National Debt Video Resources

Overdraft

(SPEECH)
[MUSIC PLAYING]

(DESCRIPTION)
Opening credits: Produced and Directed by Scott Galloway.

Two rows of chairs face a lectern with microphones in a room labeled "Committee on the Budget Hearing Room."

(SPEECH)
KENT CONRAD: I know the consequences. I know where this is headed. And it is not a pretty picture. [MUSIC PLAYING]

(DESCRIPTION)
The National Debt Clock ticks past 15.1 trillion. Text: "We must not let our rulers load us with perpetual debt." Thomas Jefferson.

(SPEECH)
KEVIN ROBERTS: America can't be great if it's broke. And we're broke.

(DESCRIPTION)
Executive in Charge of Production: Eric Davis.

(SPEECH)
JOE KLEIN: There's a simple solution to the federal debt. You pay for it.

[MUSIC PLAYING]

(DESCRIPTION)
A hand uses a paintbrush to color California with the Chinese flag. Text: "Creditors have better memories than debtors." Benjamin Franklin.

(SPEECH)
CORY BOOKER: I'll tell you right now, there's no easy answers to these solutions. It's going to take sacrifice.

(DESCRIPTION)
Editor: Greg Grzeszczak.

Video shows the exterior of the New York Stock Exchange building, lawn signs advertising "open house" and "foreclosure," and street signs for Wall Street.

(SPEECH)
KENT CONRAD: We have had the greatest economic downturn since the Great Depression.

ALICE RIVLIN: The biggest lesson from the last recession is, don't have a financial crisis.

(DESCRIPTION)
Art Director: Jessica Schuler.

(SPEECH)
ERSKINE BOWLES: By far the biggest cause is health care.

(DESCRIPTION)
A pie chart depicts three similar slices taking more than half the area, labeled health care, social security, and national defense. The other three slices are income security, interest on debt, and other.

(SPEECH)
BILL CLINTON: Baby boomers are retiring as the largest senior generation America ever produced. We're going to be living longer after 65 than any of our predecessors. And we're already bigger.

[MUSIC PLAYING]

(DESCRIPTION)
Text: Blessed are the young for they shall inherit the national debt." Herbert Hoover.

(SPEECH)
JOHN HAMRE: Each side wants to take one portion, but say it has to carry 100% of the solution. That'll never work.

(DESCRIPTION)
On the board game "Mouse Trap," a plastic boot knocks a marble down a ramp.

(SPEECH)
MITCH DANIELS: We are deep, deep, deep in the hole, headed down deeper. And it threatens the America we've known.

[MUSIC PLAYING]

(DESCRIPTION)
The marble knocks a cage off a perch, which covers the screen.

The Capitol building appears on the back of American money. Surrounding text in similar design flashes by: Medicare, Splurging, Deficits, debt.

A title: Overdraft.

A logo of a red umbrella appears beside text, Travelers.

(SPEECH)
PRESENTER: This program is made possible by the Travelers Institute, an organization dedicated to furthering the public policy discussion about the facts of the US deficit and its implications for the American opportunity.

(DESCRIPTION)
Text: travelers institute dot org.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
Text. "IT IS A TERRIBLE SITUATION WHEN THE GOVERNMENT, TO INSURE THE NATIONAL WEALTH, MUST GO IN DEBT. INTEREST IS THE INVENTION OF SATAN." Thomas Edison.

Mitch Daniels, Governor, Indiana.

(SPEECH)
MITCH DANIELS: Some people understandably say, boy, this is a sort of dry subject, dollar, cents, debt, what's it mean to me?

(DESCRIPTION)
Text on a sheet. U.S. Budget Tax Revenue, $2,165,000,000,000. Federal Budget, $3,721,000,000,000. New Debt, $1,556,000,000,000. Existing Debt, $14,272,993,603,617. Interest, $454,393,280,417.

(SPEECH)
If I read the mathematics, it means everything.

(DESCRIPTION)
Text: Remove eight zeroes, and consider as a household budget. Family Income, $21,700. Family Budget, $38,200. Debt on Credit Card, $16,500. Outstanding Credit Card Balance, $142,710. Credit Card Interest, $4,543.

(SPEECH)
ERSKINE BOWLES: When you focus on reality, it's a pretty harsh lesson for America.

(DESCRIPTION)
ERSKINE BOWLES, CO-CHAIR, NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM.

(SPEECH)
Al and I came to the opinion that we face the most predictable economic crisis in history, that this fiscal path we're on is simply not sustainable.

(DESCRIPTION)
Three men sit on stage. Text: UNC Charlotte, Center City Campus.

(SPEECH)
And if you were to try to think of an analogy of these deficits of over a trillion dollars a year, they're like a cancer. And they truly will destroy the country from within.

(DESCRIPTION)
A line graph depicts the debt as percent of GDP. The line approaches 100 percent. A bar chart depicts the debt by decade in terms of American structures. In the 1960s, a house that reaches just above zero dollars. In the 2010s, the Empire State Building, approaching 15 trillion.

(SPEECH)
BILL CLINTON: Why should people care? Because if the debt keeps going up, more and more of their federal tax dollars will be used to pay interest on the debt rather than to invest in our future through education and technology. Secondly, money will be more expensive for people. So their interest rates on their homes, small business loans, cars, sending kids to college, all that will go up. So our economic growth rate will go down long term.

(DESCRIPTION)
Kent Conrad, Senate Budget Chairman.

(SPEECH)
KENT CONRAD: Three things have happened. No. 1, well over $3 trillion of tax cuts not paid for, we have had two wars not paid for, and the economic downturn, which led us to the lowest revenue in 60 years as a share of our economy and the highest expenditures in 60 years as a share of our national income.

[MUSIC PLAYING]

(DESCRIPTION)
A white picket fence surrounds a house. A family poses outside, on the sidewalk.

RAGHURAM RAJAN, UNIVERSITY OF CHICAGO'S BOOTH SCHOOL OF BUSINESS.

(SPEECH)
RAGHURAM RAJAN: Politicians know that their constituents are suffering. What does a politician do? Let's get people into housing. Housing gives them a stake in the future. It's an asset. You can borrow against it, and you can spend. But because it's consumption, which is based on an underlying asset which has grown in value, you don't necessarily feel that you're consuming your way into debt. You're consuming against home equity. Over the 1990s and the early 2000s, the increase in house prices was very beneficial to the average American in the sense that it allowed greater consumption. All this is fine so long as it lasts.

[MUSIC PLAYING]

(DESCRIPTION)
A photo of the posing family bubbles and melts.

ALICE RIVLIN, ECONOMIST, BROOKINGS INSTITUTION.

(SPEECH)
ALICE RIVLIN: The explosion of federal debt in the last three or four years has basically only one explanation-- the financial crash and the deep recession that followed.

(DESCRIPTION)
JOE KLEIN, COLUMNIST, TIME MAGAZINE.

(SPEECH)
JOE KLEIN: The investment bankers focus their attention on the biggest single asset that most middle-class people have, which is their homes.

(DESCRIPTION)
Foreclosure lawn signs sway in the wind.

(SPEECH)
KENT CONRAD: Wall Street created financial instruments that had risks that were truly stunning.

(DESCRIPTION)
JUDD GREGG, RETIRED SENATOR, NEW HAMPSHIRE.

(SPEECH)
JUDD GREGG: They were borrowing on nothing for nothing on top of nothing.

JOE KLEIN: Traders started betting on the fate of those new financial instruments. And then it all crashed.

(DESCRIPTION)
Steam plumes above a New York subway tunnel to Wall Street Station.

(SPEECH)
KENT CONRAD: It appears there are always people who are so self-centered. They really don't give a flip what happens to all the rest of us.

[MUSIC PLAYING]

(DESCRIPTION)
Text: Number of Foreclosures. Each year from 2008 to 2011 has around 2 million foreclosures.

(SPEECH)
ALICE RIVLIN: There is lots of blame to go around. The mortgage originators who were shoveling out mortgages to people who were probably not going to be able to pay them, the bankers who were buying those mortgages and selling them around the world, and the regulators who should have been paying attention to this.

(DESCRIPTION)
Three people wearing suit pants and carrying briefcases walk in a dark hallway.

(SPEECH)
KENT CONRAD: Look, they brought us to the brink. I was in the room when the former secretary of the Treasury in the Bush administration and the chairman of the Federal Reserve came to the leaders of Congress and told us they were taking over AIG the next morning. And if they did not, there'd be a financial collapse within days.

(DESCRIPTION)
Photo of Henry Paulson and Ben Bernanke. The three people enter a dark room.

(SPEECH)
JUDD GREGG: They walked into this room at 9 o'clock at night, and they said that within 72 hours, the entire banking system of the United States, and therefore the world, will shut down. We were on the verge of the most cataclysmic fiscal event in our history. And what Secretary Paulson said was, I need the authority to make it clear that as Treasury secretary, I can step up and protect these banks from failing so that they can do business with each other.

Major companies in this country that are very well-known, that are totally solvent, that are very strong financially, could not move money around. I mean, they literally could not open their stores the next day because they could not move money.

(DESCRIPTION)
Text: TARP, Troubled Asset Relief Program.

(SPEECH)
Everybody just sort of sat there thinking, I'm sure the way I was thinking, this is incredible.

[MUSIC PLAYING]

(DESCRIPTION)
OCTOBER 3, 2008. TARP IS ENACTED. IT GRANTS THE U.S. TREASURY $700 BILLION TO BUY ASSETS AND EQUITY FROM STRUGGLING FINANCIAL INSTITUTIONS AS A RESULT OF THE MORTGAGE CRISIS.

TO DATE, $352 BILLION HAS BEEN DISBURSED, $250 BILLION GOING TO BANK BAILOUTS.

(SPEECH)
ALICE RIVLIN: This was an especially deep hole because the problem was in housing finance. Everybody has a house. And the housing crash has affected our whole economy deeply. And we're not out of it yet.

(DESCRIPTION)
Text: Debt Commission.

(SPEECH)

[MUSIC PLAYING]

JOE KLEIN: I've been doing this for 40 years. I think I've seen 300 debt commissions during that time, usually completely ignored.

(DESCRIPTION)
A document sits on a desk: The National Commission on Fiscal Responsibility and Reform, The Moment of Truth, December 2010.

ALICE RIVLIN, ECONOMIST, BROOKINGS INSTITUTION.

(SPEECH)
ALICE RIVLIN: A bipartisan group can sit down together and come up with solutions that nobody likes because everything you do to reduce the deficit is unpleasant. I mean, you've either got to cut one kind of spending or another kind of spending or raise taxes. Those are the only options you have. And nobody wants to do any of those things.

ERSKINE BOWLES: Al says, we've been very successful. We've achieved the pinnacle of our life. We pissed off everybody in America.

(DESCRIPTION)
At the UNC Charlotte conference, a man sits beside Erskine. Alan Simpson, CO-CHAIR, NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM.

(SPEECH)
ALAN SIMPSON: It took us four months to establish trust in our commission when we started. And the theme coming out of the Democrats was, who's the biggest spending president in the history of the United States before this man? Answer, George W. Bush never vetoed a single spending bill in 6 1/2 years until it came to stem cell research. So after that simmered down, the other side said, but this guy, Obama, is four times worse than Bush with the stimulus and TARP and this and that. Finally, Erskine and I said, well, keep scrapping, and we'll just do a two-member report, just the two of us.

[LAUGHTER]

JUDD GREGG: Well, I was on the commission. I voted for it. Even though it was the president's commission, and five of his six people voted for it, the president walked away from it.

(DESCRIPTION)
The document falls from the desk into a trash can.

JUDD GREGG, RETIRED SENATOR, NEW HAMPSHIRE.

(SPEECH)
If they were to just legislate the Simpson-Bowles language, then I think the recovery we would see would be extraordinary.

ERSKINE BOWLES: About one-quarter of what we did was revenue, and three-quarters was in the form of spending cuts. And the sum total of it yielded $4 trillion in deficit reduction.

(DESCRIPTION)
A line graph depicts debt as percent of GDP. The current policy rises to 200 percent in 2040. The proposal dips below 40 by 2040.

(SPEECH)
It's the minimum amount we need to reduce the deficit in order to stabilize the debt and get it on a downward path as a percent of GDP.

(DESCRIPTION)
PETER ORSZAG, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET AND FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE.

(SPEECH)
PETER ORSZAG: There's been a lot of criticism of the Obama administration for not more fully embracing the Bowles-Simpson commission. The first thing you have to realize is the report had a significant amount of revenue contained in it and therefore had almost no chance of passing the House of Representatives, regardless of whether the administration embraced it or not. So it's almost just an optics discussion of what plays better in terms of how you're presenting yourself if you embrace it or not. And that's a different discussion than it was actually going to happen if the White House embraced it.

JUDD GREGG: I think they were shocked. I mean, I think they appointed this commission and hoped that the issue would go away. And they just didn't want to risk the political capital of supporting their own commission's report.

(DESCRIPTION)
Documents flutter in the air.

Mitch Daniels, Governor, Indiana, Director, Office of Management and Budget, 2001 to 2003.

(SPEECH)
MITCH DANIELS: We Americans have a healthy skepticism of bigness. We're skeptical of big business, big labor and big government, and with good reason. And one reason that we're very, very careful not to allow monopolies whenever we can avoid them is they overcharge and mistreat their customers. They have no competition to force them to do otherwise. Government's the last big monopoly.

(DESCRIPTION)
JOE KLEIN, COLUMNIST, TIME MAGAZINE.

(SPEECH)
JOE KLEIN: We don't trust government. But we need government. And government is us when you come right down to it. Those folks in Washington weren't landed there from Mars. They were elected by us.

(DESCRIPTION)
Text: Politics and Debt.

Four people pose on the frozen reflection pool. The Capitol Building sits in the background.

(SPEECH)
KENT CONRAD: I can tell you there is enormous denial still in this town by the Right and the Left who seem to think nothing happened in the last five years.

(DESCRIPTION)
Kent Conrad, Senate Budget Chairman.

(SPEECH)
Hey, something huge happened. We narrowly averted a depression. As a result, our deficit and debt exploded. We are in real danger of a financial debacle. And we can either face up to it and take it on now and have gradual change, or we can wait for the roof to cave in. And if we do that, shame on everyone involved.

MITCH DANIELS: I don't have that high a view of people whose first ambition is to stay in office. They're so afraid to tell the truth about the problem we have. They're so afraid even to venture a suggestion.

KENT CONRAD: What's most difficult is dealing with people who just don't want to do anything. I mean, really are absolutely in denial of what is hanging over this country and seem to think that you can solve this without asking anybody to sacrifice. It's impossible.

(DESCRIPTION)
Two rows of chairs face a lectern with microphones in a room labeled "Committee on the Budget Hearing Room."

JAY FISHMAN, CEO/CHAIRMAN, TRAVELERS COMPANIES.

(SPEECH)
JAY FISHMAN: We're the richest nation in the world. We can do anything we want to do. We can do any hundred things we want to do. The only thing we can't do is everything. And so now it's a matter of alternatives and choices and how we're going to spend the resources we have.

(DESCRIPTION)
In an empty conference room at Pew Research Center, a document is labeled "No Silver Bullet."

SUE URAHN, MANAGING DIRECTOR, PEW CENTER ON THE STATES.

(SPEECH)
SUE URAHN: "No Silver Bullet" was the title of a Pew report. It actually is one of my favorite titles because it is an apt description of the tough choices that policymakers are facing when it comes to fixing the federal debt problem. There really is no silver bullet out there that is going to allow this country to fix its long-term debt problem.

(DESCRIPTION)
KEVIN ROBERTS, CEO. SAATCHI & SAATCHI WORLDWIDE.

(SPEECH)
KEVIN ROBERTS: We're probably the most famous name in advertising. But my job is to maintain and grow that mystique. Politics at the moment is disappointing. Wherever you go, it's bereft of imagination. Politicians think we are moronic. We understand the debt problem. These turkeys don't, OK? Simplicity is everything, OK? But they don't understand it enough. They make it complicated, complicated. It's very simple, man. We are spending too much.

(DESCRIPTION)
PETER ORSZAG, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, AND FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE.

(SPEECH)
PETER ORSZAG: Congress has effectively become two different camps with almost no one in the middle. One of the strongest findings from social psychology is, if you put like-minded people together in a group, the group becomes more extreme than any given individual within it. It fundamentally changes the nature of our political economy because it used to be that you'd get legislation done by getting the moderates to agree. But if there are no moderates, it's much harder to produce legislation.

BILL CLINTON: A lot of the Democrats are mad because they say, well, this is mostly caused by the Republicans who cut taxes and increase spending. And for the last 30 years, that's true. Although the Democrats are not blameless, they supported some of these policies. The problem for the Democrats is that if you look at the next 10 years, most of it will be caused by things we care about, more people in retirement years, spending more on health care.

(DESCRIPTION)
The Lincoln Memorial faces the frozen reflecting pool.

Morton Marcus, Economist.

(SPEECH)
MORTON MARCUS: You can make decisions that are unpopular early in your administration so there's two, three years to go before your election. One of the reasons that we don't see much courage in the House of Representatives is because they're elected every two years.

(DESCRIPTION)
Andrew Romano, Senior Writer, Newsweek.

(SPEECH)
ANDREW ROMANO: American voters think short term, especially when they're hurting. People want quick answers. But the fact is that there aren't quick answers and that it's going to have to be a sustained effort over a long period of time. Right now, you're seeing a lot of political energy being put into attacking the short-term debt. But the broader debate, the larger and more important debate, is what we're going to do long term.

(DESCRIPTION)
A turtle stands on a pedestrian crosswalk.

(SPEECH)
Getting rid of the turtle crossings is really not going to do all that much to help alleviate our long-term debt problem. The question is whether politicians who seize on those small symbolic measures as a way to appease voters who are concerned about spending, how are they going to tackle those problems which are not politically popular, they're actually calling for sacrifice?

(DESCRIPTION)
The turtle walks off.

Text flashes by, Baby Boomers, Cut benefits, The numbers game, on a card labeled Social Security.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
The Charging Bull statue sits on cobblestone.

(SPEECH)
JOE KLEIN: When people out in America that I've talked to take a look at Wall Street, they say, well, first, you took our jobs, then you took our homes. And then they look at Washington, and they're saying, oh, and now you want to limit our Social Security pensions? We don't want any part of that. Which is why 80% of the American people are opposed to entitlement reform.

MITCH DANIELS: Americans, in their defense, have been misled. I mean, a lot of people think, that Social Security money, I paid that in. No, you didn't. You were paying for the retirees of 10, 20, 30 years ago. Today's young people are going to pay for you.

(DESCRIPTION)
RAGHURAM RAJAN, UNIVERSITY OF CHICAGO'S BOOTH SCHOOL OF BUSINESS.

(SPEECH)
RAGHURAM RAJAN: When Social Security came in, the average life expectancy in the United States was 64. And you got Social Security at 65, which means, in a funny sense, most people didn't live to see Social Security.

(DESCRIPTION)
A single-file line of seniors walk on a sidewalk with miserable expressions.

(SPEECH)
BILL CLINTON: The baby boomers are retiring as the largest senior generation America ever produced. We're going to be living longer after 65 than any of our predecessors. And we're already bigger.

[MUSIC PLAYING]

(DESCRIPTION)
10,000 BABY BOOMERS A DAY. FOR THE NEXT 18 YEARS, WILL START TO RECEIVE SOCIAL SECURITY.

JUDD GREGG, RETIRED SENATOR, NEW HAMPSHIRE.

(SPEECH)
JUDD GREGG: The baby boom generation has taken us from 35 million retired people to 70 million retired people. We have a system that is built on the basis of having more people to pay into it than take out of it.

(DESCRIPTION)
The line of seniors walks through a turnstile. A line graph labeled Social Security through the Years compares tax income to outlays.

(SPEECH)
We've gone from, in the 1950s, 16 people paying into Social Security for every one person taking out, to today where we've got two people paying into Social Security for every one person taking out. It doesn't work.

RAGHURAM RAJAN: Which means you need the elderly, in the interests of the young, to accept a change.

(DESCRIPTION)
Andrew Romano, Senior Writer, Newsweek.

(SPEECH)
ANDREW ROMANO: Why should the baby boomers be putting such a burden on younger voters? People like me, frankly, will look at this and say, we've got to come up with some better ways to deal with these problems. Or else, by the time that we retire, it's going to be a very bleak picture.

(DESCRIPTION)
The last senior passes through the turnstile.

(SPEECH)
KENT CONRAD: In 2037, Social Security will be insolvent, will be unable to meet its full obligations. At that point, the law requires that there will be an across-the-board cut. Right now, that is estimated to be 22%.

(DESCRIPTION)
A man in a hard hat opens a large warehouse door.

(SPEECH)
JOE KLEIN: People also talk about changing the retirement age. And I would be careful about that because when you actually talk to human beings, for some, the retirement age of 67 right now is way too old.

(DESCRIPTION)
The man in the hard hat lifts a large stone vase.

(SPEECH)
RAGHURAM RAJAN: With a job that's difficult, it's something they don't actually enjoy, they want to get out of. Should those lives be extended as much as, say, the professor who sits in his chair and loves to think and finds that his work is a form of enjoyment? Think about the amount of lobbying that will be done as each profession wants to classify itself as a hardship profession with early retirement.

(DESCRIPTION)
CHIEF ECONOMIST. INTERNATIONAL MONETARY FUND (2003-2007), AUTHOR, FAULT LINES.

(SPEECH)
MITCH DANIELS: We don't have to do anything that affects today's beneficiaries or those who are coming within a few years. They should all be reassured, a deal is a deal. You're good to go. The changes we need to make there can start taking effect years in the future. But we better decide now.

(DESCRIPTION)
Alan Simpson, CO-CHAIR, NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM.

(SPEECH)
ALAN SIMPSON: Everything we have suggested or any group in America has suggested to do something with Social Security doesn't affect anybody over 60. And I get the most vicious, vicious letters from people over 60 and 70 and 80. Foul, I mean foul stuff. I'm good at that. But, boy, I tell you.

JUDD GREGG: If you mention Social Security, you are immediately attacked from the left and the right for some reason or other in very hyperbolized language, which makes discussion very hard and makes progress very hard.

(DESCRIPTION)
Chair, Senate Budget Committee, 2005 to 2007.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
A man uses a chainsaw to carve an ice sculpture in the shape of a pie chart, depicting the national budget.

ALICE RIVLIN, ECONOMIST, BROOKINGS INSTITUTION.

(SPEECH)
ALICE RIVLIN: We could index the benefits to the length of life so that the benefits went down slightly as longevity increased.

(DESCRIPTION)
The chainsaw slices a chunk about 20% labeled Social Security.

(SPEECH)
MITCH DANIELS: Why are we going to send a pension check to Donald Trump? The money ought to be for those people who, without it, are at risk of destitution in their older years.

(DESCRIPTION)
Morton Marcus, Economist.

(SPEECH)
MORTON MARCUS: Social Security today has a cap on it of about $100,000. If we remove that cap and said that every dollar you earn is subject to Social Security tax, it's estimated the Social Security Administration would add about 13% to its revenue.

(DESCRIPTION)
The man removes the Social Security slice from the ice sculpture.

(SPEECH)
BILL CLINTON: You could make just a few changes in Social Security and make it good for 75 years. If you look at the dollars, it's quite a soluble problem.

(DESCRIPTION)
Two little girls in identical dresses run to a seesaw.

(SPEECH)
JUDD GREGG: We as a culture do not pass on to the next generation less of a nation. If we continue on our present fiscal path, we're going to pass on to our kids a less prosperous nation, where they'll have a lower standard of living, a massive debt that they can't afford to pay off, and therefore a less secure nation.

(DESCRIPTION)
Cory Booker, Mayor, Newark, New Jersey.

(SPEECH)
CORY BOOKER: When it comes to debt and the pressures on government, there's a very simple way of looking at it. You can either increase revenue or decrease expenditures. And that's very clear.

(DESCRIPTION)
The girls seesaw.

(SPEECH)
ALICE RIVLIN: There's no one solution. You have to do a little bit of everything.

(DESCRIPTION)
A hand wipes flour from a wooden table.

(SPEECH)
The reason that federal tax collections are low in relation to the size of the economy right now, we have cut tax rates. And we are an economy which has not fully recovered from the recession.

(DESCRIPTION)
DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET (1994-1996). FOUNDING DIRECTOR, CONGRESSIONAL BUDGET OFFICE (1975-1983).

(SPEECH)
People aren't earning as much, and tax rates are lower than they would otherwise have been if we hadn't cut taxes.

(DESCRIPTION)
A chef pulls dough from a mixing bowl and tosses it on the table.

(SPEECH)
JOE KLEIN: Ever since Ronald Reagan, the Republican Party in particular, but also some Democrats, have been afflicted by a particularly strange and virulent form of anti-tax fetishism.

(DESCRIPTION)
The chef rolls the dough with a pin. A graph titled “Deficit With and Without Tax Cuts (billions of dollars, 2000-2012)” shows a red line, Deficit With Tax Cuts, and a blue line, Deficit Without Tax Cuts, that both start at a surplus greater than 200 in 2000. The red line reaches a deficit over 600 in 2012, and the blue line reaches a deficit of 100.

(SPEECH)
KENT CONRAD: The Bush tax cuts, which cost us well over $3 trillion just in the first 10 years, will cost us much more than that over time, are part of the problem because they were never paid for with spending reductions.

(DESCRIPTION)
The chef spreads sauce on a circle of dough

(SPEECH)
ANDREW ROMANO: If you look at public polling, most people say that one of the most effective ways to address the national debt is to get rid of the Bush tax cuts for the wealthiest Americans.

(DESCRIPTION)
Four men smile as President Bush signs a document.

(SPEECH)
RAGHURAM RAJAN: Taxing the very rich, there is some scope for increasing those taxes. But it's not going to be nearly enough to account for the higher liabilities that we have.

(DESCRIPTION)
The chef places vegetables cut in the shape of letters onto an uncooked pizza, spelling budget categories like "income security" and "health care."

(SPEECH)
ALICE RIVLIN: The good thing about the revenue side is, we have a very inefficient tax code. And it's just full of loopholes and special provisions and things that benefit one group or another. If we eliminate some of those things or reduce them, then we could raise more money with a simpler tax code and actually lower rates.

(DESCRIPTION)
The chef places the pizza in an oven.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
Text: State Debt.

(SPEECH)
BILL CLINTON: Every state, in theory, has to run on a balanced budget because they don't get to print money like the federal government. That's the good news. The bad news is, that means something very different from state to state.

(DESCRIPTION)
State Debt now exceeds 4 Trillion dollars.

(SPEECH)
JOE KLEIN: There's been a devil's bargain that was made between state politicians and their public employees unions. If you give the public employees a significant wage increase, it means you probably have to raise taxes. If you give them a pension increase, it means you can kick it down the road. Well, we've been kicking this down the road for 20 years. And all of a sudden, you got a lot of old retired public employees who have to be taken care of.

MITCH DANIELS: Governments all over the place have done this. Indiana used to do it. The bills they delayed paying were to schools, universities and local governments, who then had to go out and borrow money for six months or more.

[MUSIC PLAYING]

(DESCRIPTION)
Text: The most indebted states in the country.

Stone structures flash by from California, New York, Texas, New Jersey, and Illinois.

SUE URAHN, MANAGING DIRECTOR, PEW CENTER ON THE STATES.

(SPEECH)
SUE URAHN: States face a little bit of a double whammy, if you will. The revenue drops because taxes are down, unemployment is up.

(DESCRIPTION)
Text, Per Capita Debt in Illinois. Each person on a crowded sidewalk is captioned, $6,692.

(SPEECH)
And the population, which becomes stressed and unemployed and, in many cases, has less revenue, will be drawing down on state services, like Medicaid, like unemployment. Or-- this is another thing Illinois has done-- they just don't pay their bills.

ROBERT L. BUTLER: [LAUGHS]

(DESCRIPTION)
ROBERT L. BUTLER, MAYOR, MARION, ILLINOIS.

(SPEECH)
Well, Illinois state government ranks right up there with Alabama and Louisiana as being the worst in the country. We're billions of dollars in debt. And we go further in debt every day. And this debt has to be paid. We have vendors for the state here who are six months behind in being paid for what the service or the goods they have provided. How can they stay in business? They can't.

(DESCRIPTION)
Tom Miller.

(SPEECH)
TOM MILLER: Most of the time when people say, oh, you live in Illinois, they think Chicago. We're rural. We're South. Southern Illinois is poor.

(DESCRIPTION)
Tom walks in a barren field and picks up a straw of hay.

(SPEECH)
I enjoyed working the pharmacy. There was, to me, no greater joy than going down there and taking care of the patients.

(DESCRIPTION)
Hannah Collins.

(SPEECH)
HANNAH COLLINS: Tom Miller and his wife were just like family to me. If any time I had any problems with my medication and I got scared about something, I would call them because I felt like they knew as much about the medicine as my doctor did.

TOM MILLER: Sixty-five percent of my business was state welfare, Medicaid.

(DESCRIPTION)
Debbie Miller.

(SPEECH)
DEBBIE MILLER: Our Medicaid customers would come in, and we would fill their prescription. And they would sometimes pay a small co-pay. And then we would send the claim off to the Medicaid office and basically wait for our money to come.

TOM MILLER: We have to pay our wholesaler every two weeks for the medicine that we just dispensed. I wasn't getting paid from the state of Illinois for at least five to six months. My last check was for services provided 270 days ago, nine months. Are there any politicians that's went nine months without a paycheck? We did.

DEBBIE MILLER: It was very hard for me to watch Tom go through this every day, the suffering and the grief knowing that we were going to have to leave, and we were going to lose the pharmacy.

TOM MILLER: On August the 19th, I came in at 8 o'clock that morning.

[SOMBER MUSIC]

(DESCRIPTION)
Tom removes his eyeglasses and wipes his eyes.

(SPEECH)
And by noon, it was over.

(DESCRIPTION)
A "For Rent" sticker covers a "For Sale" sign outside a small building.

(SPEECH)
And all we were left with was empty shelves and the keys in our hands.

(DESCRIPTION
A frame that housed the "pharmacy" sign is empty.

(SPEECH)
HANNAH COLLINS: And when I drive by there, I just look at it and think, I wish they were still here.

TOM MILLER: Maybe there was something else I could have done. Guilt, guilt that was undeserved.

(DESCRIPTION)
The building on the corner sits empty as traffic drives by.

(SPEECH)
No, I've never been back. It hurts too bad.

[SOMBER MUSIC]

(DESCRIPTION)
Tom stares off to the side.

Tom walks to the driver's door in a car under an awning.

He closes the door and drives out to the main road.

His car gets off at an exit labeled "Main Street, Marion."

Tom drives past the empty building and regards the empty frame overhead.

He gets out of the car and looks around, hands in pockets.

(SPEECH)
Twenty years of my life. It's gone.

(DESCRIPTION)
Tom stands below an awning labeled "Drive-Thru Window."

He stands at the closed front door and shields his eyes to peer inside at the empty space.

Tom turns away and shakes his head.

(SPEECH)
That's it, guys.

(DESCRIPTION)
Tom looks through the empty window, then walks around to the back of the store.

Text: Communications.

(SPEECH)

[SOFT PIANO MUSIC]

(DESCRIPTION)
A clock ticks. Text: 1 million seconds is 11 and a half days.

FRANCESCA JAROSZ, JOURNALIST, INDIANAPOLIS BUSINESS JOURNAL.

(SPEECH)
FRANCESCA JAROSZ: To be honest with you, I deal in millions and billions so much, I don't even know if I could explain a trillion. And I write for a business publication. That's sad, right?

(DESCRIPTION)
1 billion seconds is 32 years.

(SPEECH)
ROBERT L. BUTLER: When you get up to $14 trillion, I don't even know how much that is. In space, we've got the stars that are a billion light years away. Well, that's about the same thing as a $14 trillion debt.

(DESCRIPTION)
1 trillion seconds is 32,000 years.

(SPEECH)
ALAN SIMPSON: The big bang theory of the universe happened 13,600,000,000 years ago. And that's a third of a trillion. And we owe 16 of those babies.

[LAUGHTER]

Now, that-- no, there’s nothing-- there's really nothing funny about that.

(DESCRIPTION)
KEVIN ROBERTS, CEO. SAATCHI & SAATCHI WORLDWIDE.

(SPEECH)
KEVIN ROBERTS: Revolution starts with language. So we got to change the language. We got to reframe the problem. Donald Khan, great neurologist, has said, look, 80% emotional, 20% rational. Rational thinking leads to one thing-- conclusions. And conclusions are not going to solve the debt problem. Emotion, on the other hand, leads to another thing-- action. And we need to take action about the debt in the U.S. We need to change.

(DESCRIPTION)
Andrew Romano, Senior Writer, Newsweek.

(SPEECH)
ANDREW ROMANO: Everyone likes the idea of sacrifice in the abstract. But when they're actually asked to make sacrifice themselves, they balk. Politicians are going to have to overcome that resistance from the public if they're going to really tackle it.

(DESCRIPTION)
Kent Conrad, Senate Budget Chairman.

(SPEECH)
KENT CONRAD: The No. 1 problem in solving the debt threat to the United States is public opinion. When you ask the American people, they say, yes, get the deficit and debt under control. When you ask them the specifics, they reject nearly every one that would be necessary to actually resolve the problem. So, for example,

(DESCRIPTION)
The chef slices the pizza.

(SPEECH)
they say don't touch Medicare and Social Security and the other health care accounts. That's 60% of federal spending. They say, and by the way, don't touch defense. That's another 20% of federal spending. So now you're left with 20% of federal spending to work with.

When you ask them the specifics, you want to cut education? No. You want to cut veterans? Absolutely not. Do you want to cut parks? No. You want to cut research on energy to reduce our dependence on foreign energy? No. The one thing by a majority that they say they all support reducing is foreign aid. Foreign aid is 1% of the budget. We're borrowing 40 cents of every dollar. And they say the one thing they're willing to do is cut 1 cent of every dollar. Hey, that's a big disconnect.

(DESCRIPTION)
Cory Booker, Mayor, Newark, New Jersey.

(SPEECH)
CORY BOOKER: Democracy is just not a spectator sport. You can't not vote for somebody and then sit back and expect them to win. We all have to get involved when it comes to moving our communities forward. We are interdependent on each other. In fact, people talk about the Declaration of Independence. I think America screams much more nobly towards a declaration of interdependence. We need each other in this nation to succeed.

KEVIN ROBERTS: About a year ago, I was in Singapore on the same platform as Al Gore. He's out there talking about global warming and fear and all that kind of stuff. And then I come up. And I can just see the audience are glazing over because they just don't, yeah, yeah, sustainability, it's a good thing. They know that. But they don't know what to do. There's nobody.

So I started to ask them, why are you all sitting there sort of like that, and what's going on? And there's people going, well, we don't know what to do. We know it's a good thing. But you know what? Not for me. What can we do? We're just one. We're just one. And we came up with this program called DOT-- Do One Thing.

(DESCRIPTION)
An animated commercial depicts people urinating in the shower. Subtitles: Peeing in the shower is what we want everyone to do. Men, Women, Children, Brazilians.

(SPEECH)
We did a great spot in Brazil. And the spot is called "Pee in the Shower." Because if they pee in the shower, that'll save 4 liters of water from toilet flushes.

(DESCRIPTION)
Text from the commercial is subtitled. One toilet flush can waste up to 12 liters of drinking water. In one year, it's 4,380 liters. Pee in the shower. Help the rainforest.

(SPEECH)
And 4 liters of water a day over 300 years is enough to save a bunch of trees in the Atlantic rainforest. So pee in the shower, save the rainforests. That's what we got to do in the debt problem.

(DESCRIPTION)
In a portrait, John Maynard Keynes reclines in an armchair.

JOE KLEIN, COLUMNIST, TIME MAGAZINE.

(SPEECH)
JOE KLEIN: There are complicated things that politicians have to be able to explain to the public that are counterintuitive. The most important one is Keynesian economics, that when the bottom falls out in a recession, government has to work to get things moving again.

(DESCRIPTION)
Text. KEYNESIAN ECONOMIC THEORY: STRESSES THE NEED FOR GOVERNMENT INTERVENTION THROUGH MONETARY AND BUDGET POLICIES TO STABILIZE THE ECONOMY.

(SPEECH)
BILL CLINTON: In this economy, if you try to raise taxes or cut spending a lot on things that are keeping us going, government revenues would go down even more than spending is cut. It wouldn't help.

JOE KLEIN: That's counterintuitive. You mean I got to spend more money and build a bigger deficit, even though our deficit has gotten pretty huge because people aren't paying as many taxes because they've lost their jobs? That's confusing.

BILL CLINTON: That's what's so hard for ordinary people to understand. How can you be for stimulating the economy for the next two years and then putting the hammer down and cutting the debt for the 10 years after that?

(DESCRIPTION)
Water rushing out of a stone ledge dries up.

PETER ORSZAG, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, AND FORMER DIRECTOR, CONGRESSIONAL BUDGET OFFICE.

(SPEECH)
PETER ORSZAG: The right policy combination today is to combine more support for the economy over the next couple years with a lot more deficit reduction that is enacted now but takes effect in 2018, 2019, 2020.

CORY BOOKER: We have an economy that the more you put pressure on capital, the less jobs. And for a city that has some poverty and is trying to create more jobs, we want to try to create environments where there's more job creation and more investment.

RAGHURAM RAJAN:

(DESCRIPTION)
RAGHURAM RAJAN, UNIVERSITY OF CHICAGO'S BOOTH SCHOOL OF BUSINESS.

(SPEECH)
Because the unemployment benefits in the United States are typically much less than in other countries, the government has been much more eager to spend in an attempt to stimulate the economy, to get it growing again. And this kind of stimulus costs money. The real problem is it doesn't seem to have had much effect on job creation.

[MUSIC PLAYING]

(DESCRIPTION)
RAGHURAM RAJAN walks through a foyer on the campus of University of Chicago. He passes a banner labeled Chicago Booth.

(SPEECH)
It used to be that when the U.S. economy went into a recession, it came out pretty quickly. And in fact, the deeper the recession, the faster it came out. What's been happening more recently is recoveries have been taking much longer.

(DESCRIPTION)
Sparks fly from a worker's machine in a workshop.

(SPEECH)
This one looks like it's going to be five years or more before the jobs come back.

JOE KLEIN: But we're going to have to be honest about jobs in this country, which politicians have not been. Those good factory jobs that used to support an entire family are never coming back.

[MUSIC PLAYING]

(DESCRIPTION)
BETWEEN 1999 AND 2009, 1 IN EVERY 3 MANUFACTURING JOBS IN AMERICA DISAPPEARED.

(SPEECH)
RAGHURAM RAJAN: Many people think that the primary reason we've had job losses in this country is because jobs are being sent abroad. But really, the biggest source of job loss is technology.

(DESCRIPTION)
In a factory, automatic machines whir.

(SPEECH)
Let me give you an example of this. Think of the job of a secretary. This used to be a very important job. It used to occupy a lot of people, primarily women. And every executive beyond a certain level had a secretary.

[PHONE RINGING]

(DESCRIPTION)
In an office, a woman opens an envelope and reads the paper inside, then answers a phone.

(SPEECH)
JENNIFER: Office of Mr. DeMeco. This is Jennifer. How may I help you?

RAGHURAM RAJAN: A lot of those jobs are now being done by email. All the things that the assistant used to do has, in a sense, been made easier by technology.

(DESCRIPTION)
The woman sitting at the office desk vanishes.

(SPEECH)
And as a result, that job no longer exists.

JOE KLEIN: What do we do with all of those people who used to work in factories, but the jobs aren't there anymore? We need them to be working because we're not going to have a solid democracy if we don't have a solid middle class.

[MUSIC PLAYING]

(DESCRIPTION)
WHILE THE UNITED STATES REMAINS THE WORLD'S LARGEST MANUFACTURING ECONOMY, MANUFACTURING JOBS MAKE UP ONLY 9 PERCENT OF THE WORKFORCE.

(SPEECH)
PETER ORSZAG: Over the past two to three decades, the effect of global labor supply has doubled to quadrupled. The impact may be going up the income distribution. So whereas before it was affecting people right in the middle of the income distribution, at the 50th percentile, say, it's creeping up to the 75th to the 90th percentile. Basically, at this point, anything that can be digitized is subject to that globalization force. And there are lots of things that even college graduates do that can be digitized.

(DESCRIPTION)
Students look at laptops. On the screen, a bar chart is labeled Stabilize the U.S. Debt. Your goal is to achieve 60% of GDP by 2018.

(SPEECH)
BILL CLINTON: If you bring the deficit down and move to a balanced budget, you drive interest rates down, which drives investment up, which creates jobs.

(DESCRIPTION)
On the students' laptops, checkboxes sit next to options such as "Tax Fringe Benefits," "Eliminate Life Insurance Tax Benefits," "Eliminate Subsidies for Biofuels."

(SPEECH)
We need to get it down because otherwise it will slow economic growth and paralyze our ability to invest in the future.

[MUSIC PLAYING]

(DESCRIPTION)
The students wear sad faces, holding printed documents that display their choices.

Text: Unemployment Rates, from 2007, 4.6% to 2011, 9.0%.

Text. REAL UNEMPLOYMENT: EVERYONE SEEKING FULL-TIME EMPLOYMENT INCLUDING PART-TIME WORKERS AND THE MARGINALLY ATTACHED. Real Unemployment rates, from 2007, 8.3%, to 2011, 15.9%.

(SPEECH)
KEVIN ROBERTS: We live in a VUCA world. It's Volatile, Uncertain, Complex and Ambiguous. So you can spend time on budgets and strategies and good luck when a tsunami hits Japan. You can either take that on the chin and get defensive, or you can think, yeah, it's a VUCA world, but it's a Vibrant world, an Unreal world, a Crazy world, an Amazing world where creativity can make a difference.

[MUSIC PLAYING]

(DESCRIPTION)
Text: Healthcare.

(SPEECH)
BILL CLINTON: We're spending approximately, as a country, $850 billion, billion, a year on health care that we would not spend if we had any other country's health system.

PETER ORSZAG: Health care is at the core of our long-term fiscal challenge between now and, say, 2050, almost all of the projected growth in the federal budget is expected to come.

(DESCRIPTION)
A line graph projects the share of GDP to rise to 40% by 2050. ERSKINE BOWLES, CO-CHAIR, NATIONAL COMMISSION ON FISCAL RESPONSIBILITY AND REFORM.

(SPEECH)
ERSKINE BOWLES: By far, the biggest cause is health care. We spend twice as much on health care in this country as any other developed nation, whether you talk about it as a percent of GDP

(DESCRIPTION)
Text: 23% of GDP.

(SPEECH)
or on a per capita basis.

(DESCRIPTION)
Text: $7,960 per capita.

(SPEECH)
And our outcomes, we rank somewhere between 25th and 50th in things like infant mortality and life expectancy and preventable death.

(DESCRIPTION)
49th.

(DESCRIPTION)
50th.

(DESCRIPTION)
Text: The U.S. Ranks last among developed countries in preventable deaths.

(SPEECH)
So we're not getting much bang for our buck.

BILL CLINTON: We're still the best in the world at some things. If we weren't good in heart surgery, somebody else would be giving you this interview, right?

(DESCRIPTION)
A nurse holds a thermometer into a woman's mouth.

(SPEECH)
But in terms of basic health care, a lot of these other countries are doing a better job than we are, spending less money. But the vast majority of the difference between us and everybody else are the sheer paperwork costs for insurance companies, health care providers, employers and employees.

(DESCRIPTION)
A woman at a desk sharpens a pencil and moves a stack of papers.

(SPEECH)
Since 1970, per capita Medicare costs per year have gone up 400%. It's a lot, right? Since 1970, per capita private insurance costs have gone up 700%.

(DESCRIPTION)
Colorful fish swim in a tank.

(SPEECH)
If you cut Medicare spending and put people back in the private market, you're either going to put them in a more expensive health insurance market, which will lower their incomes, or you'll make them sicker because they won't have insurance.

(DESCRIPTION)
A man pushes a person in a wheelchair in a lobby.

(SPEECH)
PETER ORSZAG: If you take Medicare beneficiaries and you rank them by their costs, the top 5% of beneficiaries account for 40% of the total.

SUE URAHN: Medicaid is even more complicated. Populations that it serves are pregnant women, children, disabled adults, and the frail, disadvantaged elderly.

(DESCRIPTION)
SUE URAHN, MANAGING DIRECTOR, PEW CENTER ON THE STATES.

(SPEECH)
The rule of thumb for Medicaid is that about 5% of the population drives about 50% of the costs.

(DESCRIPTION)
In a radiation oncology department, a patient lays on a hospital bed.

(SPEECH)
PETER ORSZAG: The money is in typically chronic conditions. And often, the care that's being delivered in those cases is what the provider is recommending. You're not going to make a lot of progress on changing the trajectory of health care costs unless you're affecting what providers are suggesting in those kinds of cases.

(DESCRIPTION)
An IV bag of green fluid has a dollar sign printed on it.

(SPEECH)
Currently, the financial incentives in health care are for more care rather than better care. And that's exactly what we get. We get more care rather than better care.

RAGHURAM RAJAN: We need far more competition, far more transparency. But we also need to make judgments about when treatments are necessary. There is this amazing statistic about the amount of spending that takes place in the last year of a person's life.

[MUSIC PLAYING]

(DESCRIPTION)
30% ($140 BILLION) OF THE ANNUAL MEDICARE BUDGET IS SPENT ON RECIPIENTS' LAST YEAR OF LIFE.

JUDD GREGG, RETIRED SENATOR, NEW HAMPSHIRE.

(SPEECH)
JUDD GREGG: We as a society are far too litigious. We have to change the way we deal with tort law or suing doctors and suing hospitals so that we can afford to have doctors and hospitals to actually practice medicine instead of trying to defend themselves by practicing defensive medicine.

(DESCRIPTION)
A building labeled "Mayo Clinic" sits behind a courtyard filled with stones and trees.

(SPEECH)
BILL CLINTON: The Mayo Clinic lets you enroll in a health care plan where you have coordinated care. And then they do what's necessary to help you. So there's no incentive to run extra procedures. Most Americans pay for procedure. So it's cheaper than 70% of the comparable health insurance in America, even though everybody knows it's great quality.

RAGHURAM RAJAN: I have no doubt that down the line, we'll have better technologies enabling people to make more efficient choices on their treatment, technologies which tell us which hospitals are really good, which treatments are more effective, and in a sense, how to pay for those treatments in a way that is cost effective.

(DESCRIPTION)
A hospital machine readout cycles through values, labeled blood product.

(SPEECH)
BILL CLINTON: But it's going to be much tougher and it's going to require bipartisan cooperation because it's not easy to score.

(DESCRIPTION)
The green liquid drips onto a table.

(SPEECH)
That's why this is so tough. But it's also why we need to be careful with it. We need to be dead serious. We need to level with the American people. Within five years, our health expenditures have to be x, whatever x is. But let's try to do it in a way that doesn't hurt people and lower their incomes or doesn't lower the quality of care.

(DESCRIPTION)
JAY FISHMAN, CEO/CHAIRMAN, TRAVELERS COMPANIES.

(SPEECH)
JAY FISHMAN: In 2020, simply letting the demographics run out with no change in the programs themselves, Social Security, Medicaid and Medicare will exceed $2.5 trillion.

(DESCRIPTION)
Bar charts depict 2011 Federal Revenues and future entitlement program spending. As the 2011 revenues go down, the 2011 spending goes up, and the 2020 rises even more.

(SPEECH)
So eight years from now, those programs alone, forget defense spending, forget discretionary spending, forget other mandatory spending, those programs alone outstrip the total federal receipts that we collect this year.

(DESCRIPTION)
A cake labeled with portions of the budget is sliced. The healthcare slice sits on a plate.

Text: Debt held by foreign countries.

(SPEECH)
JUDD GREGG: In the United States, we don't have enough resources or savings to purchase all the debt that we're going to issue. In other words, we're borrowing so much to operate our government that the American people don't save enough to pay for that.

BILL CLINTON: We're going to have to find ways to get investment in this country besides people just covering our deficit.

SUE URAHN: China's experienced a fair amount of economic growth over the last number of years. So it's got money to invest, and it has a high savings rate. American securities are a very safe and reliable investment.

RAGHURAM RAJAN: Think about the Chinese producing Apple iPads. They put it together. Apple buys it from their Chinese suppliers. And they have to send those people dollars. So they write a check for the Chinese supplier. The Chinese supplier takes that dollar, takes it to their bank. The bank then takes it to the central bank. And the central bank says, I have a bunch of dollars. What do I do? It goes out and buys U.S. bonds. And both sides, in a sense, are better off. The U.S. gets more iPads. The Chinese have some investments which they hope will retain value into the future.

[MUSIC PLAYING]

(DESCRIPTION)
A painter uses a brush to color a map. The state of California and a portion of Oregon is colored red, with a gold star, and a label: China.

(SPEECH)
BILL CLINTON: China owns about 25% of our debt held by foreigners. They own $1.2 trillion.

(DESCRIPTION)
The southeast of America is colored white, with a red sun, and labeled Japan.

(SPEECH)
Japan's got about $900 billion. And there are problems with that.

JUDD GREGG: At some point, people are going to look at our country and say, well, you're sort of like Greece. We don't want to buy your debt any longer. Or if we're going to buy your debt, we're going to make you pay so much for it that we're basically going to bankrupt you as a country.

(DESCRIPTION)
North Dakota is colored with a Union Jack, labeled U.K.

(SPEECH)
BILL CLINTON: The United Kingdom is the only country with a lot of our Treasury notes that we have what you might call a normal economic relationship with. That's why I favored these trade deals. If you look at when we make trade deals with countries, we negotiate it hard. We try to make it mutually beneficial. And we don't have big trade deficits with countries we have specific trade agreements with. But if you have a relationship with China and Japan, let's say, and they're your bankers and you've got to depend on them to buy your debt, it's very difficult to enforce any principles of reciprocity.

KENT CONRAD: Admiral Mullen, the chairman of the Joint Chiefs of Staff, said the national debt is the No. 1 national security threat. Why would he say that? He's a military man. He is saying it because he understands the dependence of the United States on foreign lenders.

(DESCRIPTION)
Texas, Oklahoma, and a portion of the South is labeled "All Other Foreign Countries."

(SPEECH)
Half of our debt now is being financed abroad. That puts the United States in a more vulnerable position.

ERSKINE BOWLES: That's doubly bad for America. It's bad for a couple reasons. First of all, that's a trillion dollars we can't invest in this country, in education or in infrastructure or in research to create the next new thing. But it's also a trillion dollars that is going to be invested in Asia to educate their kids, to build their infrastructure, to create the next new thing over there so the jobs of the future are there, not here. That's nuts.

JUDD GREGG: At some point here, if we stay on this course, we will find out what the effect is when the world loses confidence in the American currency. And it will be cataclysmic.

(DESCRIPTION)
The finished framed map hanging on a wall falls to the floor.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
Text flashes by: Military cuts, National Security, Costs of War, Defense.

(SPEECH)
ERSKINE BOWLES: We spend more than the next 14 largest countries combined on national defense.

(DESCRIPTION)
Text. THE U.S. REPRESENTS 5% OF THE WORLD'S POPULATION BUT 43% OF THE WORLD'S TOTAL MILITARY EXPENDITURE.

(SPEECH)
It's causing us to hollow out the country. And I'll tell you how crazy it is. We have this treaty with Taiwan that we'll protect them if they're invaded by China. The only problem is, we'll have to borrow the money from China to do it. It's crazy.

[LAUGHTER]

JOE KLEIN: And this is the dirty little secret of defense spending. These programs have remained in operation because they provide an awful lot of jobs. If you want to kill a submarine, you're taking jobs from 48 states.

KENT CONRAD: And we had testimony from the top defense analysts in the country who pointed out to us 51% of all federal employees are at the Department of Defense. That does not count the contractors. When we asked them, "How many contractor employees do you have?" they said, "We can't tell you." And we asked, "Why can't you tell us? They said, "We don't know." And I said, "Well, is there a range?" "Yes, we can tell you there are between 1 million and 9 million." That's a pretty big range.

[MUSIC PLAYING]

(DESCRIPTION)
A sign in a field reads "Fort Bragg, Home of the Airborne and Special Operations Forces." Text: Population, 151,000.

(SPEECH)
JOHN HAMRE: I built seven defense budgets.

(DESCRIPTION)
JOHN HAMRE, PRESIDENT, CENTER FOR STRATEGIC INTERNATIONAL STUDIES, former Deputy Secretary of Defense.

(SPEECH)
We didn't hide the numbers. As a matter of fact, we drown ourselves in the numbers. This is the largest enterprise in the world. We've got 300,000 vehicles. We've got 300 installations. We run the largest school system in the world, largest daycare program in the world. 350,000 kids are in daycare every day. We run the seventh largest grocery chain in the world. I mean, it's a massive enterprise. And as a result of that, the budget is large and complex.

(DESCRIPTION)
A helicopter whirs overhead. Text. ESTIMATED COSTS OF WAR IN AFGHANISTAN AS OF JANUARY 2012, $490 BILLION. ESTIMATED COSTS OF WAR IN IRAQ AS OF JANUARY 2012, $767 BILLION.

(SPEECH)
There has been an expensive set of wars. And the security requirements post-9/11 have driven up defense budgets, but only in the context of exploding budgets in general.

(DESCRIPTION)
A bar chart depicts Defense Spending as percent of GDP. In 1960, it reaches 50%. In 2010, 25%.

(SPEECH)
JAY FISHMAN: No one should confuse the issue that our solution here is premised in reducing defense expenditures materially. You could cut them to zero-- and I'm not suggesting remotely that we do. But you could cut them to zero, and our deficit would still be $900 billion.

(DESCRIPTION)
A chainsaw carves the "Defense" slice of the ice sculpture.

(SPEECH)
JOHN HAMRE: Every organization does well the things that are truly central to the organization. When I was in government and we had the Kosovo air war, within a week, we had 600 combat aircraft flown 4,000 miles to new locations, all put on bases, all able to support. We had fuel for everything. We had ammunition. We had maps. We were able to do that in just in a week.

So this organization is a remarkably effective organization for the things that really matter. But when it comes to being efficient, being a well-run business, that's not our high priority. It's going to have to become a higher priority. But our central purpose is to fight and win wars.

(DESCRIPTION)
The "defense" slice falls away from the ice sculpture.

(SPEECH)
ANDREW ROMANO: Everyone realizes that there's a long-term problem. The way to solve that problem, you've got to tackle the revenue side of the equation, you've got to tackle the spending side of the equation.

(DESCRIPTION)
Two girls play on a seesaw.

(SPEECH)
BILL CLINTON: If you want to balance the budget again, you have to get it the way we got it last time. You got to get it by cutting spending, raising revenues among those who've benefited most and can best afford to pay, and with economic growth.

JOE KLEIN: Right now, we can't think about two or three years from now. We can't afford to do that for our kids because we're going to be OK two or three years from now. We're going to come out of this recession, maybe not to where we were before. But what we really have to think about is where we're going to be 20, 30 years from now for our kids.

(DESCRIPTION)
The girls get off the seesaw and walk off together.

A white picket fence sits outside a house.

(SPEECH)
RAGHURAM RAJAN: There's that old Winston Churchill saying, right, "America eventually does the right thing after trying everything else."

(DESCRIPTION)
A photographer snaps a photo of a family, then shakes their hands.

(SPEECH)
It may take an election or an election and a half. But really, the whole process of trying to put the issues before the people so that they themselves get a good sense of the choices they have to make, I think that process is starting.

ALICE RIVLIN: I'm not giving up on democracy. I don't know what the alternative is. If you say a democratic government can't solve this problem, then you're saying we need a dictatorship? I don't think so.

KEVIN ROBERTS: For the U.S., nothing is impossible. We've just got to face the bloody hard truth. We've got to start with facing the truth and fixing that. Because once Americans get on to execution and fixing stuff, they're unstoppable, absolutely unstoppable.

[MUSIC PLAYING]

(DESCRIPTION)
The Capitol Building brightens under a clear sky.

logo of a red umbrella appears beside text, Travelers.

(SPEECH)
PRESENTER: This program is made possible by the Travelers Institute, an organization dedicated to furthering the public policy discussion about the facts of the U.S. deficit and its implications for the American opportunity.

(DESCRIPTION)
Text: travelers institute dot org.

(SPEECH)

[MUSIC PLAYING]

(DESCRIPTION)
Closing Credits. Original Music by FRED STORY.

Associate Producer, LISA CORUM. Production Manager, ALEX GREGOR. Post Production Supervisor/Colorist, JEREMY BALL. Sound Design and Mix by JASON HAUSMAN.

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Special Thanks. VANESSA WILLIS, RITA WILSON, CHRIS WILLIAM - CAROLINA BUSINESS REVIEW, KATHLEEN ELLIOTT YINUG.

Stock Photo/Footage License Credits. AP/RON EDMONDS & SUSAN WALSH, PRESIDENT BUSH IMAGES; DEPARTMENT OF DEFENSE - KOSOVO IMAGE AND AIRCRAFT CARRIER IMAGE; DVIDS - MILITARY FOOTAGE; HASBRO - MOUSETRAP FOOTAGE; copyright, I STOCK PHOTO dot COM slash POW SON, FACTORY ROBOTICS CRANE SHOT; JESS BACHMAN - DEATH AND TAXES POSTER; copyright MARY FERRELL FOUNDATION, JFK IMAGE; NASA, ESA, AND THE HUBBLE HERITAGE TEAM, (STSCI/AURA), ESA/HUBBLE COLLABORATION, STARS IMAGE SHUTTERSTOCK, HELICOPTER FOOTAGE, TANK FIRING IMAGE; PLANET NEWS ARCHIVE/SSPL/GETTY IMAGES, JOHN MAYNARD KEYNES; RYAN KELLY/CQ-ROLL CALL GROUP/GETTY IMAGES- HENRY PAULSON & BEN BERNANKE.

Copyright 2012, Susie Films.

(SPEECH)
This program was produced by Susie Films, which is solely responsible for its content.

(DESCRIPTION)
A logo of a tree sits above text, Susie Films.

Logo: WTVI, Charlotte.

Overdraft (trailer)

(SPEECH)
[DRAMATIC MUSIC]

(DESCRIPTION)
Text: Governor Mitch Daniels (Republican, Indiana).

(SPEECH)
MITCH DANIELS: Some people understandably say, boy, this is sort of dry subject, dollar, cents, debt. What does it mean to me? If I read the mathematics, it means everything.

(DESCRIPTION)
Senator Kent Conrad, Senate Budget Chairman.

(SPEECH)
KENT CONRAD: I really, genuinely believe this threatens the fundamental economic security of the United States.

(DESCRIPTION)
President Bill Clinton.

(SPEECH)
BILL CLINTON: A lot of the Democrats are mad because they say, well, this is mostly caused by the Republicans who cut taxes and increase spending. The problem for the Democrats is that if you look at the next 10 years, most of it will be caused by things we care about.

(DESCRIPTION)
Cory Booker, Mayor, Newark, NJ.

(SPEECH)
CORY BOOKER: All of us are invested in this democracy. You are not going to have parts of our community succeed and parts fail. If government fails, we all fail.

(DESCRIPTION)
Joe Klein, Columnist, Time Magazine.

(SPEECH)
JOE KLEIN: We don't trust government. But we need government. And government is us when you come right down to it. Those folks in Washington weren't landed there from Mars. They were elected by us.

(DESCRIPTION)
Andrew Romano, Senior Writer, Newsweek.

(SPEECH)
ANDREW ROMANO: It's a complex problem. People want quick answers, but the fact is that there aren't quick answers.

(DESCRIPTION)
Jay Fishman, CEO/Chairman, Travelers Companies.

(SPEECH)
JAY FISHMAN: These aren't things that can be fixed in election cycles. And the question is, do we have the political leadership that is willing to invest that way?

(DESCRIPTION)
Kevin Roberts, Saatchi & Saatchi Worldwide CEO.

(SPEECH)
KEVIN ROBERTS: Rational thinking leads to one thing, conclusions. And conclusions are not going to solve the debt problem. Emotion, on the other hand, leads to another thing, action. We need to take action about the debt in the US. We need to change.

(DESCRIPTION)
Retired Senator Judd Gregg (Republican, New Hampshire).

(SPEECH)
JUDD GREGG: We're going to pass on to our kids a less prosperous nation where they'll have a lower standard of living, a massive debt that they can't afford to pay off, and therefore, a less secure nation.

(DESCRIPTION)
Alice Rivlin, Economist, Brookings Institution.

(SPEECH)
ALICE RIVLIN: I'm not giving up on democracy. I don't know what the alternative is. If you say a democratic government can't solve this problem, then you're saying we need a dictatorship. I don't think so.

[DRAMATIC MUSIC]

(DESCRIPTION)
Overdraft.

Overdraft "100 Words" – The American Opportunity

Overdraft "100 Words" – Healthcare

Overdraft "100 Words" – Debt denial – Kent Conrad

Overdraft “100 Words” – Balancing act – Governor Mitch Daniels & Mayor Cory Booker

Overdraft "100 Words" – Social insecurity – Senator Judd Gregg

Jay Fishman: Economic opportunity & the U.S. deficit

(DESCRIPTION)
A man in a suit looks over a fence toward the Washington Monument. A street sign reads, Connecticut Avenue. A building entrance reads, Chamber of Commerce of the United States of America.

(SPEECH)
JAY FISHMAN: So I was invited to come to the nation's capital today to speak to a group of leaders about an issue that I think is of importance to all of us, and that is the economic environment that confronts us over the next 10 years.

(DESCRIPTION)
The man faces away from the fence. Text: Jay S. Fishman, Chairman and Chief Executive Officer, Travelers Companies, Inc.

(SPEECH)
This is going to take everyone's engagement. It's going to be collective engagement and collective sacrifice. I am an optimist. I think the American people are up for it. And the real question is do we have the leadership that has the will to lead us there? That is the real question.

(DESCRIPTION)
Text: Jay S. Fishman, U.S. Chamber of Commerce Washington, D.C. November 8, 2010. Jay stands behind a podium on stage, in front of an audience seated at round tables. A U.S. and a Chamber of Commerce flag stand behind Jay. A repeating backdrop says, NCF, US Chamber dot-com, with the Chamber of Commerce seal that says, The Spirit of Enterprise. U.S. Chamber of Commerce. Jay's podium reads, Jay S. Fishman, Chairman and Chief Executive Officer, The Travelers Companies, Inc.

(SPEECH)
Thanks for the opportunity to be here today. I do want to share some time with you talking about something that I think is just genuinely important. I think it really matters. And what I'd like to do is to spend a few minutes with you telling you why it matters and then why me.

So first, I couldn't have imagined that I would be on this stage. If I'd thought about it two years ago, I would not have raised my hand. We were running a company. We were in the early stages of the financial crisis. It was all hands on deck, lots of things to do.
And the fact is one of my directors said to me, look, you need to understand, right now, a standing nail gets whacked. And I thought about that. And at least initially, I thought he was right and put my head down and went to work.

But over these last couple of years, given the situation and the crises that we faced, out of this has come, I think, some serious issues that need serious conversation. We all understand that there is a level of unease in the American population about the economy.

We all get it. We see it in polls, such as are your children going to do better than you do? Are you doing as well as you thought you would? Are we on the right track? Some pretty basic, fundamental core questions about who we are as a people and what we're doing.

And the answer has been widely negative, and you all can find that data and look at it yourself. And I really began to try and understand what was it that was going on that was causing that level of unease? We all understand what 9.5% unemployment means. We understand when financial institutions go into disarray.

But it struck me that this was deeper than that. It struck me that we were-- that people were beginning to identify a concern about where America was headed just fundamentally and to its core. Now at Travelers, we are nothing if not data-driven. That's-- that has really been our hallmark, and I think one of the great strengths of the organization.

And notwithstanding the fact that I actually am an avowed news junkie. I'm actually someone who can sit down with C-SPAN for a warm evening and get cozy to it. Because I'm interested in listening to other people. I'm interested in listening to what public policymakers and thought leaders have to say.

And yet, notwithstanding a 24-hour news cycle and a constant flow of information and data, I actually couldn't find any information about what really the long-term prospects for our nation were. And so, we decided at the company to do a deep dive ourselves. And it has been-- candidly, it has been really remarkably revealing.

I have shared this analysis with audiences, both not so sophisticated as well as sophisticated, financially sophisticated. And frankly, the level of surprise at how the data sorts out and what it means about our future has, candidly, even surprised me.

(DESCRIPTION)
A screen on stage reads, Our Leadership Challenge For This Decade.

(SPEECH)
So it's been revealing, and I do think that it's important we-- to share with you and to engage as many people as we can in understanding the dynamics. Hopefully, we've presented this in a way that mere mortals can understand it. I've tried to stay away-- I'm not, and notwithstanding a degree of Bachelor of Science in economics, I'm not an economist, and I don't pretend to be one.

So I've tried to present the data in a way that regular, kicking around business people would understand. If you were a CEO in a big company or in a small company and you asked your folks to go out and do a budget, and do a plan, and look for the-- look at the prospects over the next 10 years, what would they see, what would they analyze, and what would they share with you, and how could you understand it and react to it? And that's what we've done.

We've used Congressional Budget Office data, and we used it, one, because it is bipartisan. Two, it's statute-driven. It's comprehensive. It's thoughtful. My hat is off to those people. It's presented in a transparent way. It allows analysis to be done thoroughly and completely. It's really an exceptional asset that we have. It doesn't mean, though, that one can't have a different view and take a different position with respect to some of the projections. But the work is just very first-rate, high quality work.

And most importantly, it's the data, frankly, that our public policymakers use to make decisions, foreign policy, engage in public debate. So it's impossible, I think, to do a thoughtful analysis and not tackle it and not really come to understand it. So that's the why. And the why now really gets to the title of this presentation.

As you'll see, this is not a next decade issue. This is here and now, today, right here. Time is not our ally. The longer we wait, the more painful the resolution will be. The longer we wait, the more painful the resolution will be. I am convinced, after looking at this data, if the question gets asked, whose ox is going to be gored? The answer is everyone's. Because the problem is so comprehensive and so large that it's impossible for small groups to solve this problem. So it's going to affect, I think, 300 million Americans. And time really is of the essence.

And now, why me? And at the risk of starting with a speech that it all started at a 10,000-watt radio station in Houston, Texas, I want to share with you a picture. It's 19-- I do get emotional on this one. This is 1947. And the green circles are my mother and father. The red circles are my mother's father and mother. The blue circles are my great grandparents. And the little baby down there in the purple circle is actually my now 63-year-old sister.

(DESCRIPTION)
A black and white family photo on the screen depicts eight adults, an elderly man and woman, and a baby in the elderly man's lap. The elderly man and woman are circled together in blue. Another man and woman behind them are circled in red, and another man and woman are circled separately in green. The baby's face is circled in a purplish pink. The people in the photo wear formal dress, with long-sleeved dresses and suits with ties.

(SPEECH)
And here's my family's story; it really is standing around this table. My maternal grandmother, the woman in the red circle, gets sent over here. Now this is family lore, but I've done the best I can to verify this, and I actually believe it so.

My grandmother gets sent over here by herself from Eastern Europe to go live with distant relatives when she's 13 years old. Put in a boat and sent over here in the early 1900s. And she was sent over because she could sew, and she could get a job, which she did on the Lower East Side. And she became a seamstress.

And slowly, one at a time, sent enough money back so that her four brothers and sisters and her parents could eventually emigrate to the United States, and that's how we came to be here. My father, two years here out of service, was desperately trying to start a small printing business and ultimately would prove successful at it.

But I'm the son of a small businessman, and I'm really talking about a small business. Enough so that he could pay the rent, quite literally the rent, and he could educate his kids. So my sister and I are the first generation to go to college in our family. And the poignancy of this particular picture is that these four generations lived in a two-bedroom apartment in the Bronx together. All four generations in one two-bedroom apartment in the Bronx.

Now I was born in the Bronx, spent my early years there when we went uptown to White Plains. That was quite the uptown move. But the dynamic of going from this picture in I think what is a generational blink of an eye, for me to be standing here on this stage in front of all of you and having the privilege of running a Dow 30 company is remarkable to me. It's, honest to God, it's just remarkable to me.

And that is the American opportunity. I have been very directly the beneficiary of that oppor—I’m not going to do it-- of that opportunity of come to the U.S., working hard and making something of yourself. And so I just feel a personal obligation to be engaged. That's what I feel. I feel a personal obligation to be engaged because I'm worried that that opportunity is at risk.

And shame on me, given the wonderful benefits that I've had in my life, if I don't stand up for it. So I'm here to make this presentation, and I want to make three points before, as Warner Wolf would say, we go to the videotape. The first is there's nothing political in this speech. If you hear anything political, you're not listening carefully.

I have no-- This is a human speech. It's an economic one. It's a personal one in some measure. But it sure isn't political. Two, I'm not advocating for any single policy or policies. You won't hear that. I don't have solutions. I'm quite convinced there are solutions. I am an optimist. I'm quite convinced that there are actually a number of different solutions.

What I'm not so convinced of is if we have the will to live up to them, as if we have the will to stand behind them and make them happen. I'm not so convinced of that. So what I am advocating for is leadership. Now lots of you were inside the Beltway folks, and you may chuckle at what I'm about to say. But I believe that it takes leadership beyond-- that transcends politics, and maybe the hardest thing of all, that transcends election cycles.

I am also convinced that this challenge is of sufficient depth, that if we think of things in two- or three- or even four-year cycles and don't remain committed to a solution, we got a real problem. We got a real problem. And I hope in the context of putting this data together and doing it in a way that, again, mere mortals can understand it.

By the way, I'm one of those mere mortals. I just haven't been able to fully get the way people speak about the economic environment in which we're living today, and where we're headed. So let me turn to the analysis and share a few things with you.

So the first is, obvious question. Where are we headed, and why does it matter? So let me put up the bottom line to start with. This is Congressional Budget Office data for 2020. This is where they think we're going to end up.

(DESCRIPTION)
Text: FEDERAL GOVERNMENT BUDGET ($ in billions). 2020E. Total Revenues equals $4,856. Total Spending equals $5,541. Total Deficit equals ($685). Federal Debt equals $16,073. Debt % GDP equals 69%. Debt % Revenues equals 330%. The total deficit value is written in red. The Travelers umbrella logo sit sin the bottom right corner of the slide.

(SPEECH)
So revenues, and I'm going to take you through where we are today, so you'll understand what's embedded in these assumptions. And that is a critical part of this analysis, by the way, the assumptions, and are they realistic?

$4.8 billion. We're going to have a little over $5.5 billion of expenses, a nearly $700 billion deficit in that year. Federal debt will have grown to in excess of $16 trillion. That's 16 trillion. Debt as a percentage of GDP will be up at almost 70%. And I just find it interesting, no one else does, to look at debt as a percentage of revenues, because that's typically how I always thought of my own economic situation. How much do I owe? How much do I make? It just sort of made sense to me.

And so here, debt is a percentage of revenues, a little over three times. Now what you're going to hear from me is, notwithstanding how challenging this picture is, is it reasonable to assume that it can actually be this good? Is it reasonable to assume it can actually be this good?

Let me give you a couple of the underlying dynamics. There is a large deficit in each and every year that the CBO projects between now and 2020. And the cumulative amount of those deficits over these 10 years is $6.2 trillion-- 6.2 trillion over the next 10 years. So as we start thinking about policy and solutions, you've got to understand the magnitude of the challenge we're facing.
Rule No. 1, typically, when in a hole, stop digging. And this is where we're headed. So the takeaway here is getting to 2020 is going to be difficult and painful. And frankly, when you look underneath, is it reasonable to assume that it could be this good?

Let me go back 10 years and set the framework for you. So this is the federal budget back in the year 2000, a mere 10 years ago. And the numbers themselves are not all that critically important, but it is useful to just get a grounding.

So we've got revenues of $2 trillion, $2 trillion. We've got spending of a $1.8 trillion. We've got a surplus of $200 billion in the year federal debt is a mere $3.4 trillion at that point.

(DESCRIPTION)
Text: Federal Government Budget (dollars in billions). A pie chart on the slide is titled, 2000. It has five wedges, colored blue and green. A key identifies blue as discretionary and green as mandatory. A large green wedge reads, Social Security, Medicare and Medicaid $740, 42%. A smaller green wedge says, Net Interest Payments $223, 12%. Another small green wedge says, Other Mandatory Spending $211, 12%. A text box with an arrow pointing to this wedge says, Unemployment Compensation. Food Stamps. Supplemental Security Income. Earned Income and Child Tax Credits. Civilian and Military Retirement. Veterans' Benefits. Fannie Mae and Freddie Mac. Agricultural Subsidies. A blue wedge says, Defense $295, 16%. Another blue wedge says, Other Discretionary Spending $320, 18%. A text box with an arrow pointing to this wedge says, Transportation. Education Grants. Health-related Research. Homeland Security. Federal Justice System. Foreign Aid. National Parks. A text box below the pie chart says, Total Revenues equals $2,025. Total Spending equals $1,789. Total Surplus equals $236. Federal Debt equals $3,410.

(SPEECH)
And if you think about this as a balance sheet, as the balance sheet of a business, you'd look at it, and you would say, pretty good. Pretty good. Income statement, balance sheet.

Now, fact is that the dynamics that surround some of the challenges we face, Social Security, Medicare, Medicaid and some of the other dynamics, were already there, already apparent and were already visible to some folks. And they were starting to talk about it. The question was did anybody have the will to actually sit down and begin to do anything about it?

But I found the distinction here between discretionary and mandatory, which is something that gets chatted about endlessly in the public arena, fascinating. Because in the end, I found it difficult to sort out. I understand the dynamic, that which is considered mandatory is either mandatory by contract, think paying interest on debt, or mandatory by statute. Social Security, Medicaid, Medicare, food stamps, supplemental income.

But now, take a look at the discretion-- the so-called discretionary side. First, we got defense, which, of course, stands on its own. And then interesting to me, you've got things like national parks, foreign aid, the federal justice system, Homeland Security, health-related research. That's considered discretionary?

It strikes me, anyway, just as one person, that a lot of those things define the fabric of who we are as a people. The things that we value, the things that we think are important, the global outreach, protecting our own, taking care of those who need help, our national parks. Can you imagine closing the Grand Canyon?

Of course, you can't. So I took a step away, and I thought, alright, I'm going to do away with these artificial distinctions between discretionary and mandatory because I just don't think they're all that substantive. There's a human dynamic that's different, but there's not a substantive policy difference.

So I started thinking about this as OK, we've got $2 trillion in revenues. How do we want to spend it? How do we as a people, 300 million people, decide we want to spend $2 trillion in revenues? And it gets real interesting when you break it down to that level of simplicity, and you start thinking about how much do we bring in and how much are we going to spend.

So now let me turn the clock forward to 2010. This is where we are right now.

(DESCRIPTION)
Text: Federal Government Budget (dollars in billions). 2000. Total Revenues equals $2,025. Total Spending equals $1,789. Total Surplus equals $236. Federal Debt equals $3,410. Debt % GDP equals 35%. Debt % Revenues equals 170%. 2010E. Total Revenues equals $2,143. Total Spending equals $3,485. Total Deficit equals ($1,342). Federal Debt equals $9,031. Debt % GDP equals 62%. Debt % Revenues equals 420%. The total deficit value is written in red.

(SPEECH)
Revenue’s flat. This, by the way, is all federal revenues. That's what we're dealing with here. All federal revenues. I'm going to talk about state and municipal for like a second and a half down the road, but that's what I'm focusing on right now.

Revenue stayed flat over this period of time, $2 trillion, $2 trillion. Spending almost doubled from $1.7 trillion to $3.5 trillion. So of course, what was a surplus has become a deficit of a trillion $300 billion. And now that's the annual stuff. That's the P&L for the business people.

Now let's take a look at the balance sheet. Well, our debt has grown from $3.4 trillion to $9 trillion in those 10-year period of time. Ten years, 2.6 times what it was 10 years ago. Debt as a percentage of GDP went from 35% to 62, and debt as a percentage of revenues, which again, kind of resonates with me, went from 170 to 420. That's a real change in 10 years. That's a real change.

And so if this were our business, if this were our company, alarm bells would be going off internally. How did we get here, and where do we go? So, now let me again take a look underneath this. And here's a fascinating-- I'm going to again ignore the typical discussion of what's mandatory and what's discretionary.

I want to leave you with a point on this, a little factoid. It's like from Willie Geist, “Too Early with Willie Geist,” if you want to sound smart.

(DESCRIPTION)
The previous values for 2000 and 2010E appear on the next slide, minus the debt lines, along with two pie charts, the previous 2000 chart, and a new 2010E chart. The new chart has a large green wedge that says, Social Security, Medicare and Medicaid $1,492, 43%. It has a smaller green wedge that says, Other Mandatory Spending $433, 12% and a very narrow green wedge that says, Net Interest Payments $202, 6%. A blue wedge says, Defense $692, 20%. Another blue wedge says, Other Discretionary Spending $666, 19%. The Net Interest Payment wedges on both charts, and the federal debt lines in both sets of values are circled in yellow.

(SPEECH)
Federal debt has gone from $3.4 trillion to $9 trillion in that period of time, and yet net interest payments have gone down, from $223 billion to 202.

Obvious, the federal government is the beneficiary of the remarkably low interest rates that we're all dealing with today. Whether you're a borrower or a lender, it actually doesn't matter. The effective interest rate back in 2000 was 6.5%, 2.2 in 2010. If the interest cost were the same, and we can have a really rich debate one day about what's driving that, the incremental interest cost this year would be almost $600 billion.

If the government financed its obligation in 2010 the same way it did in 2000, $600 billion more. So you can now play with the pie on the right. Does that mean that the total deficit would have been almost $2 trillion? Or does it mean that we would have attempted to change spending in some other way.

I point out from the graph that the $600 billion that I'm identifying is like about equal to all other discretionary spending and a good hunk of-- or a good hunk of the defense. So we were fortunate here. We have a moment in time where, notwithstanding how challenging things are and how difficult this analysis looks, we're actually a beneficiary. Now if that changes and it changes suddenly, and you've got lots of economists who actually think that it will at some point, staying away from advocacy, and you can come to a different conclusion about 2010. But it's a fascinating analysis to simply look at how much money are we bringing in and where is it going?

(DESCRIPTION)The previous 2010E values appear, alongside a new set of 2020E values that say, Total Revenues equals $4,856. Total Spending equals $5,541. Total Deficit equals ($685). Federal Debt equals 6,073. Debt % GDP equals 69%. Debt % Revenues equals 330%. The total deficit value is written in red.
(SPEECH)
So now, let me turn the clock ahead to 2020. Again, same data I showed you before. Federal debt now going from $9 trillion to $16 trillion in that period of time. So that's the 6.2 trillion of cumulative annual deficits that keep getting financed by borrowing.

Debt as a percentage of GDP goes up to 69%. Debt as a percentage of revenues actually goes down, driven in large measure by the fact that there's an assumption that revenues are going to more than double over this period of time. That's a big deal. I'm going to go into that for a little bit. But there's a presumption in here that revenues are going to more than double in the next 10 years.

And so I look at that, and I look at that 10-year period, and I go, wow. Now what's really troubling about 2020 is not so much-- it's bad enough the point in time data. It's bad enough. But it's the direction of things that really is deeply troubling. This is a simple graph of the projected deficit in each year between now and 2020.

(DESCRIPTION)
Text: Federal Budget Deficit - Troubling Outlook (dollars in billions). A chart has years from 1970 to 2020 on the x-axis, with intervals of 5. It has billions of dollars on the y-axis, with a scale from negative $1,600 to positive $400 and intervals of 200. The bars on the chart are blue, until around 2010, when they become red. A key identifies blue as actual and red as projected. From 1970 to around 1997, blue bars reach below 0, never reaching lower than negative $400. In a brief period in the late '90s/early 2000s, four bars reach above 0 never reaching positive $200. Then, a segment of bars reaches below 0 again, passing negative $400, then finally plummeting to negative $1,400 around 2009. The projected bars in red after 2010 trend upward toward negative $600, then trend downward again, past negative $600 until the end of the chart at 2020. A black arrow points down along this projected downward trend.

(SPEECH)
And obviously, coming out of the stimulus spending and the bailout costs, we make some real improvement coming into 2015, and then the Congressional Budget Office data actually has it heading in the wrong direction from that point on.

Now if this is real simple, if it's red, we're still running negative. We like it to be less red. We'd like it to be blue. But you're dealing with a circumstance here where the trend heading into a point in time is troubling. Because it's not on a path to getting better. And when I share with you the assumptions that are embedded in this, I bet all the change in my pocket that you're all going to be pretty surprised as to what are the assumptions that are embedded in this and the fact that revenues are more than doubling, and yet the deficit continues to do what it does.
(DESCRIPTION)
The 2010E pie chart and values appear once more, alongside the 2020E values and a new 2020E pie chart. The pie chart has a large green wedge that reads, Social Security, Medicare and Medicaid $2.662, 48%. A smaller green wedge reads, Net Interest Payments $778, 14%. A narrow green wedge says, Other Mandatory Spending $479, 9%. A blue wedge reads, Defense $880, 16%. Another blue wedge reads, Other Discretionary Spending $742, 13%. The Total Revenues line in the 2010E values, and the largest green wedge in the 2020E chart are circled in yellow.

(SPEECH)
One more little factoid, and this really made it for me. The total revenues in 2010, $2 trillion,100 billion will not be enough to fund Social Security, Medicaid and Medicare 10 years from now. If we simply take the demographics, and we age people, and we know exactly what it's going to look like-- as an insurance company, I actually do believe that we do know what it's going to look like.

Almost $2.7 trillion in 2020 for Social Security, Medicaid and Medicare. Total revenues today, $2.1 trillion. You begin to get a sense of the magnitude of the problem and the challenge that lies ahead of us and the fact that any solution here has to, by definition, affect lots and lots of people.

(DESCRIPTION)
Jay goes back to the deficit chart.

(SPEECH)
I want to make one other point about the next 10 years, and I say this as a business person who actually has the good fortune of running a company that's been in pretty good shape. We’re already-- it is already such that we've never been here before. Business people, markets, international finance, we've never anticipated a 10-year period that looks like that.

And so when someone says, how are the markets going to react to this or how will businesses react to this, the truth is there's more uncertainty about it now than ever before. And for all of the conversation about the uncertainty that business people face, as I've sat and spoken with other CEOs, I am convinced that when they say the world is so uncertain, I'm not ready to make the commitment.

They're not talking about whether unemployment is going to be 9.5 or 9.0 or whether the tax rates are or aren't going to change. They're talking about this. They're talking about what the next 10 years are going to look like, and what does it do to each of our propensity to save, and invest, and spend, and educate? And what happens to the economic engine that we all engage in? And as business people, what does that mean for our investment?

And until I think there is some clarity with respect to these 10 years in a way that doesn't look red alert-like, I suspect you will continue to hear that discussion that the level of uncertainty and indecision is high. Because it is.

I don't know what this means for borrowing costs. I don't know what this means for liquidity. I don't know what this means for cost of doing business. I don't know what it means for price increases. I have no idea. We've never been here before. And that level of uncertainty is real, particularly when you put your head on the pillow at night, as one guy responsible for a business with others. But you are the ultimate person sitting up there and saying, I just don't know. I don't know.
So we all get a little more conservative. We get a little cautious. We do more with less. We don't hire. We work the crowd a little longer. Because we just don't know what it means. This is real. This is a real problem.

OK. I want to take you through the assumptions, and I'm going to go through these somewhat rapidly because you're all sophisticated enough to get it and to get it quickly. And the question is are these optimistic? Notwithstanding how problematic the next 10 years look like and that balance sheet looks like in 2020, how do we even get there? Well, here's some real data for you.

This again comes right from the CBO.

(DESCRIPTION)
A slide says, Optimistic Assumptions? The next slide says, Key Economic Assumptions Embedded In The Projections. A chart is titled, Unemployment Rate. It has years from 2010 to 2020 on the x-axis, with intervals of one year. It has percentages from 0.0 to 12.0% on the y-axis, with intervals of 2%. The unemployment rate begins at 9.7% in 2010 then slopes down to reach 5.1% in 2015. For the rest of the chart, from 2016 to 2020, the unemployment rate remains steady at 5.0%.

(SPEECH)
This is what's embedded in those assumptions you saw. So one, there is an assumption that unemployment will be cut in half by 2015, will be down to 5.1%, round numbers, half, from 10 to 5. Now we're having a tough time making some real progress in that regard. You all know the numbers. We need to create between 1 million and 1,200,000 jobs a year in the U.S. just to keep up with changing population.

And so you need a pretty healthy engine, an economic engine, to add real job growth if we're going to see this. This would imply a level of economic growth that would be Herculean. And again, I put it in the context of the level of uncertainty that's so apparent to all of us. This is a big deal relative to that assumption because now we're going to get back to what does it mean for taxable income? What does it mean for personal savings? What does it mean for revenues? And by the way, what does it mean for spending?

Because it all rumbles through it. It rumbles through it in unemployment compensation. It rumbles through it in taxable income and taxes paid. This is a big assumption. We're going to do all this, including getting to $16 trillion of indebtedness, without triggering inflation. And again, I want you to understand. This is simply what's embedded in those projections.

So, we're awfully nimble, and we end up coming out of this at a 2.3% long-term consumer price index assumption. Maybe, could be, hope so.

(DESCRIPTION)
Text: Key Economic Assumptions Embedded In The Projections. A chart is titled, Consumer Price Index. It has years from 2010 to 2020 on the x-axis, with interval of one year. It has percentages from 0.0 to 5.0% on the y-axis, with intervals of 1%. A line on the graph begins at 1.7% in 2010, then dips to 0.9% in 2011. It slowly climbs to reach 2.2% in 2015. It remains constant at 2.3% from 2016 to 2020.

(SPEECH)
Again, I'll tell you, we've never been here before. We've never seen the money supply do what it's done. We've never seen, again, not an advocacy position for or against. I'm just making a factual observation. We've never seen quantitative easing of the type that's now being discussed. I don't know. I don't know if this is possible or not. But I know that we would look back on this if we achieved it, and we would say, that was a job extraordinarily well done.

(DESCRIPTION)
The next chart is titled, 10-Year Treasury Yield, again with an x-axis that goes from 2010 to 2020. The y-axis goes from 0.0 to 10.0%, with intervals of 2%. The line on the graph dips from 3.5 to 3.4% from 2010 to 2011, then climbs to reach 5.7% in 2015. It remains steady at 5.9% from 2016 to 2020.

(SPEECH)
This one is interesting to me. This is an assumption about what the 10-year Treasury will become, will ultimately-- I think it's 2.4% or so this morning. And the assumption is that as we come out of this and we begin to generate some real economic growth, that interest rates will rise.

But in the context of long-term rates, you would put a 5.9% 10-year Treasury at the low end of the spectrum, certainly not at the high end. And how we finance $16 trillion publicly and do so with a robust economic engine that's going to be needed to create the other statistics I spoke about is at least confusing to me.

Again, I'm not an economist. I'm not an economist. But I see the inconsistency potentially in the assumptions. Maybe it'll happen. I'm not saying it won't. Don't misunderstand my comments here. I'm just trying to share with you what's embedded in the numbers, and I'll let you come to your own conclusions about it.

And here's the big kahuna. Here's nominal GDP growth.

(DESCRIPTION)
A new chart is titled Nominal GDP Growth, again with an x-axis from 2010 to 2020. The y-axis goes fro 0.0 to 7.0% wither intervals of 1%. The line on the graph begins at 3.1% in 2010, then climbs steeply to 6.0% in 2013 and 6.3% in 2014. It drops to 4.9% in 2015, then declines to 4.3% in 2019 and 2020.

(SPEECH)
So we come out of this and ultimately get a robust recovery. By the time we get to '11 and '12, it's 3.3% and 4.1%. It peaks out at a little over 6 and then comes down to mid 4s.
In this analysis, it assumes no recession. It assumes no other financial crisis. It assumes actually no further repercussions from declining housing markets, and what that does to people's savings, and how they feel about spending.

Now you begin to understand how these assumptions begin to link together. The only way that one can generate that kind of employment growth is to generate GDP growth of this magnitude. And of course, the thing begins to come together. But if you were a business person, you'd look at these assumptions, and you'd say, all right, let's do a downside case. I want to come back to that in a second because that is so important.

So those are the economic factors. I want you to understand the statute factors that are embedded in this. This is CBO data. So again, $16 trillion of debt, $6.2 trillion of deficits over the next 10 years. First is there is an assumption in here already that all the tax cuts expire.

(DESCRIPTION)
Slide Text: Key Actions Assumed In The Projections. Expiration of the 2001, 2003 and 2009 tax cuts. Alternative minimum tax won't be indexed for inflation. Annual reductions in Medicare payments to physicians as scheduled. Discretionary Federal spending will only rise with inflation (approximately 1.8%), but between 1999 and 2008 it grew by 7.5% on average.

(SPEECH)
All of them.

So we're not talking about whether it's 200, or 250, or 500, or 1 million. The underlying assumption here is that tax revenue is benefited by the elimination of all the tax cuts. Second one is one that actually hasn't been spoken about very much, but it's here. It's here and now, which is the alternative minimum tax is not going to be indexed for inflation.

For all the conversation about tax policy, this is going to have a real effect. When people go to file their 2010 tax returns, the AMT is going to capture way more people, I think, than anyone anticipates that it will, because historically, it has been indexed for inflation. So we haven't had to deal with this.

But this is for real, and people may very well wake up to this and say, gee, I had no idea. But that's in here. And it's in here as incremental tax revenue. It actually assumes that there will be annual reductions to physicians for Medicare payments. We have not had the political will to do that before, but it does assume because it's contained in the statute that we will. And that's an interesting phenomena for those who have doctors in the family.

And then lastly, it assumes that we actually get discipline, that discretionary spending, notwithstanding my willingness to remove it from the discussion as being truly unimportant, I don't mean that the spending isn't important, but the distinction isn't meaningful. It's a distinction without a difference I think is the expression, is that we assume that that's only going to rise with inflation, which over the time period is about 1.8% overall, in spite of the fact that in the last 10 years, we've been growing at 7.5% on average.

So I take a look-- I take a look at all that and I go, again, awfully optimistic assumptions. Now let me tell you one that's bothering me because it's not embedded here. It's a quiet problem, but it's real. We all understand the dynamic of the flattening world, particularly given the fact that 69% of all jobs in the private sector now are service-based.

(DESCRIPTION)
Text: Service-providing Private Sector Employees. 69% of all jobs were service-providing in the private sector as of October 2010. A graph has years from 1939 to 2009 on the x-axis, with intervals of 10 years. The y-axis is ablated, number of Employees in Thousands, and goes from 0 to 100,000, with intervals of 10,000. The line on the graphs begins at about 15,000 in 1939, then rises steadily, reaching above 90,000 near 2009, when it begins to dip slightly.

(SPEECH)
And whether you're a radiologist that now suddenly finds the films being read overnight in different countries around the world, we're beginning to wake up and understand that service-based economies have a Tom Friedman-like effect, have an ability to flatten things out.

Now one can speculate as to whether that will have an impact on personal income for those who compete on a global basis. There are certainly plenty of groups of employees you can think about in the last 24 months who have seen this firsthand and up close. But the real question to me about this is will U.S. personal income over the next 10 years, and obviously, therefore, tax revenue because people pay taxes on their personal income, will it rise as much as expected given the fact that we're going to increasingly face a global, border-free labor market? I don't know. But I know it's not in the numbers. That I know. I know it's not in the numbers.

So kind of bottom line. My own take on it is that in my job, I would turn to the finance group, and our guys are the best. They really are. And I would say our guys and women are the best. By the way, we have real women leaders. I didn't mean that in any substantive way.

I'd say, you know what? Go back and do a downside case. Give me a few things going wrong. Show me what happens if interest rates rise beyond what we expect. Show me what happens if inflation begins to ramp up. Show me what happens if we're unable to drive unemployment down to that level in that short period of time. And show me what the numbers look like.

Because in the end, I personally think that good business leaders hope for the best but plan for the worst. And I'm really not at all sure that we're even addressing what the worst can be. Our sense of unease is driven by data that when you simply take a step back, pull the assumptions back, you'd say, it's not batting 1,000, but it's pretty close. It's pretty close.

I don't want to scorecard it, but if this actually happened and we ended up with those economic assumptions, we'd look back on these last 10 years, notwithstanding the fact that we would have $16 trillion in federal debt, and we'd say, that was a pretty good decade.

So I'm worried about it. I'm worried about it a lot. I'm worried about it that things could actually be considerably worse than we think they could be. And because we've never been here before, it's hard to do the analysis. It's hard to simply crank it through and say, well, what happens if? But I think there's a responsibility for us to begin to engage in that, to demand, to demand that debate. To demand it.

Two minutes on state and local government, because this has sat-- that whole federal dynamic sits underneath an emerging issue at the state and local government level. This is simply state and local debt outstanding, approaching $2.5 trillion in 2010.

(DESCRIPTION)
Slide text: Outstanding State And Local Government Debt. A graph has years from 1950 to 2010 on the x-axis, with intervals of 10 years. It has dollars in billions on the y-axis, from $0 to $3,000, with intervals of $500. The line on the graph rises shallowly from the x-axis, finally crossing the $500 mark around 1985. It rises more steeply, reaching above $1,000 in the early '90s. It dips briefly in the mid-'90s, then rises very steeply to reach almost $2,500 in 2010.

(SPEECH)
Lots have been written about it and obviously, problems in all sorts of states and issues related to it.

What's a little less-- people know this, but it's just not as visible, which is what are the unfunded liabilities that actually exist at the state level? This is real numbers. It's from the Pew Center.

(DESCRIPTION)
Text: State and Municipal Unfunded Pension and OPEB Liabilities (dollars in billions). The slide has two pie charts with two wedges each. The first chart is titled Pension Liabilities with a large green wedge that says, Funded $2,314, 84%, and a smaller blue wedge that says, Unfunded $452, 16%. The next chart is titled OPEB Liabilities, with a large blue wedge that says, Unfunded $555, 95%, and a small green wedge that says, Funded $32, 5%. The unfunded wedges on both charts are circled. Text below the charts says, $1 Trillion of Unfunded Liabilities.

(SPEECH)
So in the pension arena, the liabilities are largely funded. There's about $450 billion, this is billions, of unfunded pension liabilities. But OPEB is other post-employment benefits, principally medical. There are others, but it's principally medical.

So you've got $555 billion of unfunded post-employment benefits. You put the two together, you got $1 trillion of unfunded liabilities at the state and local level. On top of $2.5 trillion of debt. Call it $3.5 trillion. I'm going to remind you, that was the debt in the early slide that I put up of the federal debt in 2000.
The state and local governments, if you add up debt and unfunded liabilities right now, equal the debt position of where the U.S. government was a mere 10 years ago. This sits on top of that federal issue. So as I say, I'm a C-SPAN junkie. And so now, we're back to why and why does it matter?

And I think that Kent Conrad gave a terrific interview. Particularly the young people in the room, this is worth listening to. This is a public policymaker who at least is beginning to understand the issue and grasp its consequence.

(DESCRIPTION)
A man sits in an office in front of a wall of plaques. Text: Senator Kent Conrad, North Dakota (D), Budget Committee Chairman.

(SPEECH)

[VIDEO PLAYBACK]

- Young people should especially care because if this debt goes to the levels that are now anticipated, that would put a crushing burden on them. It would also weaken the economy at the very time they want to be financing their kids' education, or buying a home, or purchasing a car. So it'd have a direct effect on the quality of their lives.

[END PLAYBACK]

JAY FISHMAN: It's encouraging when we actually hear voices that are trying to raise the alarm. Let me spend a few minutes at least on how we got here, although I'm sensing from the room that you're getting it. But let me nonetheless take a little bit of time on this. First, this is no great shock. We got older.

(DESCRIPTION)
A slide says, How We Got Here.

(SPEECH)
Life expectancy up. The percentage of population at 65 years-plus has gone up. We've got a older population being supported-- a bigger number, a bigger percentage of the population in that retirement benefit arena being supported by a smaller number of younger workers.

And if you see, this problem will really begin to exacerbate itself again. It has before but again as we get towards 2015.

(DESCRIPTION)
Text: An Aging Population. A chart is titled, % of U.S. Population That is 65-plus Years Old. It has an x-axis from 1900 to 2050, with intervals of 10 years. It has a y-axis from 0 to 25%, with intervals of 5%. The line on the graph begins at 4% in 1900, then climbs steadily to 13% in 1990. It dips briefly to 12% in 2000, then climbs to 20% in 2040 and 2050.

(SPEECH)
These statistics are just, they're just demographics. That's all they are. We got older, and that's putting real stress, obviously, on Social Security, Medicaid and Medicare, as well as the post-employment benefit liabilities that I spoke about at the state and government level.

Two, medical inflation has been dramatic.

(DESCRIPTION)
Text: Medical Inflation. (Index 1980 to 1082 equals 100). A chart has years fro 1950 to 2010 on the y-axis, with intervals of five years. It has 0 to 450 on the y-axis, with intervals of 50. A key identifies the blue line on the graph as CPI - Medical Care and the red line as CPI - All Items. Both lines rise shallowly from the x-axis, reaching 100 at around 1965. Here, the lines begin to diverge, both sloping upward, but at different rates. The red line slopes up past 200 in 2010. The blue line slopes up toward 400 in 2010.

(SPEECH)
I don't need to tell anybody in this room how much time has been spent on medical inflation, but it's a real number, and we're spending a lot more. And we’re keeping-- and we're dealing with diseases that we wouldn't have thought about 30 or 40 years ago. We're keeping people alive. These are all good things. These are all good things. But we're spending real money on it. And the question becomes, how do we want to finance it? How do we want to finance it?

(DESCRIPTION)
Text: Medicare and Social Security. Medicare - Originated in 1965. 1965: Life expectancy - 70, Minimum access age - 65. - 2010: Life expectancy - 78, Minimum access age - 65. Social Security - Originated in 1935. - 1935: Life expectancy - 62, Minimum access age - 65. - 2010: Life expectancy - 78, Minimum access age - 62.

(SPEECH)
Three, Medicare and Social Security. Medicare originated in 1965. Life expectancy was 70. It's now 78. And of course, we've expanded the benefits since the plan was originally introduced. Social Security originated in '35 when life expectancy was 62. Minimum access age was 65. Again, we've got a 78-year life expectancy now. We've lowered the access age to 62 on a discounted basis, although that whole dynamic is beginning to get some attention, and we're beginning to push that off. Now whether that's part and parcel of a solution or not, who knows? But this is not a problem that's not, I think, well-recognized.

These next couple were interesting ones to me. This is the growth in both federal as well as state and local employees dating back to 1960. And the federal is exclusive of the military.

(DESCRIPTION)
Text: U.S. Employment Statistics. A chart is titled Government Employees. It has years from 1960 to 2010 on the x-axis with intervals of five years. The y-axis is labeled, Number of Employees in Thousands, and goes from 0 to 20,000, with intervals of 4,000. A key identifies a green line as state and local government employees, and a blue line as federal government employees. The green line begins around 5,000 and slopes up toward 20,000 in 2010. The blue line remains relatively constant, hovering below 4,000 for the entire graph. Text: 2.4% CAGR for State and Local Government Employees. 0.4% CAGR for Federal Government Employees.

(SPEECH)
Federal has largely been flat over that period of time. State and local has been growing at almost 2.5% a year on a compounded basis since 1960. That's 700 basis points more than the private sector.

It's 1.7% approximately compound growth rate for the private sector, 2.4% for state and local. Exacerbated by getting older, the benefit structures and all the rest were creating an upside-down pyramid that becomes increasingly difficult to finance.

And I go back for a moment on that, and just an observation, nothing more than that, although you're going to hear a little about it. You've all read that, in fact, at least the analysis suggests that wages, salaries, benefits in particular in the public sector, and I'm speaking now specifically to state and local governments, are actually now at levels that exceed equivalent private sector jobs.

And so the private sector operating in a competitive environment, we've all gone through the process of thinking about how much employees contribute to their medical plans and what do they do with respect to defined benefit pensions, which are largely gone from the private sector and 401(k)s and contributions. That's a phenomena that really hasn't occurred in the public sector.

And so you've got an increasing growth rate of employees in that segment in the public sector that's actually being supported by a smaller number of growth of employees in the private sector that aren't earning as much or generating the benefits as much as the public sector is.

And there's another ox and gore story, but I'll leave that for another day. I size it up, and I really do think it is, in the end, all about leadership and choices. This is not all that difficult to understand. This is pretty easy, I think.

And I just want to put this up. I don't know if Governor Christie is right. I don't mean about the facts. I'm sure he's right about the facts. His staff wouldn't let him speak if it wasn't. I don't know if his solutions are right or wrong, and I don't know whether I agree with them or not. But here's a guy who's telling it, I think, like he sees it. He's being transparent, he's being candid. He's letting people know what the facts and circumstances are, and he's explaining his choices. And I think this is the starting point of leadership. Transparency, openness, understanding and sharing of the issue.

(DESCRIPTION)
Text: Governor Chris Christie (R-NJ), February 11, 2010. Christie addresses a government chamber of people.

(SPEECH)

[VIDEO PLAYBACK]

- One state retiree, 49 years old, paid over the course of his entire career a total of $124,000 towards his retirement, pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly half a million dollars for health care benefits. A total of $3.8 million on a $124,000 investment. Is that fair?

A retired teacher paid $62,000 towards her pension, and nothing, yes, nothing for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits over her lifetime and another $215,000 in health care benefit premiums over her life.

Is it fair for all of us and our children to have to pay for that excess? The total unfunded pension and medical benefit costs are $90 billion. We would have to pay $7 billion per year just to make them current, out of current revenues. We don't have that money. You know it, and I know it.

That's what's been done to our citizens. We need to offer a pension system that we can afford. And we can no longer offer health benefits that are 41% more expensive than the average Fortune 500 company’s cost. That is truly the unfair part of this equation.

[END PLAYBACK]

JAY FISHMAN: That's an address to the legislature. And he actually does periodically, he does interviews on CNBC, not a plug for CNBC, but a pretty powerful guy in a casual setting. And just I think trying to tell it like it is. I think it's interesting, or at least like he sees it, at least as he sees it. I think it's interesting.

I grew up in the financial arena where chairman of the Federal Reserve, their job was to be quiet, and do their thing behind closed doors, and calm the markets. And I think that Chairman Bernanke is actually doing a remarkably good job in being visible and outspoken as a Fed leader should be given the circumstance we're facing.

I just thought his quote, this is back in April. Quote is really very, very telling.

(DESCRIPTION)
Text: Choices. Chairman Ben Bernanke - April 7, 2010. "Inevitably, addressing the fiscal challenges posed by an aging population will require a willingness to MAKE DIFFICULT CHOICES. The arithmetic is, unfortunately, quite clear... Unless we as a nation demonstrate a strong commitment to fiscal responsibility, in the longer run we will have neither financial stability nor healthy economic growth." Make difficult choices, is written in bolded all caps with an asterisk. Text: Emphasis added.

(SPEECH)
And he's really speaking about it from the aging population dynamic. But unless we have a willingness to make difficult choices, that we will neither have financial stability nor healthy economic growth. And again, you have to read too much between the lines on here, but for a Fed chairman to be this vocal is, I think, awfully interesting.

So choices. This is a fascinating analysis that's been done by an outside firm.

(DESCRIPTION)
Text: Difficult Choices Need to be Made. A table is titled, Mutually Exclusive Tax Increases/Spending Cuts Needed to Reduce the Deficit to 3 Percent of GDP (approx. negative $550B) in 2015. It reads: (1) Raise individual taxes only by 30%. (2) Raise all taxes by 15%. (3) Cut all Medicare, Medicaid, and Social Security spending by 25%. (4) Cut discretionary spending by 40%. (5) Cut all spending by 13%. (6) Impose a VAT of 7.7%. (7) Half spending cuts, half tax increases: (a) Raise all taxes by 8%. (b) Cut all spending by 7%.

(SPEECH)
What this attempts to do is to quantify a series of mutually exclusive actions that would be taken-- that could be taken, that would reduce the deficit to 3% of GDP in 2015. To do that would require either revenues or expenses or some combination thereof of $550 billion. 550.

So if we wanted to cut discretionary spending by 40%, that would get us there. If we wanted to raise individual taxes by 30%, it would get us there. If we want to impose a VAT tax of 7.7% based upon expected consumption expenditures, it would get us there. And lastly, if we want to do it by raising all taxes by 8 and cut all spending by 7, that also gets us there. But it's $550 billion. We're not talking about nickels and dimes here.

And of course, this brings home very poignantly that time is of the essence. The longer we wait, the more difficult this is going to get. And I also am, again, completely convinced that this is not a question of whose ox is going to get gored. It's everyone. We're just so far over our skis beyond our means that it's impossible for small groups in some way to solve this problem. It's just that big.

So you talk about $550 billion, and I want to share with you a wonderful speech that-- a short one that Judd Gregg gave from the floor of the Senate back in March. So the background is this. The Senate had just passed, and for those of you who are in government, forgive my ignorance about this, I may not express it quite correctly, but had passed this PAYGO dynamic where the rule was that there’d be no spending unless it was offset in another program, unless it were deemed to be an emergency. In which case, we'd put it aside, and we would deal with the spending dynamic.

And so it literally happened just, I guess, a couple of weeks before this. And the debate is over an inner-city summer jobs program. That's the debate. That's the item on the floor. And it's for $2 billion. For $2 billion. That's the price tag for the program. And this is Senator Gregg's speech with respect to what's going on the floor.

[VIDEO PLAYBACK]

(DESCRIPTION)
The lower right corner of the screen reads, C-SPAN 2, U.S. Senate. A man addresses the senate chamber.

(SPEECH)
- Senator from New Hampshire is recognized.

- Why do we keep doing this? Why do we keep doing this?

(DESCRIPTION)
Text: Senator Judd Gregg, R-New Hampshire. Budget Committee Ranking Member.

(SPEECH)
Why do we keep passing on to our children these debts? Why do we keep running programs out here after programs that are shrouded in sweetness and light but aren't paid for?

We just passed a PAYGO point of order here four weeks ago. It's a great fanfare. Great breast-beating about how fiscally responsible we were going to be. And time after time since we passed that PAYGO point of order, amendments have been brought to this floor, which violate it. And this is another one.

This amendment costs $2 billion, which isn't paid for. Summer jobs may be good. I'm sure they are good.

(DESCRIPTION)
Text: Murray (D-WA) Amendment. Uses $1.5 billion to create 500,000 youth summer jobs nationwide. Extending Tax Breaks, Jobless Benefits, Highway Funds.

(SPEECH)
But why do you want to put the debt for those summer jobs onto the children of the people who are having the summer jobs? If this is a priority, and it is, let's pay for it. Let's take the money out of some other account.

But let's not add to the debt, and let's not once again violate the PAYGO rules, which this Senate has so profoundly or loudly proclaimed is the manner in which we're going to discipline ourselves fiscally. It's a $2 billion item. If you can't stand by PAYGO for $2 billion, you're making a farce.

[END PLAYBACK]
JAY FISHMAN: So the slide before, we talked about $550 billion and trying to find a resolution with respect to that. And here's an emotional moment on the floor with a $2 billion program. It really, I think, speaks to the gap that we have. The gap between what is I hope to many of you now, painfully obvious, I hope it is, and the will that we have to actually do the things that are necessary to make it right.

I do think there are really good things happening. Now whether in fact it turns out to really good action, we will see. We have two terrific bipartisan commissions that have been charged with figuring it out. Figure it out. Give us a plan.

(DESCRIPTION)
Text: Leadership. Recommendations expected this year from: National Commission on Fiscal Responsibility and Reform, - Co-chairs - Alan Simpson and Erskine Bowles. Bipartisan Policy Center's Debt Reduction Task Force, - Co-chairs - Alice Rivlin and Pete Domenici.

(SPEECH)
These are talented people. They care deeply. They're emotionally committed and involved. I've listened to a couple of them speak about what they're doing. I think this is real important.

And we expect a report, what, by the end of this year is what the expectation is. This is really the first attempt that I'm aware of of trying to recognize the severity of the issue and empowering talented, thoughtful people to engage and try and figure out where we go from here.

So I've tried to stay away from either political positioning or particular issue advocacy. I've tried very hard to be an advocate for the American opportunity. And as I tried to figure out how do you close particularly with a sophisticated group like this, I tried to figure out if I could snap my fingers and make something happen, what would I do?

And it seems to me that it would be a real plea for leadership. And I think there's a few things. And again, for those inside the Beltway, you may actually chuckle at this. But I think we need leadership now more than ever that not only transcends politics, that's kind of easy, but actually one that transcends election cycles.

How can you possibly manage a problem of this magnitude if every two or four years the fundamental policies that we engage in are up for grabs? If you ran a business that way, you wouldn't be running it for long. These are issues that are going to take really serious time and attention and engagement, consistency, performance, measurement, watching, tracking, all of us together, trying to make it better. It can't be ultimately subject to the election cycles. How we do it? I have no idea.
(DESCRIPTION)
An illegible slide behind Jay has the heading, The American Opportunity.

(SPEECH)
But I know it's obvious that that's what it's going to take. Two, we have remarkable economic expertise and resources here. I find it interesting, and maybe these commissions will be transparent about how they're doing it. Any other time we have faced a real serious issue nationally, we take the experts, we put them in a room, and we say, figure it out. And be vocal, be visible.

Here, we somehow think that this kind of issue is the subject of the political debate and folks who are not trained, knowledgeable about complex economic matters. We're in a different zone here. And the notion that we somehow don't turn to the remarkable strength, the expertise that exists in the United States and say, please go help us figure it out is really a remarkable loss to me, an untapped resource, untapped expertise.

It seems to me that whatever plan-- And by the way, I'm actually of the mindset that there's lots of plans that will ultimately get us there. I don't think that there's one magic solution that we somehow have to force our way to. I think there's lots of solutions, and everything should be on the table. But I do think that it's going to take broad-based, collective sacrifice, and that plan has to be articulated clearly, so that everybody understands what we're all doing together, how we're all solving the issue, not leaving it to one small group or another group because it's just well beyond the economics for that to happen. And finally, to have the will to stick to it.

I'm absolutely convinced here in the United States, we can do anything we want. I'm convinced we can do any two things, any 100 things. The only thing we can't do is everything. And that, unfortunately, is what we've been trying to do. Everything, all at once.

And that just doesn't work. It's taken us a while to get here. It's going to take a real commitment of leadership to get us out. I thank you very much for your time and attention today. I hope it’s been worth being here, and I'm happy to take any questions.

[APPLAUSE]

(DESCRIPTION)
The presentation screen displays the Travelers logo. A man in the audience holds a mic.

(SPEECH)
AUDIENCE: How do we 100% of the people to work, go to work, produce two to three times what they were producing before, increase of productivity, greater amount of manufacturing of products and services. So who is doing that plan?
JAY FISHMAN: Yeah. I'm darned if I know who's doing it. Let me make an observation because, again, you're talking-- you're talking to someone who just feels strongly about that American opportunity just given my history. I don't think my father could start his printing business today. I think the regulatory and tax and cost environment is such that he actually couldn't get the darn thing started. I don't think he could.
So we have at the Travelers Institute, it's an organization that Joan Woodward has led for us and has done a fabulous job raising, raising issues of serious public policy, public policy debate in a public way. We've tackled a couple of issues in the last year. I've asked Joan to tackle small business creation as the next issue.

I struggle enormously. Now there's a tiny of a bit of a sub rosa agenda. We're one of the largest insurers of small businesses in the United States. But when you actually look and you go into specific towns, you get into specific situations and you look at the barriers that exist to creating a newly created small business, it's remarkable.

And there's a whole debate to be had about how do we lower the barriers? How do we make it easy to give someone the opportunity to succeed, and by the way, therefore, to fail? I'm not sure you could do it today. And I think that's an enormous loss.

I don't know what organizations are taking up what issue. I know that I feel moved to be-- and I'll drag Travelers a little bit, but no one should understand, no one should be confused. It's a company. We all work together. We're in the insurance business. That's going to be our focus. To the extent that I have time and energy and health, I want to be involved in this debate. I want to raise it. I want to raise the discussion.

And if someone ultimately says, look, there's a guy who helped raise the quality of discussion, great. And if not, then I've wasted some time. But I feel terrible just sitting idly by and watching the process happen around me. I'm not really good at sitting around and watching processes happen.

(DESCRIPTION)
The screen displays a slide that says NCF, with Jay's name and title. Logo: Travelers.