I.O.U.S.A.

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•

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and Kate Incontrera

with Dorianne Perrucci

Foreword by David Walker

John Wiley & Sons, Inc.

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I O U S A

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•

•

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IOUS A

•

•

•

and Kate Incontrera

with Dorianne Perrucci

Foreword by David Walker

John Wiley & Sons, Inc.

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Copyright © 2008 by Addison Wiggin and Kate Incontrera. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

Book design by Figaro.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750–8400, fax (978) 750–4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748–6011, fax (201) 748–6008, or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifi cally disclaim any implied warranties of merchantability or fi tness for a particular purpose.

No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profi t or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

The opinions and views expressed in this book and its foreword are solely those of their respective authors, and not those of I.O.U.S.A., LLC or the Peter G. Peterson Foundation.

The Peter G. Peterson Foundation and I.O.U.S.A., LLC did not write or edit any portion of this book, do not endorse it and are not receiving any compensation from its sales.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762–2974, outside the United States at (317) 572–3993 or fax (317) 572–4002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our w
eb site at www.wiley.com.

ISBN 978–0–470–22277–5

Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1

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For Jennifer, Meritt, August, and Elizabeth,
who make all the late - night pacing worthwhile
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Contents

Foreword ix

I.O.U.S.A. Cast of Characters xvii

Acknowledgments

xix

Part One: The Mission

The Mission

3

Chapter 1 The Real State of the Union

15

Chapter 2 The Budget Defi cit

23

Chapter 3 The Savings Defi cit

43

Chapter 4 The Trade Defi cit

59

Chapter 5 The Leadership Defi cit

75

Epilogue 93

Part Two: The Interviews

The Interviews

97

Alice Rivlin

99

William Bonner

111

Robert Rubin

127

Peter G. Peterson

139

Ron Paul

147

Paul A. Volcker

161

Dr. Alan Greenspan

169

Warren Buffett

175

vii

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viii Contents

James Areddy

197

Paul O’Neill

205

Arthur Laffer

225

Steve Forbes

245

Additional Resources

261

Index 263

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Foreword

This book will provide you with information on two journeys based on the critically acclaimed documentary
I.O.U.S.A.
The fi rst is a journey through time in which you learn about various key events relating to our country ’ s fi nancial and other affairs since the beginning of the American republic in 1789. This journey also looks forward to what our future would look like in 2040 under a do - nothing or let - the - chips - ride scenario. During this journey you will also learn about four key defi cits that threaten America ’ s and our families ’ futures and what both Washington policy makers and you should do about them.

The second journey follows the efforts of various participants, including myself, in the Fiscal Wake - Up Tour across the United States. As of June 2008, the Tour had traveled to over half the states and about 40 cities. Participants in the Tour state the facts and speak the truth directly to the American people about our nation ’ s true fi nancial condition and fi scal future. They also highlight the failure of Washington policy makers to address a range of large, known, and growing challenges that threaten our future.

The documentary is based in large part on a “ Four Defi cits ”

speech that I have given on a number of occasions on the Fiscal Wake - Up Tour, which also draws certain lessons from the fall of Rome, the longest - surviving republic in human history. These and the book
Empire of Debt
(Wiley, 2006), written by Bill Bonner and Addison Wiggin, provide a solid foundation for the documentary ’ s message. These messages are reinforced by a solid cast of bipartisan characters from the political arena. And we hear from three major sectors of the U.S. economy: those ix

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x Foreword

who save and invest; those who choose not to save; and those for whom saving is very diffi cult.

This Foreword, however, covers my own personal journey, including how it evolved during the shooting of the fi lm over the past two years. My journey continues and will until leaders whom we ’ ve sent to Washington start focusing on the nation ’ s future rather than their own present need to get reelected and begin to make tough choices. Our leaders need to deliver some real results for the American people. The alternative is unthinkable for many people.

My personal journey started on October 2, 1951, in Birmingham, Alabama. I was the fi rst of three sons of David S. Walker and Dorothy West Walker. As a child I grew up in several towns in Alabama and Florida. In my early years we rarely traveled outside our hometowns and never outside our home states.

I went to college at Jacksonville University in Jacksonville, Florida, where I met my wife Mary. We were married at the end of my sophomore year. In fact, at the early age of 19, we eloped to South Carolina. I subsequently graduated with a B.S. degree in accounting. Thirty - seven years and many moves later, which included homes in Florida, Georgia, Texas, and Virginia, Mary and I are still married. We now have two children and three grandchildren. So far we ’ ve beaten the odds associated with marrying at such a young age.

My professional career stated in public accounting with Price Waterhouse and Company. After earning my certifi ed public accountant (CPA) certifi cate, I changed fi rms and joined Coopers and Lybrand. Later, I became involved in the recruit-ing and human resource consulting business before doing public service in the federal government. My career has included serving as head of a global service line for Arthur Andersen LLP before the fi rm experienced the problems that led to its downfall.

My federal government career started in 1983 with the Pension Benefi t Guaranty Corporation and later the Labor flast.indd x

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Foreword
xi

Department. I

’ ve had the privilege to lead three federal government agencies, all professional services organizations.

Most recently I served as Comptroller General of the United States and head of the U.S. Government Accountability Offi ce (GAO) from 1998 to 2008. I also served as a Public Trustee for the Social Security and Medicare Trust Funds (1990 – 1995) while I was a partner with Arthur Andersen.

I have been fortunate to receive Presidential appointments from Ronald Reagan, George Herbert Walker Bush (41), and Bill Clinton, each time being confi rmed unanimously by the United States Senate. There aren ’ t many people who can say that. In fact, I may be the only person who can.

During my more than 35 - year professional career I have spent 20 years in the private sector and 15 years with the federal government. I have been a transformational change agent in many of these positions, so far with very positive results.

Hopefully, that will continue.

Other than my professional background, there are things about me and interests that have had a strong infl uence on my career and actions. For example, my Walker line came to America in the 1600s and initially settled in Virginia. I have several ancestors who fought, and at least one who died, during the American Revolution. I am a student of history and a member of the Sons of the American Revolution. Mary and I live in Mt. Vernon Farms, Virginia, on land that was once owned by George Washington.

Despite my family ’ s long history in America, to my knowledge, I am only the second Walker in my direct line to graduate from college. Most of my ancestors prior to my father worked in the mines, in mills, on farms, or as ministers.

While we rarely traveled outside the state in my early years, I have been fortunate to travel to all 50 states and about 90 countries to date. And, while I am proud to be an American, I also realize that there are many issues that are global in nature and that we must partner for progress with other countries to help make the world a better and safer place. Furthermore, while the flast.indd xi

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xii Foreword

United States is number one in many things, my experience has caused me to realize that we are not number one in all things.

In fact, we lag many other industrialized nations in connection with a range of key outcome - based indicators — public fi nance, education, health care, savings, and research and development, to name a few.

From a political perspective, early in life I was a south-ern Democrat. Later I was one of the fi rst in Northern Florida who changed my party registration to become a Republican.

In 1997, I offi cially became a political independent, refl ecting my frustration with both parties. As a candidate for the position of Comptroller General of the United States, I believed I should be independent both in form and in substance.

I consider myself an American who is an internationalist.

I was very involved in international policy and accountability issues during my tenure as Comptroller General. My interest in international issues continues and I was recently fortunate to be elected as the fi rst chairman of the Independent Audit Advisory Committee (IAAC) of the United Nations.

Enough about my background — what about my involvement in the documentary? My involvement began with reading a book. As a history buff and a person interested in fi nancial matters, I decided to buy the book
Empire of Debt
on one of my many trips into a bookstore before boarding a fl ight. On this occasion, Mary and I were fl ying to Phoenix to visit our son Andy, our daughter - in - law Meghan, and their family.

During my career, I have become a fast reader and prolifi c writer. As a result, I was able to speed - read the book on the long fl ight west. I enjoyed the book, especially the analogies to past history. I have used the analogies in many of my speeches, including frequent references to the challenges that we now face that led to Rome ’ s downfall. At the same time, while I enjoyed the book, I did not agree with everything in it.

When Mary and I arrived at Andy and Meghan ’ s home we had the opportunity to engage in a time - honored tradition for grandparents: reading to our then granddaughter, Grace. She flast.indd xii

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Foreword
xiii

is a very bright young girl. While I took my turn and read her a children ’ s book, as somewhat of a joke, I also read her a single paragraph out of
Empire of Debt.
The paragraph discussed how our current federal policies were mortgaging our future. When I was done, I asked Grace what she thought. To my shock and amazement she said, “ Devastating, Granddaddy! ” She was only four years old at the time!