Every so often we stumble across something so moving and so compelling that we feel we MUST share it with those around us. Well that is exactly what has happened to me over the past week. In today’s show I want to share a documentary done by the Peter G. Peterson Foundation titled “I.O.U.S.A”.
I originally found this while scanning through documentaries on Netflix. The actual documentary is about an hour and a half, however if you visit the website, www.iousathemovie.com, you will find the 30-minute version. Whether you are a Republican, Democrat, young, or old, you NEED to watch this documentary. I honestly believe that every American needs to watch this and should understand the gravity of this problem we have.
This documentary, “I.O.U.S.A: One Nation. Under Stress. In Debt”, chronicles the growing debt problem of the United States. It expresses the federal deficit as a percentage of Gross Domestic Product (GDP is the overall size of the economy). A good way to think of this from an individual standpoint is to think of GDP as the nations “net worth”. In February of 2007 (this documentary was produced in 2008), the federal deficit was 64% of GDP. Essentially, we were carrying debt equivalent to 64% of our Net Worth.
To give you an idea of how deep this is, on September 30th of 2007, including the unfunded promises of Social Security and Medicare, our Federal Debt was $53 trillion! This number (before the current administration) was increasing at about $2 – $3 trillion per year.
The documentary does a great job of not only showing where we are currently, but it goes all the way back to the beginning of the country to show just exactly how we got here. This is a wonderful way to look at our situation because our Federal Debt is really just the combined total of each year’s budget surplus/deficit. On the very first day of our government in 1789, our Federal Debt was $75 million (40% of GDP due to our war for independence). This literally scared our fore-fathers to death. So much so that by 1835, they had completely paid the deficit down to ZERO! This is the only time in the history that this has happened.
To give you a better perspective, here are some historical debt/GDP ratios to compare to our levels today:
- Civil War (1861-1965) 33% of GDP
- WWI (1935) 44% of GDP
- WWII (1939-1945) 122% of GDP (0% foreign ownership. We owed to ourselves.)
- End of Reagan Era 64% of GDP
- End of Clinton Era 57% of GDP
So if you remember above, I said that in February of 2007 we were at 64% of GDP. Imagine, however, where that number is now considering the horrid events of 2008.
As you listen to the show I will walk through each of these eras and explain what was going on and how we were able to handle it then. I will also explain how this time it is different. The documentary does a wonderful job of breaking down our real economic problem into four areas: Budget, Savings, Trade, and Leadership. PLEASE, PLEASE, PLEASE go watch this video. Once you’ve watched it, come back and leave comments. Let’s get a discussion started here. You’ve heard my thoughts, now I would like to hear yours!