I. O. U. S. A. has a complicated history. First there was a book called Empire of Debt. That inspired a documentary called I. O. U. S. A. Then the movie-makers felt the need for a book based on the movie. Hence we have the book I. O. U. S. A.
In the introduction, the filmmakers acknowledge the difficulty of making a movie about the national debt, a topic synonymous with boredom for most people. Yet they also try to emphasize that to them, the topic is very important. Our national debt is huge and getting bigger and has the potential to bring catastrophe to the nation. Hence they made the documentary and later the book. The result is a work that at once serves as a good introduction to the problem and an explanation of why the problem probably won’t be solved.
On the first point, the book gives a clear summary of the debt problem for economic novices. The authors walk us through a series of fundamental points. (1) The United States government, like almost all modern governments, spends more money than it takes in, and thus has a debt. (2) We finance our debt by selling bonds to investors, and promising to pay a certain annual interest rate on those bonds. (3) Thus we are entirely dependent on a group of investors willing to hold our bonds for the interest rates that we’re willing to offer. (4) When national debts get too big, the investors get skittish about their interest payments and start to dump the bonds. Once this happens, it starts a downward cycle that leads to national insolvency and economic disaster.
All of this ought to be common knowledge. It’s a tribute to the lousiness of our national education system that many people don’t even understand what government bonds are or how we pay for our national debt.
From there the book proceeds to chapters on our “four deficits”. Besides the national deficit, there’s the trade deficit, the savings deficit, and the leadership deficit. These chapters are also laid out with admirable simplicity and clarity, yet the long-term consequences if we don’t deal with them are not neglected. The book wraps up with a series of interviews with major financial players such as Warren Buffet, Paul Volcker, and alan Greenspan.
So that’s the good part of I. O. U. S. A. What’s the bad part? The bad part is that the authors never escape the boredom trap. They offer thunderous declarations about how important the topic is and how we can’t afford to ignore it, yet their respondes smack very much of politics-as-usual. For example, in the opening chapter we get this: the Comptroller General “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”. Yet two pages later we learn of the same individual’s response: “he hosts a series of luncheons and civic meetings around the country, which he’s dubbed the Fiscal Wake-Up Tour.”
So we’ve got luncheons. We’ve got civic meetings. And we’re calling it by the hair-raising, pulse-pounding name of “the Fiscal Wake-Up Tour”. What’s next? Founding a committeee? Perhaps even creating a task force? The national debt certainly is a huge problem. It’s too big to be solved by the current political system. If the problem is to be solved, we need some innovative approach to bringing it to public attention. This book does not offer that.