New Film on National Debt Focuses on Wrong Problem

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Dean Baker and F. Scott McCown
The Houston Chronicle, October 31, 2008

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'I.O.U.S.A.' makes villain of social-program spending.

AL Gore's success with An Inconvenient Truth has inspired documentary filmmakers to tackle big social problems. This year a new movie has been released that attempts to move public opinion about our nation's federal budget deficit.

I.O.U.S.A. premiered at the 2008 Sundance Film Festival and opens this weekend in several theaters in Houston and later at Rice University. The film makes the case that the nation must act now to address a projected $54 trillion budget deficit that will otherwise burden our children and grandchildren.

Two organizations, the Peter G. Peterson Foundation and the Concord Coalition, are using the film as a catalyst for action. Just as Al Gore's An Inconvenient Truth built public support for cutting carbon emissions, they want I.O.U.S.A. to build public support for cutting federal spending.

Al Gore was successful because he got his science mostly right. So, does I.O.U.S.A. get its economics mostly right?

The movie was produced before the present economic recession, and therefore ignores the role of public spending in stimulating a stalled economy, but we can ignore this flaw because the movie's horizon extends far beyond our current economic woes.

On the film's central point — that the United States has a growing deficit — there is no room for argument.

Our country needs to be fiscally responsible, which includes both watching spending and collecting revenue.

But one must put the film's $54 trillion deficit projected over the next 60 years in context. While that is a lot of money, the United States also has a very big economy.

In fact, $54 trillion equals only about six percent of our gross domestic product over the same period.

Historically, our country has spent larger percentages of GDP to address major national challenges. For example, at its height, Cold War military spending grew by more than eight percent of GDP.

More troubling than the film's lack of perspective though is who the film casts as the villains — Social Security, our nation's retirement system; Medicare, our nation's health care for the elderly; and Medicaid, our nation's health care for the poor. The film and the accompanying Peterson and Concord campaigns strongly imply that the nation must cut spending on these social programs.

But if we did, our country would still need pensions and health care for the elderly and the poor. I.O.U.S.A. ignores this reality, treating financial security and health care as discretionary purchases that we can just do without. It is as if Al Gore had suggested in An Inconvenient Truth that we solve the problem of global warming by all standing still.

Instead, Gore identified the underlying problem — carbon emissions — and proposed an advantageous solution — green growth. Just as we don't have to trade the economy to preserve the environment, we don't have to trade financial security and health care to preserve the economy, if we solve the underlying problem.

While an aging population will increase the cost of Social Security, we can readily take steps to either trim or cover that cost. Social Security is not the underlying problem.

The real problem is the cost of health care. The bulk of our projected deficit comes from high and rising private sector health care costs. The United States pays almost twice as much per person for health care as Germany, Canada or any other wealthy country. I.O.U.S.A. assumes a continuously growing gap between the cost of health care in the United States and other wealthy countries, and this growing gap accounts for the film's scary budget projections.

If current trends continue, in 30 years we will spend four times more per person on health care than other wealthy countries. This increase drives the deficit projections because Medicare, Medicaid and other government programs pay half of health care costs in the United States.

Tragically, health outcomes in the United States aren't as good as other countries that pay less. If we end up paying four times as much for an inferior health care system, we will be in a world of hurt.

Addressing the cost of health care, like addressing global warming, requires significant political will. I.O.U.S.A. contributes little to building that political will and a lot to undermining public support for important social programs critical to ordinary American families. I.O.U.S.A. is simply not An Inconvenient Truth.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.

F. Scott McCown is the executive director of the Center for Public Policy Priorities in Austin, TX.