're this vulnerable to foreign capital sources, let us not be naive enough to think quite apart from the economic effects on our interest rates and the dollar and so forth, that a China, for example, could decide that they have a strategic interest of some sort that is not in America's strategic interest and they're going to pull this lever and use it. And I know a lot of people say oh, they'd never do a thing like that because they'd be worrying about the value of what they hold. History is full of situations where national strategic interests were considered paramount by the country. So, let's be sure we focus on the geopolitical national security aspects as well as all the economic numbers you've been hearing. WALKER: The truth is that America's future is being mortgaged. And increasingly that mortgage is not held by Americans. At the end of World War II we had debt on the GDP of 22 percent because we were betting the ranch. On the other hand, all the debt was owed to Americans. Today over 50 percent of all debt held by the public is held by foreign lenders and it's going up dramatically. We have massive taxation without representation. We are passing on a huge tax bill to our kids and grandkids. That's immoral. It's got to stop. VELSHI: Alice Rivlin, can this problem be fixed if there is the will to do it? We talked earlier about social security, but can the entire zet situation be fixed? Understanding that we will have deficits for the short-term. RIVLIN: It will take time, but, can we do it? Oh, yes, we can do it. We're not alone in facing these kinds of problems. Most -- in fact all industrial countries have the combination of an aging population and rising healthcare costs. We need to take the steps that will bring our budget into balance, decide what do we want to promise in the way of healthcare and in the way of benefits to older people and how are we going to pay for it. That's a common problem. VELSHI: So, in the world that you see where we could fix this, what's the cost? What will Christine and I and our viewers experience differently if we had to put in to place the things that would fix this economy, this debt situation. RIVLIN: Over the long-run we would probably pay higher taxes because we would decide we want some of the things that the government has promised. We don't want to cut back on all of them and we're willing to pay for them. But, the American people have to have a choice. Right now ,we're just on autopilot, we are committing things -- promise -- making promises for the future and committing ourselves to benefit that we cannot afford in our current tax system. So we have to fix that. ROMANS: Bill, what's the national - what is the awareness? Do Americans understand, do taxpayers and voters understand that this is the situation we've got ourself in with successive administrations, successive Congresses. BRADLEY: I think people understand they've been overspending in their lives. Therefore it's easy to make the case that the nation has been overspending, as well. And I think that is the key point here. We consume 72 percent of our GDP, we save less than 1 percent. The Chinese consume 38 percent of their GDP, but save 35 percent. VELSHI: Wow. BRADLEY: Out of savings comes investment in technology in infrastructure and in health and education of our people. If we don't have savings, we can't be getting the economic growth we need for the long-term and we can't have savings unless we reduce what we spend at the national level. VELSHI: Pete. PETERSON: I think it's impossible to overestimate the point that Bill is making and Dave has made. If we were to be larger savers, we wouldn't be nearly this vulnerable as we are at the present time. But again, I come back to our culture. We've become gifted consumers and borrowers. We want it all and we want it now. And it requires a whole new CNN program to deal with this, but to me one of the most fascinating questions is how do we get Americans to save much more? That should be a major theme that comes out of this program. VELSHI: That's not just about having higher interest rates when people save, it's a conceptual shift in the way we do things. PETERSON: It's psychological, sociological. ROMANS: How do we do it, then? I mean, I feel a feeling if they can take money out of their houses again that maybe consumption is going to go back up. VELSHI: We send the message that spending is good for the economy, spending is good for the growth. (CROSSTALK) PETERSON: Let me say something that's unpopular, if I may. A number of years ago I was asked by the White House and the Congress to chair a little task force on capital formation and saving. And I got Democrats, Republicans, Independents, savings economists, and I asked them to evaluate our current savings tax incentives. And to my amazement they were unanimous. They're not very effective. They have only marginal effect. I said, well what is it you're saying? You're saying we have to save more. And I think they were unanimous that America has to look at what Singapore has done, Chile has done, I think Australia and others and to have some program of mandatory savings, which is what all those countries have. But terribly important, that money should not go into the government's hands. That money should be outside of the government and really saved. So, why don't you have a program on how to get Americans to save more. WALKER: Tax preferences have not worked. We have the lowest savings rate of any industrialized nation. The people who save and take advantage of tax preferences are people who have discretionary income to be able to do it is not necessarily new savings. We need some type automatic savings vehicle on top of a reformed benefit social security program. Why? Alan Greenspan said in the film, without savings there is no future. PETERSON: Automatic is a nice word, isn't it? VELSHI: Mandatory. Alice Rivlin, what do you think of that? Will that help us in a big way to have people forced, maybe, or highly encouraged to put aside some money? RIVLIN: I do agree with that. I think we could have much stronger incentives for people to save. But, let me make an optimistic point, here. After the Great Depression we had a whole generation that worried about the future and saved more. The one good thing that may come out of this current economic crisis is people have been shocked into realizing that housing prices can go down, 401(k)s can go down and that they need to prepare for the future. We should take advantage of that change of mind and not let it go away. VELSHI: We went from mandatory to automatic to incentive. It's getting better as we keep going around. ROMANS: And let me, just very quickly, we don't have much time left, but I want to ask each of, you've got 15 seconds in the elevator with President-elect Obama, what is the one thing you tell him about this subject, the one thing you want him to do? VELSHI: And we mean 15 seconds. BRADLEY: Address entitlements, at the same time of stimulating the economy. When you same late the economy make long-term investments, not simply giving money to individuals to spend. VELSHI: Pete Peterson. PETERSON: In addition to what Bill said, don't do anything now that makes the long-term problem worse. WALKER: Do a stimulus program now, but put a process in place, and take steps to help get our own financial house in order to avoid a much bigger crisis down the road. VELSHI: Last word to you, Alice Rivlin. RIVLIN: Take immediate steps. Don't wait for the recovery to address the long-run problems, as well as stimulating the economy in short-run. Two things at once. VELSHI: All right, so great good ideas out there and some real similarities about the fact that you have to take action now, but there may be no better opportunity to deal with some of the biggest problems this country's facing. ROMANS: That's right. OK, this has been a pretty eye-opening couple of hours. We thank our guests Alice Rivlin, Pete Peterson, David Walker, Bill Bradley. VELSHI: This is an issue that we will certainly continue to follow here on CNN. I'm Ali Velshi. ROMANS: And I'm Christine Romans. Thank you for joining us.

Lakeland Community College faces financial crisis with enrollment drop: The Wake Up for Tuesday, April 23, 2024

• Updated: Apr. 23, 2024, 6:18 a.m. |
• Published: Apr. 23, 2024, 6:03 a.m.

Administrators at Lakeland Community College in Lake County will have to make difficult decisions related to workforce, classes and programs and buildings to remain in operation, a 110-page audit concludes. (cleveland.com file photo)

• Cliff Pinckard, cleveland.com

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Enrollment at Lakeland Community College peaked at about 9,400 students in 2012, two years after U.S. college enrollment peaked.

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Krugman agrees with the Fiscal Wake-Up Tour (not that he wants to)

In Nobel-prize winning economist and New York Times columnist Paul Krugman’s column Monday, he makes an interesting point about California’s budget woes that supports much of what The Concord Coalition’s message has been for the last three years traveling the country on the Fiscal Wake-Up Tour . The irony is that he often protests much of what we stand for.

In writing about the political barriers to sound fiscal policy and governance in California, he expresses concern that it “foreshadows the future of the nation as a whole.” He continues:

“Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it’s spending to rescue the economy and the banks. Is that a real possibility?

Well, in a rational world Mr. Gross’s warning would make no sense. America’s projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the current crisis, in other words, should be manageable.

But that presumes that we’ll be able, as a political matter, to act responsibly. The example of California shows that this is by no means guaranteed. And the political problems that have plagued California for years are now increasingly apparent at a national level.”

The point of the Fiscal Wake-Up Tour is to express alarm about America’s fiscal challenge and to convince the American people, and through them their elected representatives, of the need to act sooner rather than later. That is because the earlier we make reforms to our tax system, our health care system and Medicare, and to Social Security, the less painful such changes will be and the less economic trouble the country will have because of the increase in debt and interest payments.

Our tour is designed to get politicians to act responsibly before a crisis forces their hands and that is an occurrence that is quite rare.

So, while we might disagree with Krugman on the magnitude of the problem (I would have to see exactly how “modest” the tax increases he suggests are) we agree that our fiscal challenge is manageable, and all it would take is less dysfunctional politics. This is why we consider our tour an “optimistic” endeavor and not preaching “doom-and-gloom.”

Finally, this fundamental message is often quickly dismissed by those who sometimes criticize us for being myopic and overly alarmist in our focus on deficits and debt. As we say often, The Concord Coalition has never taken a position on whether we favor a small government or a large government. We are motivated by our desire to reduce the fiscal constraints on future generations so they can enjoy the benefits of a healthy economy. The thing standing in the way of that is political dysfunction on all sides of our issues. We can’t take it for granted that politicians, regardless of their governing margins, will take even modest steps to correct problems in time.

–Josh Gordon

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