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Downloaded from
YTS.MX

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Official YIFY movies site:
YTS.MX

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So I got up at 4:45 a.m. this morning,

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woke up to three inches of snow,

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and we're in a driving snowstorm here,

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and we're on our way to Chicago,

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driving two hours to see our
next group in downtown Chicago.

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David McKnight

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is tirelessly crisscrossing the country,

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sounding a warning cry to
anyone who will listen.

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This group is likely mired down

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in the tax-deferred paradigm,

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and we're just looking

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to take the Power of Zero message to them

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and open their eyes to the reality

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that tax rates, in the future,

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will likely be much higher
than they are today.

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Way back in 1913,

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the U.S. passed the 16th Amendment

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which gave Congress power
to tax citizens directly

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on their income.

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In its first year, the
highest tax rate was just 7%,

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but in just four years

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Congress raised the top tax rate to 77%.

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- We're gonna start with a
quiz here, see how you do.

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First question on the quiz,

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can anybody tell me
the highest tax bracket

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in the history of our country?

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What's the worst it's ever been?

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- 90%.
- 92.

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- 90%, 92, anybody
wanna go higher than 92?

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The last two years of World War II,

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the highest marginal tax bracket was 94%,

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and that was for any dollar that you made

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above and beyond $200,000.

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Now, $200,000 back then
was a pretty big deal.

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It was about $3.2 million
in today's dollars.

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Can you even think if anybody back then

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that made that type of money?

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Well, who made that
type of money back then?

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Well, there was an actor who
later became a politician.

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His name was Ronald Reagan.

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If you study his biography, he talks about

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how he never made more
than two movies in a year.

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Reason being, he made
about $100,000 per movie,

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and any dollar he made
above and beyond $200,000,

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he only kept six cents on the dollar.

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Truth be told, he didn't even
get to keep the six cents.

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Who got the six cents?

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The State of California,
to pay for state tax.

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So, it literally did not make sense

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for Ronald Reagan to work
past the month of June.

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So, he took the rest of the year off.

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He went to his ranch.

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He rode horses.

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Started making movies again
January 1st the following year.

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That was a long time ago.

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Let's fast forward to
the decade of the '70s.

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The highest marginal tax
bracket in that decade

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was 70%, once again,

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for any dollar you made
above and beyond $200,000.

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Now, let's fast forward
to about a month ago,

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January 1, 2018.

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What's the worst tax
rate you can pay today,

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the tax rate which Bill Gates pays taxes

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on most of his earned income?

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- 37?
- 37%.

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So, here's my question for you,

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how does 37 stack up

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against some of these tax rates
we experienced in the past?

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What do you think?

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Pretty good.

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It's pretty good.

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In fact, you could make the
case that it's historically low,

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and it's interesting you should say that

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because I do this workshop
all across the country

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and I routinely ask rooms full of people,

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well, bad how are taxes this year?

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What do think they say?

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Going up.

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- They say bad, horrible,
as bad as they've ever been.

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What's the truth?

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Tax rates literally haven't
been this good in 80 years.

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- You and I know that our
country is in a crisis.

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So, what I want to know is,

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why in the world are you
going all across the country

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to talk about our fiscal
condition of this great country?

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- So, I've actually been
traveling around the country

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for about four years now,

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taking the Power of Zero
message to different groups.

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It's usually two different
cities in a week.

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- Let's define
three words we will use

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debt, deficit, and GDP.

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Debt refers to the total
amount our country owes,

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whereas deficit refers to the gap

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between what our country collects in taxes

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and spends in a year.

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GDP, which stands for
Gross Domestic Product,

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is the total value of goods and services

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produced by our country in a year.

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What's really insightful
is the relationship

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between our country's debt to GDP

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or deficit to GDP.

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That's like comparing a
person's debt to income.

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We're entering unprecedented territory.

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This is the highest
the debt has ever been,

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except for right after World War II,

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and then we had just fought a world war.

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World War II, 1945 to '47,

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when it was 119%.

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We were basically out of money.

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There was serious concern

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whether we could even
continue the war into 1946.

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- One way to think about
it is the deficit to GDP,

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so that's just the current deficit,

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there's only one time, as
far as I know, in history

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when it's been higher in peacetime

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and that was during the Great Recession,

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when Obama was president,

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when tax revenues fell off the cliff.

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What's unprecedented is we are
now sort of at normal growth

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in a pretty good economy,

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and yet we have this
extraordinary deficit.

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That's really pretty much unprecedented.

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- We enacted the biggest
tax cuts and reforms

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in American history.

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- With the reduction in taxes
that took place in 2018,

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is that gonna drive debt up?

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Yeah, we've been told that
we need to increase taxes,

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lower spending.

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What did we do?

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We did just the opposite.

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We decreased taxes.

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We increased spending.

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I find that very troublesome.

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This is during peace, prosperity,

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all the times when you should be getting

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your fiscal situation under control,

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and we are just borrowing,
borrowing, borrowing,

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basically 'cause we don't
wanna pay the bills.

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But it's also a drag on the economy,

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so it has secondary effects
other than direct effects

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on what the government
can actually spend on.

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It reduces the rate of
growth of the economy,

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and reduces long-term revenues as well.

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- When you cut taxes
on current generations,

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you are simultaneously raising
them on future generations.

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- You know, people talk
about taxes and debt

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as if they're polar opposites.

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They're really the same thing.

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It is all driven by spending.

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Once we have spent a dollar,

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we've already decided to tax it.

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The only question is whether we tax it now

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or we borrow it now and
tax it in the future.

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- Then if you think
about it, what is debt?

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All debt is is taking from the
future and spending it today.

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- There's $20 trillion
of GDP in this country.

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That is the measurement of the
output of goods and services

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of the greatest economy that
has ever lived on planet Earth.

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That's a huge issue right now.

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What is the growth rate
going to be, looking forward?

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It is possible

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that one country can grow
out of its debt limits.

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It's generally happened,

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it's usually come after a war,

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but we're talking about

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significant economic growth trajectories.

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To paint a picture, it would
be twice the growth rate,

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probably, that we have
today, on a sustained basis.

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One could have a huge
innovation boom through AI,

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or we grow at the profile of China.

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Possible, but historically unprecedented,

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at least on a sustained basis.

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On a three or five-year basis, sure,

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but not on a sustained 20, 30-year basis.

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We're getting old.

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Europe is old.

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Japan is very, very old.

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Japan sells more adult
diapers than baby diapers.

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Now, that's old.

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China will get old before they get rich.

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Well, what happens
economically when you get old?

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Your spending goes off a cliff.

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Do you understand?

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Old people don't spend any money.

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If I'd ask you right now,

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how much money do your grandparents spend?

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Nothing, that's gonna be
you in 30 years, okay,

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and so we've had these
78 million baby boomers

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who drove the economy.

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You know, it's about me, and
more, and bigger, and better,

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and me, and more, and bigger, and better.

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Well, guess what?

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Those 78 million baby
boomers are over the hill.

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They're all over age 50.

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You know what happens at age 50?

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Your spending goes off a cliff,
and every year after age 50

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you're gonna continue to
spend less and less and less.

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- Well, we have two reasons
why our growth is slow.

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One is that our population
is no longer growing.

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It's aging, so the labor
force isn't growing very fast,

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so the number of people working
is not growing very fast,

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and then, so how much
does each worker produce

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as productivity?

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That's also been slow.

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So there's a lot of signs

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that the growth rate of
productivity is persistently down.

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Population growth rate
is persistently down.

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Well, that kind of tells you,

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we could have some more
investment, and that'd be fine.

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That'd be fine,

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but nobody thinks, I don't
think, that that in and of itself

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can compensate for lower
growth rates of productivity

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00:09:27,380 --> 00:09:29,390
and lower population growth rates.

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So, the growth rate of real GDP

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is gonna be lower going forward.

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The estimates are that it
went from something to 3%

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to arguably 2.1, 2.2%.

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So, going back to where I started,

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debt to GDP, which is growing,

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we know that GDP is not growing
as quickly as it used to

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and that has to constrain our
capacity to accumulate debt.

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That's a big deal.

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00:09:52,250 --> 00:09:53,510
That's a really big deal.

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The analogy with a rich person is,

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you never look at the level
of debt of Bill Gates.

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That would be a silly thing to do.

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00:10:00,110 --> 00:10:00,943
You'd say, first of all,

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how big is his debt
compared to his income?

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00:10:03,470 --> 00:10:05,150
And even that wouldn't scare you too much

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00:10:05,150 --> 00:10:07,040
if you knew his income was really growing

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00:10:07,040 --> 00:10:08,510
relative to his debt.

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00:10:08,510 --> 00:10:12,400
- So the U.S. actually
looks relatively bad

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00:10:12,400 --> 00:10:14,457
compared to many other countries.

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00:10:16,080 --> 00:10:18,630
- The fastest-growing
expense in the federal budget

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00:10:18,630 --> 00:10:21,080
is interest on the federal debt,

238
00:10:21,080 --> 00:10:23,200
and what do you get for
interest on the federal debt?

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00:10:23,200 --> 00:10:24,040
Nothing.

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Doesn't it frighten you

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00:10:25,280 --> 00:10:28,150
when you see that $20 trillion number?

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I mean, do you?

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I get nervous.

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00:10:30,290 --> 00:10:32,080
There's not a lot of
things I get nervous about,

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00:10:32,080 --> 00:10:33,864
but that's one thing that I do.

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00:10:45,370 --> 00:10:48,300
20 trillion is a number that
we can't even comprehend.

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00:10:48,300 --> 00:10:49,780
People ought to Google that up and, say,

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00:10:49,780 --> 00:10:50,613
- figure out how much
- Oh.

249
00:10:50,613 --> 00:10:53,830
- just one trillion is, and
then what's 20 trillion?

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00:10:53,830 --> 00:10:56,270
I mean, it's just an
incomprehensible number.

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00:10:56,270 --> 00:10:57,720
So, let me put it this way.

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If $1 equals one second, got that?

253
00:11:00,449 --> 00:11:02,080
$1 equals one second.

254
00:11:02,080 --> 00:11:05,490
A million dollars equals 11 1/2 days.

255
00:11:05,490 --> 00:11:09,320
A billion dollars equals 32 years.

256
00:11:09,320 --> 00:11:13,390
A trillion dollars equals 32,000 years.

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00:11:13,390 --> 00:11:14,223
Think about that.

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00:11:14,223 --> 00:11:18,080
32,000 years at $1 equals one second,

259
00:11:18,080 --> 00:11:20,110
and we are 20 trillion in the hole

260
00:11:20,110 --> 00:11:22,740
with 125 trillion of unfunded obligations.

261
00:11:22,740 --> 00:11:25,948
This is a very, very serious situation.

262
00:11:26,920 --> 00:11:28,870
At the end of World War II,

263
00:11:28,870 --> 00:11:31,660
President Truman cut taxes and spending.

264
00:11:31,660 --> 00:11:32,910
In fiscal '46,

265
00:11:32,910 --> 00:11:36,540
he took the federal
spending from $85 billion

266
00:11:36,540 --> 00:11:40,010
down to $30 billion in a single year,

267
00:11:40,010 --> 00:11:42,370
so cut federal spending by almost 2/3,

268
00:11:42,370 --> 00:11:44,520
fired 10 million federal employees.

269
00:11:44,520 --> 00:11:46,670
It was called war demobilization.

270
00:11:46,670 --> 00:11:47,890
The Keynesians at the time

271
00:11:47,890 --> 00:11:52,190
predicted 25% unemployment
and a second Great Depression.

272
00:11:52,190 --> 00:11:54,710
Instead, we got the postwar economic boom.

273
00:11:54,710 --> 00:11:58,690
So, a combination of tax
reductions to stimulate the economy

274
00:11:58,690 --> 00:12:02,150
and then, serious spending restraint

275
00:12:02,150 --> 00:12:04,080
is what brought us back

276
00:12:04,080 --> 00:12:06,680
from the last time we had this much debt.

277
00:12:06,680 --> 00:12:08,260
Congress has done the first part.

278
00:12:08,260 --> 00:12:11,640
We now have in place a tax reduction

279
00:12:11,640 --> 00:12:15,730
that is having an enormous
positive impact on the economy,

280
00:12:15,730 --> 00:12:18,450
but at the same time, having cut taxes,

281
00:12:18,450 --> 00:12:20,587
we have to restrain spending,

282
00:12:20,587 --> 00:12:23,097
and that is where we are failing.

283
00:12:27,300 --> 00:12:29,310
- Well, I think one of the
saddest parts about the problem

284
00:12:29,310 --> 00:12:31,920
is that these days it's self-imposed.

285
00:12:31,920 --> 00:12:34,880
In many ways, the huge national debt

286
00:12:34,880 --> 00:12:37,673
reflects the brokenness of our government.

287
00:12:37,673 --> 00:12:38,676
- That was the third

288
00:12:38,676 --> 00:12:40,310
most popular songs by--

289
00:12:40,310 --> 00:12:44,750
- Managing and getting
the debt under control

290
00:12:44,750 --> 00:12:49,070
is not as complicated as
politicians want you to believe.

291
00:12:49,070 --> 00:12:51,860
This is a knowable problem.

292
00:12:51,860 --> 00:12:54,830
There are many organizations
in Washington, DC.

293
00:12:54,830 --> 00:12:56,220
I'll name just a couple of them.

294
00:12:56,220 --> 00:12:57,730
The Congressional Budget Office,

295
00:12:57,730 --> 00:12:59,660
that's a nonpartisan organization

296
00:12:59,660 --> 00:13:02,620
that gives massive reams
of data to Congress

297
00:13:02,620 --> 00:13:05,330
about various federal programs.

298
00:13:05,330 --> 00:13:06,970
The Office of Management and Budget,

299
00:13:06,970 --> 00:13:08,910
that advises the White House.

300
00:13:08,910 --> 00:13:11,600
The Trustees for Social
Security and Medicare,

301
00:13:11,600 --> 00:13:12,870
and on and on.

302
00:13:12,870 --> 00:13:15,710
They're all saying the same thing.

303
00:13:15,710 --> 00:13:18,280
We have a fundamental
problem in this country,

304
00:13:18,280 --> 00:13:20,040
and it needs to be dealt with.

305
00:13:20,040 --> 00:13:22,150
- Instead of paying for
all the new initiatives,

306
00:13:22,150 --> 00:13:24,550
whether they're tax
cuts, spending increases,

307
00:13:24,550 --> 00:13:26,460
all sorts of things that we like,

308
00:13:26,460 --> 00:13:27,790
the government's just putting it all

309
00:13:27,790 --> 00:13:29,510
on the national credit card,

310
00:13:29,510 --> 00:13:31,170
and as a result our national debt

311
00:13:31,170 --> 00:13:33,600
is just going up and up and up,

312
00:13:33,600 --> 00:13:35,348
and it's growing faster than the economy,

313
00:13:35,348 --> 00:13:37,450
and that's when you know
you have a real problem.

314
00:13:37,450 --> 00:13:38,900
On the President's tax reform plan,

315
00:13:38,900 --> 00:13:41,340
he says that big tax cuts will be paid for

316
00:13:41,340 --> 00:13:43,020
by economic growth.

317
00:13:43,020 --> 00:13:44,770
What's your take on that?

318
00:13:44,770 --> 00:13:45,603
Well, I don't think

319
00:13:45,603 --> 00:13:48,783
any serious nonpartisan
analyst of tax cuts

320
00:13:48,783 --> 00:13:51,330
would suggest it's gonna pay for itself.

321
00:13:51,330 --> 00:13:53,500
It may help a bit on the growth side,

322
00:13:53,500 --> 00:13:55,350
but in order to actually
create enough revenue

323
00:13:55,350 --> 00:13:56,183
to pay for itself

324
00:13:56,183 --> 00:13:59,410
would require a much
bigger growth expansion

325
00:13:59,410 --> 00:14:00,890
than really seems realistic.

326
00:14:00,890 --> 00:14:02,650
What the Trump people are betting,

327
00:14:02,650 --> 00:14:04,340
President Trump's people are betting,

328
00:14:04,340 --> 00:14:07,610
is that somehow this, and I
won't call it a tax reform.

329
00:14:07,610 --> 00:14:10,100
They call it a tax reform;
I call it a tax cut.

330
00:14:10,100 --> 00:14:11,820
They're betting that somehow

331
00:14:11,820 --> 00:14:14,780
this is going to jump-start

332
00:14:16,720 --> 00:14:19,120
various initiatives on the parts of firms,

333
00:14:19,120 --> 00:14:19,953
including investment,

334
00:14:19,953 --> 00:14:23,060
and that magic productivity
number that I talked about

335
00:14:23,060 --> 00:14:24,447
is gonna work, and if it did?

336
00:14:24,447 --> 00:14:27,740
You know, you give me a 1%
increase in productivity,

337
00:14:27,740 --> 00:14:30,090
that takes care of a lot of problems.

338
00:14:30,090 --> 00:14:32,230
So, the question is, is that gonna work?

339
00:14:32,230 --> 00:14:35,990
I don't see any evidence that it is,

340
00:14:35,990 --> 00:14:38,150
other than sort of religious faith,

341
00:14:38,150 --> 00:14:40,770
and we're taking a hell of a bet because

342
00:14:42,500 --> 00:14:46,630
we have to start reforming entitlements

343
00:14:46,630 --> 00:14:49,230
or we will, in my view, we
will have to raise taxes.

344
00:14:49,230 --> 00:14:51,460
Now, precisely how high it's gonna be,

345
00:14:51,460 --> 00:14:52,730
there's a lot of room to debate,

346
00:14:52,730 --> 00:14:56,940
but people will have to pay
more taxes, and that's painful,

347
00:14:56,940 --> 00:14:59,880
but you can't get away with
stuff forever for nothing.

348
00:14:59,880 --> 00:15:02,360
- The argument that
they pay for themselves,

349
00:15:02,360 --> 00:15:05,550
that they're gonna raise
economic growth so much

350
00:15:05,550 --> 00:15:07,150
just hasn't been borne out.

351
00:15:07,150 --> 00:15:09,800
There is no empirical evidence for that.

352
00:15:09,800 --> 00:15:12,670
- The bad news is, it was debt-financed.

353
00:15:12,670 --> 00:15:16,320
Even when you consider the
likely impact on economic growth

354
00:15:16,320 --> 00:15:18,890
by nonpartisan independent parties,

355
00:15:18,890 --> 00:15:21,840
it's expected to add debt to GDP.

356
00:15:21,840 --> 00:15:23,560
Time for that has passed.

357
00:15:23,560 --> 00:15:26,560
That made sense in the 1980s,

358
00:15:26,560 --> 00:15:31,560
when the top rate on income was 70%.

359
00:15:31,730 --> 00:15:33,070
It's not the Reagan years anymore.

360
00:15:33,070 --> 00:15:35,760
There isn't a 70% marginal
tax rate on the wealthy.

361
00:15:35,760 --> 00:15:38,300
- Few economists would have
argued with reducing taxes

362
00:15:38,300 --> 00:15:39,500
at that point.

363
00:15:39,500 --> 00:15:41,150
It's another example

364
00:15:41,150 --> 00:15:44,940
of Washington wanting
to have their dessert

365
00:15:44,940 --> 00:15:47,390
before they end up eating their spinach,

366
00:15:47,390 --> 00:15:50,270
and eventually we have to
end up eating our spinach

367
00:15:50,270 --> 00:15:52,530
if we wanna get healthy in the future.

368
00:15:52,530 --> 00:15:53,760
I think the challenges,

369
00:15:53,760 --> 00:15:56,440
there are such, not
only a lack of appetite,

370
00:15:56,440 --> 00:16:00,670
there is an aversion to
having a serious conversation

371
00:16:00,670 --> 00:16:01,793
in this country.

372
00:16:03,220 --> 00:16:04,900
The president himself has said

373
00:16:04,900 --> 00:16:08,120
we are not gonna touch
Social Security and Medicare.

374
00:16:08,120 --> 00:16:10,920
That lulls people into a
false sense of security,

375
00:16:10,920 --> 00:16:13,060
and a sense of security
that, ah, you know,

376
00:16:13,060 --> 00:16:15,670
the federal government
will just bail this out.

377
00:16:15,670 --> 00:16:17,960
There's gonna come a time
when that just can't happen.

378
00:16:17,960 --> 00:16:19,153
We've become ostriches.

379
00:16:19,153 --> 00:16:21,860
We've just, we've got
our head in the sand.

380
00:16:21,860 --> 00:16:24,150
- But something's gonna
happen to this tax rate

381
00:16:24,150 --> 00:16:26,850
January 1st, 2026.

382
00:16:26,850 --> 00:16:27,683
What's gonna happen?

383
00:16:27,683 --> 00:16:28,516
Is it gonna go up or down?

384
00:16:28,516 --> 00:16:29,349
Go up.

385
00:16:29,349 --> 00:16:30,212
What's it gonna go up to?

386
00:16:30,212 --> 00:16:34,270
It's gonna go back up to what
it was in 2017, which is 39.6.

387
00:16:34,270 --> 00:16:36,980
The real question I have
for you, however, is this.

388
00:16:36,980 --> 00:16:40,650
What is likely to happen
to tax rates after 2026,

389
00:16:40,650 --> 00:16:43,650
as we move forward in time
to 2030, 2035, and beyond?

390
00:16:43,650 --> 00:16:45,010
What does your gut tell you?

391
00:16:45,010 --> 00:16:46,570
How do you see this playing out?

392
00:16:46,570 --> 00:16:47,780
I know this is a tough question,

393
00:16:47,780 --> 00:16:49,830
but how do you see it playing out?

394
00:16:49,830 --> 00:16:51,150
Yeah, in my heart,

395
00:16:51,150 --> 00:16:54,970
I would love to say that
there's some sort of realization

396
00:16:54,970 --> 00:16:56,130
that we're all going to come to,

397
00:16:56,130 --> 00:16:58,390
but the reality is, most likely,

398
00:16:58,390 --> 00:17:00,350
that we will hit the crisis point

399
00:17:00,350 --> 00:17:02,730
sometime in the next decade,

400
00:17:02,730 --> 00:17:06,000
and when that happens,
I'm not entirely sure

401
00:17:06,000 --> 00:17:07,160
that the public will see it

402
00:17:07,160 --> 00:17:10,300
as anything other than an
invitation to raise taxes,

403
00:17:10,300 --> 00:17:12,260
and not to address spending,

404
00:17:12,260 --> 00:17:15,070
and until and when we address spending,

405
00:17:15,070 --> 00:17:17,516
there is not going to be a
resolution to this crisis.

406
00:17:20,560 --> 00:17:22,830
If you wanna know how we got here,

407
00:17:25,820 --> 00:17:29,152
25, 35, and 49.

408
00:17:29,152 --> 00:17:33,260
26% is the combined increase

409
00:17:33,260 --> 00:17:35,810
of inflation and population

410
00:17:35,810 --> 00:17:37,720
during the past 10 years.

411
00:17:37,720 --> 00:17:41,370
We've had 35% increase in revenues,

412
00:17:41,370 --> 00:17:43,640
so obviously it is not a revenue problem.

413
00:17:43,640 --> 00:17:45,620
Our revenues have grown much faster

414
00:17:45,620 --> 00:17:47,880
than inflation and population.

415
00:17:47,880 --> 00:17:51,530
That third number is
what's killing us, 49%.

416
00:17:51,530 --> 00:17:54,870
That's the increase in
spending in the same period.

417
00:17:54,870 --> 00:17:56,010
Any family knows

418
00:17:56,010 --> 00:17:58,600
that you cannot turn in
numbers like that very long

419
00:17:58,600 --> 00:18:00,250
before you're in serious trouble.

420
00:18:01,100 --> 00:18:04,120
You have to understand the math.

421
00:18:04,120 --> 00:18:07,770
After a nine-year fake bull market,

422
00:18:07,770 --> 00:18:12,492
90% of America doesn't have $140,000.

423
00:18:12,492 --> 00:18:14,060
90%.

424
00:18:14,060 --> 00:18:18,150
50% of America arrives at death
or retirement with nothing.

425
00:18:18,150 --> 00:18:21,260
75% of America arrives
at death or retirement

426
00:18:21,260 --> 00:18:23,510
with less than 28,000 in assets.

427
00:18:23,510 --> 00:18:24,420
It's also true

428
00:18:24,420 --> 00:18:26,930
that probably 70% of
the American population

429
00:18:26,930 --> 00:18:28,760
has less than a thousand dollars.

430
00:18:28,760 --> 00:18:29,600
Can you imagine?

431
00:18:29,600 --> 00:18:33,060
A thousand dollars of accessible cash.

432
00:18:33,060 --> 00:18:34,470
That's pretty sad.

433
00:18:34,470 --> 00:18:38,230
- So here's what I say to
all my prospects and clients,

434
00:18:38,230 --> 00:18:40,960
all the people that I
ask to give consideration

435
00:18:40,960 --> 00:18:43,200
to what's about to happen.

436
00:18:43,200 --> 00:18:48,010
the government,

437
00:18:48,010 --> 00:18:52,550
are they gonna need more revenue
in the future, yes or no?

438
00:18:52,550 --> 00:18:53,890
Everybody says yes.

439
00:18:53,890 --> 00:18:57,100
Is it possible they could
need a lot more revenue?

440
00:18:57,100 --> 00:18:57,973
Of course it is.

441
00:18:57,973 --> 00:19:00,280
They're going to transfer wealth

442
00:19:00,280 --> 00:19:03,000
from those that have to those that don't,

443
00:19:03,000 --> 00:19:05,270
and the 90% of the people in America

444
00:19:05,270 --> 00:19:06,260
who don't have any money

445
00:19:06,260 --> 00:19:09,960
have the votes to make sure
that that transfer will happen,

446
00:19:09,960 --> 00:19:13,740
so it's very, very important
that people do planning now

447
00:19:13,740 --> 00:19:15,647
while they can stay in control.

448
00:19:15,647 --> 00:19:18,610
- What will we be spending
money on as a country

449
00:19:18,610 --> 00:19:20,890
that could literally
force tax rates to go up?

450
00:19:20,890 --> 00:19:22,700
What are the big-ticket items?

451
00:19:22,700 --> 00:19:25,020
- They're gonna need
money for Social Security,

452
00:19:25,020 --> 00:19:28,889
for Medicare, for Medicaid,
the Unaffordable Care Act.

453
00:19:32,210 --> 00:19:34,980
- When Social Security
started off in 1935,

454
00:19:34,980 --> 00:19:38,090
you had 42 workers putting
money into the program

455
00:19:38,090 --> 00:19:40,610
for every one person that took money out,

456
00:19:40,610 --> 00:19:43,420
and back then you had to be 65

457
00:19:43,420 --> 00:19:45,300
before you could draw on Social Security.

458
00:19:45,300 --> 00:19:48,570
The average life expectancy was only 62.

459
00:19:48,570 --> 00:19:50,880
They didn't even anticipate
that the average person

460
00:19:50,880 --> 00:19:53,650
would live long enough to
ever draw on Social Security.

461
00:19:53,650 --> 00:19:56,070
If you were lucky enough to make it to 65,

462
00:19:56,070 --> 00:19:59,190
you only drew on Social
Security for two years,

463
00:19:59,190 --> 00:20:00,670
and then you died.

464
00:20:00,670 --> 00:20:01,950
Fast forward to today.

465
00:20:01,950 --> 00:20:04,450
We got 2.7 workers putting
money into Social Security

466
00:20:04,450 --> 00:20:07,090
for every one person that takes money out,

467
00:20:07,090 --> 00:20:09,673
and today you can take Social
Security as early as age 62,

468
00:20:09,673 --> 00:20:11,410
and if you start at 62

469
00:20:11,410 --> 00:20:13,780
you'll continue to draw
all the way to age 85.

470
00:20:13,780 --> 00:20:16,070
You see, Social Security started off

471
00:20:16,070 --> 00:20:18,130
as insurance against living too long,

472
00:20:18,130 --> 00:20:20,900
and it slowly morphed
into a pension program

473
00:20:20,900 --> 00:20:24,580
that covers us for nearly
a quarter of our lives.

474
00:20:24,580 --> 00:20:27,600
- So, everybody believes that
10,000 baby boomers a day

475
00:20:27,600 --> 00:20:28,970
are retiring.

476
00:20:28,970 --> 00:20:30,160
That's an average.

477
00:20:30,160 --> 00:20:31,740
It's not the truth.

478
00:20:31,740 --> 00:20:33,060
Here's the truth.

479
00:20:33,060 --> 00:20:34,240
The number-one birth year

480
00:20:34,240 --> 00:20:38,490
in the history of the United
States of America was 1957,

481
00:20:38,490 --> 00:20:41,877
followed closely by '58, '59, '60,

482
00:20:41,877 --> 00:20:43,433
'61, '2, '3, and '4.

483
00:20:44,320 --> 00:20:47,440
That means that 70% of the baby boomers

484
00:20:47,440 --> 00:20:52,060
will retire between 2022 and 2029,

485
00:20:52,060 --> 00:20:53,330
and we don't have the money now

486
00:20:53,330 --> 00:20:55,910
for all the people
receiving Social Security.

487
00:20:55,910 --> 00:20:59,060
Where are we gonna get the
money for those people?

488
00:20:59,060 --> 00:21:02,160
And same thing will apply with Medicare.

489
00:21:02,160 --> 00:21:03,300
Where will we get the money

490
00:21:03,300 --> 00:21:07,010
when 70% of the baby boomers retire

491
00:21:07,010 --> 00:21:10,070
and start taking health care benefits?

492
00:21:10,070 --> 00:21:13,170
- And when you get around
public health people

493
00:21:13,170 --> 00:21:14,890
and ask them what is the spend?

494
00:21:14,890 --> 00:21:16,780
Do you know the current spend on diabetes?

495
00:21:16,780 --> 00:21:20,900
And where they know it, the
next question is, what happens

496
00:21:20,900 --> 00:21:24,790
when the number of diabetics
quadruple in, say, 30 years,

497
00:21:24,790 --> 00:21:27,250
and nobody has an answer for that,

498
00:21:27,250 --> 00:21:31,500
and it's nothing other than

499
00:21:31,500 --> 00:21:33,463
national, urban.

500
00:21:34,770 --> 00:21:39,770
It's an impending tsunami
coming right at us,

501
00:21:40,040 --> 00:21:41,300
and I see

502
00:21:44,340 --> 00:21:49,340
no official, effective, sincere response.

503
00:21:49,410 --> 00:21:50,870
Nobody wants to have that conversation

504
00:21:50,870 --> 00:21:51,703
with the American public.

505
00:21:51,703 --> 00:21:54,000
Nobody wants to talk to
them about entitlements.

506
00:21:54,000 --> 00:21:54,890
They don't wanna talk to them

507
00:21:54,890 --> 00:21:56,500
about the mandatory
cuts that are necessary.

508
00:21:56,500 --> 00:21:57,333
They don't wanna talk to them

509
00:21:57,333 --> 00:22:01,130
about the fact that we
already are over 100% of GDP

510
00:22:01,130 --> 00:22:02,590
when it come to the amount
of debt that we have

511
00:22:02,590 --> 00:22:03,430
in this country.

512
00:22:03,430 --> 00:22:05,210
Nobody wants to have
that hard conversation,

513
00:22:05,210 --> 00:22:07,140
and so again, entropically,

514
00:22:07,140 --> 00:22:09,890
we are getting to the crisis
point because it's easier.

515
00:22:11,220 --> 00:22:12,250
Here's the reality.

516
00:22:12,250 --> 00:22:14,570
All Congress has to do

517
00:22:14,570 --> 00:22:17,840
for this whole situation to
come to a head is nothing,

518
00:22:17,840 --> 00:22:20,650
because every year that they do nothing

519
00:22:20,650 --> 00:22:23,700
makes the problem even more unsolvable.

520
00:22:23,700 --> 00:22:25,550
So, why is this being swept under the rug?

521
00:22:25,550 --> 00:22:27,200
Why is nobody talking about this?

522
00:22:27,200 --> 00:22:29,490
Probably because it's not popular.

523
00:22:29,490 --> 00:22:33,560
- The last time that we had
Social Security reform was 1983,

524
00:22:33,560 --> 00:22:35,700
and that was a real accomplishment,

525
00:22:35,700 --> 00:22:38,590
but the truth is a lot of
people don't understand

526
00:22:38,590 --> 00:22:42,190
that the reason that we had
Social Security reform in 1983

527
00:22:42,190 --> 00:22:44,600
is because the so-called trust funds

528
00:22:44,600 --> 00:22:47,950
were gonna go dry within
a matter of months,

529
00:22:47,950 --> 00:22:49,810
and if the trust fund goes dry,

530
00:22:49,810 --> 00:22:52,690
that means the federal
government couldn't pay benefits

531
00:22:52,690 --> 00:22:54,330
in a timely manner,

532
00:22:54,330 --> 00:22:55,640
and I can assure you

533
00:22:55,640 --> 00:22:57,378
that if tens of millions of Americans

534
00:22:57,378 --> 00:23:00,190
don't get their Social
Security payments on time

535
00:23:00,190 --> 00:23:02,500
there would be a
significant political uproar

536
00:23:02,500 --> 00:23:03,650
associated with that.

537
00:23:03,650 --> 00:23:05,503
But we know from the trustees

538
00:23:05,503 --> 00:23:09,037
that Social Security hits
a wall in the early 2030s,

539
00:23:09,037 --> 00:23:12,270
and Medicare hits a
wall in the late 2020s.

540
00:23:12,270 --> 00:23:13,860
These are fiscal realities

541
00:23:13,860 --> 00:23:15,861
that are gonna force us to
make some very hard decisions

542
00:23:15,861 --> 00:23:17,391
in the next decade.

543
00:23:23,430 --> 00:23:27,020
- So, to make up for the
liabilities that we're incurring

544
00:23:27,020 --> 00:23:29,070
with all the promises we've made

545
00:23:29,070 --> 00:23:31,200
in social insurance programs,

546
00:23:31,200 --> 00:23:35,740
we're gonna have to increase,
substantially, the tax rate,

547
00:23:35,740 --> 00:23:36,597
and perhaps even double it.

548
00:23:36,597 --> 00:23:39,740
- According to recent calculations
I've done with Bill Gale,

549
00:23:39,740 --> 00:23:44,150
we'd have to raise somewhere
between five and 10% of GDP,

550
00:23:44,150 --> 00:23:45,570
depending on what one assumes

551
00:23:45,570 --> 00:23:48,080
about the future growth
of health care costs,

552
00:23:48,080 --> 00:23:50,158
and demographics, and so forth.

553
00:24:02,960 --> 00:24:04,560
- Congress loves to
kick the can down the road.

554
00:24:04,560 --> 00:24:05,560
They love to procrastinate

555
00:24:05,560 --> 00:24:08,610
because making tough decisions
gets you voted out of office.

556
00:24:08,610 --> 00:24:10,160
What's gonna happen with our country

557
00:24:10,160 --> 00:24:13,870
if we just continue to procrastinate?

558
00:24:13,870 --> 00:24:15,130
What are the options?

559
00:24:15,130 --> 00:24:18,020
Well, let's say we hit insolvency.

560
00:24:18,020 --> 00:24:21,010
Then we have some triggers
that come into effect,

561
00:24:21,010 --> 00:24:24,690
which will force benefits to be reduced

562
00:24:24,690 --> 00:24:26,863
for a lot of people who can't afford that,

563
00:24:27,750 --> 00:24:31,200
and the reality of that is
going to hit extremely hard,

564
00:24:31,200 --> 00:24:32,033
to the point where

565
00:24:32,033 --> 00:24:34,010
I don't think anybody's gonna
actually allow that to happen,

566
00:24:34,010 --> 00:24:36,160
but the emergency measures
that will have to be taken

567
00:24:36,160 --> 00:24:38,100
in order to prevent something like that

568
00:24:38,100 --> 00:24:40,444
are dramatic tax increases.

569
00:24:47,349 --> 00:24:51,407
- One train to
South Ferry, two minutes away.

570
00:24:51,407 --> 00:24:54,530
- It's very important
that we do a better job

571
00:24:54,530 --> 00:24:57,250
of conveying to the American people

572
00:24:57,250 --> 00:25:01,100
that this horrendous
catastrophe is coming.

573
00:25:01,100 --> 00:25:02,520
Talked about David Walker,

574
00:25:02,520 --> 00:25:04,360
former Comptroller General
of the federal government.

575
00:25:04,360 --> 00:25:06,607
Well, he appeared on 60
Minutes back in 2008,

576
00:25:06,607 --> 00:25:07,927
and he said, "Hey, I got some bad news.

577
00:25:07,927 --> 00:25:09,457
"Tax rates have to double

578
00:25:09,457 --> 00:25:11,180
"or our country's going to go broke,"

579
00:25:11,180 --> 00:25:13,090
and the radio show host
just didn't believe him,

580
00:25:13,090 --> 00:25:14,827
and he says, "It's funny
we're on a radio show

581
00:25:14,827 --> 00:25:15,660
"talking about this right now,"

582
00:25:15,660 --> 00:25:17,807
and the radio show host said,
"Oh, I don't believe you.

583
00:25:17,807 --> 00:25:18,950
"That doesn't even make sense to me,"

584
00:25:18,950 --> 00:25:21,677
and he goes, "I can give
you one four-letter word

585
00:25:21,677 --> 00:25:24,260
"that explains why tax
rates have to double."

586
00:25:24,260 --> 00:25:29,080
- You know there's a new
four-letter word in fiscal policy.

587
00:25:29,080 --> 00:25:30,940
It's called math,

588
00:25:30,940 --> 00:25:33,670
and unfortunately there's not
that many people in politics

589
00:25:33,670 --> 00:25:35,530
that are very proficient at that.

590
00:25:35,530 --> 00:25:40,010
- So, in the next 75 years
Medicare spending alone

591
00:25:40,010 --> 00:25:43,100
is projected to take up
the entire federal budget.

592
00:25:43,100 --> 00:25:46,100
But the gap between projected spending

593
00:25:46,100 --> 00:25:49,830
and projected revenues is just too great.

594
00:25:49,830 --> 00:25:53,890
You cannot grow your
way out of this problem.

595
00:25:53,890 --> 00:25:56,660
That means we have one of two choices.

596
00:25:56,660 --> 00:26:00,470
We either cut spending or we raise taxes,

597
00:26:00,470 --> 00:26:03,610
and there's consequences
to both these choices,

598
00:26:03,610 --> 00:26:05,640
so higher tax rates, we know,

599
00:26:05,640 --> 00:26:08,270
create distortions in the economy.

600
00:26:08,270 --> 00:26:11,670
They likely reduce the rate
of growth of the economy,

601
00:26:11,670 --> 00:26:12,880
at least at the levels

602
00:26:12,880 --> 00:26:15,600
that we're gonna have
to increase tax rates

603
00:26:15,600 --> 00:26:18,340
in order to fulfill all
the promises we've made.

604
00:26:18,340 --> 00:26:19,610
Where we are headed?

605
00:26:19,610 --> 00:26:22,430
I think we are headed towards
a period of uncertainty.

606
00:26:22,430 --> 00:26:24,810
We are on an unsustainable path

607
00:26:24,810 --> 00:26:27,160
because that tax cut made
things so much worse.

608
00:26:28,530 --> 00:26:30,270
We are heading for changes in the future,

609
00:26:30,270 --> 00:26:31,320
but we don't know what they'll be,

610
00:26:31,320 --> 00:26:33,350
so there's absolutely no confidence

611
00:26:33,350 --> 00:26:35,755
of what the future tax
or spending laws will be.

612
00:26:40,200 --> 00:26:43,190
- You look at our current
trend on spending.

613
00:26:43,190 --> 00:26:45,710
Within the next two years

614
00:26:45,710 --> 00:26:48,720
we're gonna reach
trillion-dollar budget deficit.

615
00:26:48,720 --> 00:26:51,830
When we run a trillion-dollar
budget deficit,

616
00:26:51,830 --> 00:26:55,410
that's the same as adding about $8,000

617
00:26:55,410 --> 00:26:59,220
to the credit card debt of
every family in America,

618
00:26:59,220 --> 00:27:01,370
and this is not a theoretical exercise.

619
00:27:01,370 --> 00:27:03,680
That money is owed by your family

620
00:27:03,680 --> 00:27:06,250
just as surely as if it
appeared on your credit card.

621
00:27:06,250 --> 00:27:07,500
In fact, you're required

622
00:27:07,500 --> 00:27:09,740
to pay back the government loan first,

623
00:27:09,740 --> 00:27:10,640
through your taxes.

624
00:27:10,640 --> 00:27:12,750
The IRS is there to insist that you do,

625
00:27:12,750 --> 00:27:16,250
before you can even start to
pay down your credit card bill.

626
00:27:16,250 --> 00:27:18,670
That's what a trillion-dollar deficit is.

627
00:27:18,670 --> 00:27:20,220
Far more dangerous.

628
00:27:20,220 --> 00:27:23,340
I asked this question a few
years ago of a panel of experts

629
00:27:23,340 --> 00:27:26,010
that we had before the

630
00:27:26,010 --> 00:27:28,420
when can we expect a
sovereign debt crisis?

631
00:27:28,420 --> 00:27:29,870
A sovereign debt crisis

632
00:27:29,870 --> 00:27:32,530
is when a government
simply runs out of credit

633
00:27:32,530 --> 00:27:33,923
and nobody will loan it money.

634
00:27:33,923 --> 00:27:35,380
When I asked the experts,

635
00:27:35,380 --> 00:27:38,870
well, how long do we have
before sovereign debt crisis?

636
00:27:38,870 --> 00:27:41,490
And the answer was, well,
there's no way to predict that.

637
00:27:41,490 --> 00:27:43,710
It could be triggered by
any number of developments

638
00:27:43,710 --> 00:27:47,277
that are unforeseeable, but, he said,

639
00:27:47,277 --> 00:27:50,547
"Once you hit trillion-dollar
annual deficits,

640
00:27:50,547 --> 00:27:53,187
"you will have set the stage
for a sovereign debt crisis.

641
00:27:53,187 --> 00:27:57,340
"Things will become unstable
very quickly after that,"

642
00:27:57,340 --> 00:27:58,840
and that's two years from now.

643
00:28:01,270 --> 00:28:03,550
Four years after that

644
00:28:03,550 --> 00:28:07,890
our interest costs will exceed
what we're currently spending

645
00:28:07,890 --> 00:28:09,490
on our entire defense budget.

646
00:28:09,490 --> 00:28:10,420
Just the interest,

647
00:28:10,420 --> 00:28:14,180
just renting the money
that we've already spent

648
00:28:14,180 --> 00:28:16,270
will exceed what we're currently spending

649
00:28:16,270 --> 00:28:17,520
to defend our country

650
00:28:17,520 --> 00:28:19,630
through all of our military operations.

651
00:28:19,630 --> 00:28:22,470
About three years after
that Medicare collapses,

652
00:28:22,470 --> 00:28:25,080
and about six years after that
Social Security collapses,

653
00:28:25,080 --> 00:28:28,490
and the closer we get
to those tipping points,

654
00:28:28,490 --> 00:28:31,990
the more draconian are the choices

655
00:28:31,990 --> 00:28:34,620
that we're gonna have to try to save them,

656
00:28:34,620 --> 00:28:38,130
and as we approach a sovereign debt crisis

657
00:28:38,130 --> 00:28:41,860
we will see markets begin to
look at the federal government

658
00:28:41,860 --> 00:28:45,330
and say, you know, we're not
entirely sure you can pay back

659
00:28:45,330 --> 00:28:49,220
the now more than $20
trillion that you owe.

660
00:28:49,220 --> 00:28:52,110
- First of all, no one knows
exactly when bond markets

661
00:28:52,110 --> 00:28:55,012
are gonna decide this is not sustainable.

662
00:28:55,012 --> 00:28:56,243
The bond markets will tell us

663
00:28:56,243 --> 00:28:58,930
when those yields start going up a lot,

664
00:28:58,930 --> 00:29:01,583
sovereign debt yields, interest rates.

665
00:29:02,640 --> 00:29:03,490
There is feedback.

666
00:29:03,490 --> 00:29:04,710
What you don't wanna do

667
00:29:04,710 --> 00:29:07,870
is wait until the bond
markets blow the whistle,

668
00:29:07,870 --> 00:29:09,570
so I think what we have to say is,

669
00:29:09,570 --> 00:29:12,580
do we think the
debt-to-GDP is sustainable?

670
00:29:12,580 --> 00:29:16,020
By which I mean that if we
do our projections outward,

671
00:29:16,020 --> 00:29:18,723
that that ratio is not exploding,

672
00:29:19,570 --> 00:29:22,300
that it's somewhere near
our historical levels.

673
00:29:22,300 --> 00:29:24,830
I have a lot of concern,
because as I look at the number,

674
00:29:24,830 --> 00:29:26,130
and I don't think I'm alone,

675
00:29:26,130 --> 00:29:28,730
Congressional Budget Office,
other objective people

676
00:29:28,730 --> 00:29:33,270
see that debt-to-GDP
ratios are really climbing

677
00:29:33,270 --> 00:29:35,850
to levels that are unprecedented,

678
00:29:35,850 --> 00:29:37,380
with the exception of World War II,

679
00:29:37,380 --> 00:29:39,675
which was obviously a
different sort of story,

680
00:29:39,675 --> 00:29:42,150
and it's not cyclical.

681
00:29:42,150 --> 00:29:45,997
We're not paying our bills
on Medicare, Medicaid.

682
00:29:50,580 --> 00:29:55,580
- Whatever the current
people in Washington think

683
00:29:55,920 --> 00:29:59,030
is not relevant to what I'm talking about,

684
00:29:59,030 --> 00:30:01,263
because there's a reality coming at you,

685
00:30:02,370 --> 00:30:05,870
and the reality is going
to cause them to say,

686
00:30:05,870 --> 00:30:08,490
wait a minute, where do we get the money

687
00:30:08,490 --> 00:30:13,033
to spend it on infrastructure,
on military, and so on?

688
00:30:14,410 --> 00:30:17,820
The squeeze from the rising debt burden,

689
00:30:17,820 --> 00:30:19,343
combined with other things,

690
00:30:20,320 --> 00:30:23,840
is going to squeeze out
the things they want,

691
00:30:23,840 --> 00:30:26,660
so they're gonna have
to pay attention to it.

692
00:30:26,660 --> 00:30:28,740
In 1912

693
00:30:28,740 --> 00:30:32,950
Congress controlled 97%
of the Federal budget

694
00:30:32,950 --> 00:30:34,110
each year.

695
00:30:34,110 --> 00:30:35,800
The only thing that it didn't control

696
00:30:35,800 --> 00:30:37,720
was interest on the debt,

697
00:30:37,720 --> 00:30:39,990
and that was before the Federal Reserve,

698
00:30:39,990 --> 00:30:42,890
so we didn't have the ability
to manipulate interest rates.

699
00:30:42,890 --> 00:30:45,390
We had to pay real
market rates of interest.

700
00:30:45,390 --> 00:30:49,100
Today, rather than
controlling 97% of the budget,

701
00:30:49,100 --> 00:30:53,360
Congress controls about 30%
of the budget, and declining.

702
00:30:53,360 --> 00:30:54,870
Discretionary items

703
00:30:54,870 --> 00:30:57,400
are getting less and
less important over time,

704
00:30:57,400 --> 00:30:59,190
and more and more of the budget

705
00:30:59,190 --> 00:31:01,540
is going to non-discretionary items,

706
00:31:01,540 --> 00:31:03,900
which are very hard to cut back.

707
00:31:03,900 --> 00:31:06,570
Taking Medicare away from a poor person,

708
00:31:06,570 --> 00:31:08,870
from your grandmother,
those are hard reforms.

709
00:31:08,870 --> 00:31:12,080
That's not like taking away
a subsidy to an artist,

710
00:31:12,080 --> 00:31:14,720
or foreign aid, all of which
are tiny items anyways.

711
00:31:14,720 --> 00:31:16,630
Here you're talking about core,

712
00:31:16,630 --> 00:31:19,000
critical things that Americans depend on,

713
00:31:19,000 --> 00:31:22,630
and we don't seem to be
willing to pay the taxes

714
00:31:22,630 --> 00:31:26,510
to fulfill the promises that
we've made to each other,

715
00:31:26,510 --> 00:31:28,530
and especially to older
people and sick people.

716
00:31:28,530 --> 00:31:32,070
- The importance of the
debt has been obscured

717
00:31:32,070 --> 00:31:34,790
by the fact that interest
rates have been kept very low,

718
00:31:34,790 --> 00:31:37,893
practically zero, but now they're rising.

719
00:31:39,000 --> 00:31:40,973
So, we have a huge deficit,

720
00:31:42,310 --> 00:31:43,700
and the burden of the debt

721
00:31:43,700 --> 00:31:47,003
is now contributing
significantly to the deficit,

722
00:31:48,040 --> 00:31:52,140
and we have a process that's
under way, that's relentless.

723
00:31:52,140 --> 00:31:53,473
This is a reality,

724
00:31:54,490 --> 00:31:58,580
that the high deficit adds to the debt,

725
00:31:58,580 --> 00:32:01,400
so the debt is bigger,
interest rates are rising,

726
00:32:01,400 --> 00:32:04,210
so the burden of the debt is rising,

727
00:32:04,210 --> 00:32:08,113
and as it combines with
entitlement overspending,

728
00:32:09,010 --> 00:32:11,910
everything is gonna be
squeezed out of the budget.

729
00:32:11,910 --> 00:32:14,070
There won't be anything left.

730
00:32:14,070 --> 00:32:16,580
So, we have a crisis on our hands.

731
00:32:17,450 --> 00:32:21,940
- Every percentage point
that the interest rates rise,

732
00:32:21,940 --> 00:32:22,980
we end up paying

733
00:32:22,980 --> 00:32:27,060
another $200 billion a year

734
00:32:27,060 --> 00:32:28,140
just in interest costs.

735
00:32:28,140 --> 00:32:31,020
Now, every billion dollars we
throw around in Washington,

736
00:32:31,020 --> 00:32:34,330
that's about $8 from every
family in the country.

737
00:32:34,330 --> 00:32:35,300
When you hear about

738
00:32:35,300 --> 00:32:39,090
a $200 billion increase

739
00:32:39,090 --> 00:32:40,640
in our interest costs,

740
00:32:40,640 --> 00:32:42,350
that means that out of your taxes

741
00:32:42,350 --> 00:32:44,900
you'll be paying another $1,600

742
00:32:44,900 --> 00:32:46,870
to do absolutely nothing more productive

743
00:32:46,870 --> 00:32:49,320
than the rent money we've already spent,

744
00:32:49,320 --> 00:32:51,100
and then you reach a sovereign debt crisis

745
00:32:51,100 --> 00:32:53,630
where markets simply say,

746
00:32:53,630 --> 00:32:55,960
we don't think you're gonna
be able to pay us back.

747
00:32:55,960 --> 00:32:59,210
We would rather lend to somebody
a little more creditworthy,

748
00:32:59,210 --> 00:33:01,740
and that's when you hit the wall.

749
00:33:01,740 --> 00:33:03,660
That's when you become a Venezuela.

750
00:33:03,660 --> 00:33:05,010
That's when you become

751
00:33:05,010 --> 00:33:06,530
and go through the problems we're having

752
00:33:06,530 --> 00:33:10,136
right now in Puerto Rico,
and it's not far off.

753
00:33:17,250 --> 00:33:18,083
About four years ago

754
00:33:18,083 --> 00:33:19,720
I wrote a book called The Power of Zero.

755
00:33:19,720 --> 00:33:20,620
I self-published it.

756
00:33:20,620 --> 00:33:21,660
I threw it out on Amazon.

757
00:33:21,660 --> 00:33:22,610
I crossed my fingers.

758
00:33:22,610 --> 00:33:23,443
I hoped people would buy it,

759
00:33:23,443 --> 00:33:26,600
and to my utter disbelief
people actually bought it,

760
00:33:26,600 --> 00:33:30,070
and that was the beginning of
a movement and a revolution.

761
00:33:30,070 --> 00:33:32,440
The book is the book
version of the presentation,

762
00:33:32,440 --> 00:33:35,560
so I give the, it's literally
a whiteboard presentation

763
00:33:35,560 --> 00:33:36,430
where I get up on stage

764
00:33:36,430 --> 00:33:38,110
and I draw the presentation up there.

765
00:33:38,110 --> 00:33:40,300
In February 2018

766
00:33:40,300 --> 00:33:43,450
David McKnight met with
book agent Howard Yoon

767
00:33:43,450 --> 00:33:45,480
to explore how a major book publisher

768
00:33:45,480 --> 00:33:47,880
could help expand the
audience for his message.

769
00:33:47,880 --> 00:33:50,340
Having your book vetted, approved,

770
00:33:50,340 --> 00:33:52,130
and published by a mainstream publisher

771
00:33:52,130 --> 00:33:52,966
- versus doing your own--
- Oh yeah,

772
00:33:52,966 --> 00:33:54,380
it takes you into the
mainstream, for sure.

773
00:33:54,380 --> 00:33:57,820
So, here we are in New York
City with Penguin Random House

774
00:33:57,820 --> 00:33:59,310
to sign the final contract

775
00:33:59,310 --> 00:34:02,560
to have them publish the 2018
version of The Power of Zero.

776
00:34:02,560 --> 00:34:05,960
The road we are on is a perilous one

777
00:34:05,960 --> 00:34:08,767
that ultimately leads to the
bankrupting of our country,

778
00:34:08,767 --> 00:34:12,720
and history is shouting this warning at us

779
00:34:12,720 --> 00:34:15,290
that countries that bankrupt themselves

780
00:34:15,290 --> 00:34:17,130
aren't around very long.

781
00:34:17,130 --> 00:34:19,860
There's a reason why Admiral Mike Mullen,

782
00:34:19,860 --> 00:34:22,520
the Chairman of the Joint Chiefs of Staff,

783
00:34:22,520 --> 00:34:25,690
said that in his professional
military judgment,

784
00:34:25,690 --> 00:34:29,360
our greatest national security
threat was the national debt,

785
00:34:29,360 --> 00:34:32,190
because before you can
provide for the common defense

786
00:34:32,190 --> 00:34:34,430
you have to be able to pay for it,

787
00:34:34,430 --> 00:34:37,800
and the debt is beginning
to threaten our country's

788
00:34:37,800 --> 00:34:39,410
ability to do so.

789
00:34:39,410 --> 00:34:40,480
Yeah, that's absolutely right.

790
00:34:40,480 --> 00:34:43,410
We've had a number of our
national security leaders

791
00:34:43,410 --> 00:34:45,390
regularly report to
the members of Congress

792
00:34:45,390 --> 00:34:48,540
that the single biggest threat
to our national security

793
00:34:48,540 --> 00:34:51,660
is the national debt,
and that is unimaginable,

794
00:34:51,660 --> 00:34:53,220
that when we do all the things we do

795
00:34:53,220 --> 00:34:55,810
to build up a strong Defense Department,

796
00:34:55,810 --> 00:34:57,380
increase security around the world

797
00:34:57,380 --> 00:34:58,660
at a time when there's so many

798
00:34:58,660 --> 00:35:01,340
new and ever-growing global risks,

799
00:35:01,340 --> 00:35:04,600
we would undermine our
ability to protect ourselves

800
00:35:04,600 --> 00:35:06,583
by being economically so weak.

801
00:35:07,914 --> 00:35:11,070
- All right, 10-minute drive.

802
00:35:11,070 --> 00:35:11,930
Let's do it.

803
00:35:13,450 --> 00:35:17,400
these bonds that a lot of
foreign countries buy into,

804
00:35:17,400 --> 00:35:21,040
when they buy in and invest
in their bonds, guess what?

805
00:35:21,040 --> 00:35:23,130
There was a time where we owned America.

806
00:35:23,130 --> 00:35:25,930
Now they get to own a piece of America.

807
00:35:25,930 --> 00:35:28,420
America is slowly and gradually

808
00:35:28,420 --> 00:35:30,610
mortgaging itself away

809
00:35:30,610 --> 00:35:33,070
to foreign entities who don't care,

810
00:35:33,070 --> 00:35:34,330
who have the same interests,

811
00:35:34,330 --> 00:35:37,034
have the same care for
this nation that we have.

812
00:35:39,500 --> 00:35:41,500
When you think about China

813
00:35:41,500 --> 00:35:44,580
and how they have so much
of our debt right now,

814
00:35:44,580 --> 00:35:47,270
it's a scary notion that
at any point in time

815
00:35:47,270 --> 00:35:49,930
they could call the note on that.

816
00:35:49,930 --> 00:35:52,160
And speaking more broadly,

817
00:35:52,160 --> 00:35:54,920
just look at what's going
on in Venezuela right now.

818
00:35:54,920 --> 00:35:59,030
Look at what's happening
in Puerto Rico right now.

819
00:35:59,030 --> 00:36:01,280
That's because of a sovereign debt crisis,

820
00:36:01,280 --> 00:36:04,810
debt that got beyond the
control of the government,

821
00:36:04,810 --> 00:36:09,410
and the result is a
collapsing infrastructure,

822
00:36:09,410 --> 00:36:11,540
a collapsing economy,

823
00:36:11,540 --> 00:36:15,580
and a wholesale population
exodus fleeing those conditions.

824
00:36:15,580 --> 00:36:17,370
We have a lot of the Puerto Rico citizens

825
00:36:17,370 --> 00:36:18,520
are coming to the mainland

826
00:36:18,520 --> 00:36:21,000
because they're American citizens.

827
00:36:21,000 --> 00:36:24,540
We bankrupt our country, where
are all of us going to go?

828
00:36:24,540 --> 00:36:28,400
- When we have a debt
of trillions of dollars,

829
00:36:28,400 --> 00:36:30,550
I can tell you implicitly

830
00:36:30,550 --> 00:36:33,230
that it does harm to every major industry

831
00:36:33,230 --> 00:36:35,887
within our democracy.

832
00:36:42,401 --> 00:36:44,840
I think not-for-profit entities

833
00:36:44,840 --> 00:36:48,010
such as a Sutter and Intermountain Health,

834
00:36:48,010 --> 00:36:50,100
are facing some financial challenges

835
00:36:50,100 --> 00:36:53,010
that we've never seen before
in the history of health care.

836
00:36:53,010 --> 00:36:54,840
What's happening in our community is

837
00:36:54,840 --> 00:36:57,030
we have 18% commercial patients,

838
00:36:57,030 --> 00:37:00,410
and 82% that either
are Medicare, Medicaid,

839
00:37:00,410 --> 00:37:02,440
or have no insurance,

840
00:37:02,440 --> 00:37:04,630
and there's a huge payment disparity

841
00:37:04,630 --> 00:37:08,520
between what we're paid
by a governmental payer

842
00:37:08,520 --> 00:37:12,120
such as Medicare or Medicaid
versus a commercial.

843
00:37:12,120 --> 00:37:14,480
- When Brian's
hospital bills a dollar,

844
00:37:14,480 --> 00:37:17,300
it needs 22 cents to break even.

845
00:37:17,300 --> 00:37:19,370
It receives 50 to 60 cents

846
00:37:19,370 --> 00:37:22,010
from commercial insurance
or private payers,

847
00:37:22,010 --> 00:37:24,620
but only 18 cents from Medicare,

848
00:37:24,620 --> 00:37:27,240
and just 12 cents from Medicaid.

849
00:37:27,240 --> 00:37:30,240
Medicare does not pay our costs.

850
00:37:30,240 --> 00:37:31,380
Neither does Medicaid,

851
00:37:31,380 --> 00:37:33,373
and that trend continues to get worse,

852
00:37:34,244 --> 00:37:37,160
and this is what we have to
do is try to shift these costs

853
00:37:37,160 --> 00:37:38,930
onto the private payers.

854
00:37:38,930 --> 00:37:40,010
It's really a hidden tax

855
00:37:40,010 --> 00:37:42,730
on the people that are
paying for insurance,

856
00:37:42,730 --> 00:37:45,550
whether it's an employer or an individual.

857
00:37:45,550 --> 00:37:46,383
For example,

858
00:37:46,383 --> 00:37:50,850
this year they are planning
a 1% increase for hospitals.

859
00:37:50,850 --> 00:37:54,860
Our pharmacy costs increased
about 8% last year,

860
00:37:54,860 --> 00:37:58,270
and we're estimating about
an 8% increase this year.

861
00:37:58,270 --> 00:38:00,890
Labor expenses, supply expenses,

862
00:38:00,890 --> 00:38:03,060
are all going up two to 4%.

863
00:38:05,372 --> 00:38:08,370
If you look at it from a
hospital industry overall,

864
00:38:08,370 --> 00:38:12,200
need about a 11% increase
in Medicare payments

865
00:38:12,200 --> 00:38:13,480
just to break even.

866
00:38:13,480 --> 00:38:16,380
It's the same issue with
Medicaid at the state level.

867
00:38:16,380 --> 00:38:18,160
In fact, right now in Arizona

868
00:38:18,160 --> 00:38:20,630
we were getting paid literally 10% less

869
00:38:20,630 --> 00:38:24,430
than we were 10 years ago
for the same services.

870
00:38:24,430 --> 00:38:25,610
But simply put,

871
00:38:25,610 --> 00:38:29,570
when my fellow colleagues
back in Washington

872
00:38:29,570 --> 00:38:31,860
can just raise the debt ceiling

873
00:38:31,860 --> 00:38:34,580
and cut taxes irresponsibly

874
00:38:34,580 --> 00:38:37,670
without looking at the
totality of the picture,

875
00:38:37,670 --> 00:38:40,460
I think that, again, is a death spiral.

876
00:38:40,460 --> 00:38:44,310
- Non-profits are faced with
- what do we do?

877
00:38:44,310 --> 00:38:45,780
At our particular institution

878
00:38:45,780 --> 00:38:48,900
we offer services that we
lose significant money on.

879
00:38:48,900 --> 00:38:52,340
For example, we have a hospice home

880
00:38:52,340 --> 00:38:55,030
that cares for those
that are terminally ill.

881
00:38:55,030 --> 00:38:57,040
It loses significant amounts of money,

882
00:38:57,040 --> 00:38:59,560
but it's an important
service to our community.

883
00:38:59,560 --> 00:39:02,100
Ultimately we are gonna

884
00:39:02,100 --> 00:39:05,530
can we continue to do that
as a non-profit institution?

885
00:39:05,530 --> 00:39:08,940
Those are the decisions
we're gonna have to face

886
00:39:08,940 --> 00:39:12,110
if this current payment policy continues.

887
00:39:13,370 --> 00:39:15,830
how would you pay for
100 million diabetics

888
00:39:15,830 --> 00:39:16,760
in the United States?

889
00:39:16,760 --> 00:39:18,163
The answer is, we won't pay for them.

890
00:39:18,163 --> 00:39:19,920
It's that simple.

891
00:39:19,920 --> 00:39:21,630
They're just gonna be people dying.

892
00:39:21,630 --> 00:39:23,030
Dying in the streets.

893
00:39:23,030 --> 00:39:24,930
It's not possible

894
00:39:24,930 --> 00:39:27,830
to deal with the acute medicine

895
00:39:27,830 --> 00:39:30,060
that's gonna come out
of that many diabetics.

896
00:39:30,060 --> 00:39:33,723
Emergency rooms are already
overflowing with this problem.

897
00:39:34,930 --> 00:39:35,820
They won't tolerate,

898
00:39:35,820 --> 00:39:39,980
neither by budget, or space,
or number of physicians.

899
00:39:39,980 --> 00:39:41,040
It's just not gonna happen.

900
00:39:41,040 --> 00:39:43,610
It'll be easier to pretend
like there isn't a problem,

901
00:39:43,610 --> 00:39:45,570
to jimmy with the statistics

902
00:39:45,570 --> 00:39:47,590
and sweep the dead people under the rug,

903
00:39:47,590 --> 00:39:50,770
than it would be to continue
on the current path,

904
00:39:50,770 --> 00:39:53,630
so it's a little bleak.

905
00:39:53,630 --> 00:39:54,750
It's a little bleak.

906
00:39:54,750 --> 00:39:56,200
Not for CrossFitters, though.

907
00:39:57,470 --> 00:39:59,270
We are in a down, deathward spiral

908
00:40:00,420 --> 00:40:02,940
that if we don't take
control of immediately,

909
00:40:02,940 --> 00:40:04,620
our country will be in a position

910
00:40:04,620 --> 00:40:06,263
that it's never been before,

911
00:40:07,120 --> 00:40:09,560
with a debt that could really paralyze

912
00:40:09,560 --> 00:40:13,130
every single aspect of our great nation.

913
00:40:13,130 --> 00:40:16,520
- One solution to our
entitlement crisis is

914
00:40:16,520 --> 00:40:18,560
we can just print more money.

915
00:40:18,560 --> 00:40:21,450
The problem is money is
valuable because it's scarce,

916
00:40:21,450 --> 00:40:24,230
and the more you print of it
the less scarce it becomes.

917
00:40:24,230 --> 00:40:26,120
I subscribe to a coin magazine.

918
00:40:26,120 --> 00:40:27,450
In the back of that coin magazine

919
00:40:27,450 --> 00:40:30,780
you can buy a $100 trillion
bill from Zimbabwe,

920
00:40:30,780 --> 00:40:31,843
and it only costs $4,

921
00:40:32,860 --> 00:40:35,350
and that includes shipping
and handling from Zimbabwe.

922
00:40:35,350 --> 00:40:38,630
- Unfortunately, most
of our fiscal problem

923
00:40:38,630 --> 00:40:41,570
is in some sense a future
problem, not a past problem.

924
00:40:41,570 --> 00:40:45,240
It's not servicing the debt
that we've already accumulated.

925
00:40:45,240 --> 00:40:48,310
It's the debts that we
have yet to accumulate,

926
00:40:48,310 --> 00:40:50,890
and these benefits are, by their nature,

927
00:40:50,890 --> 00:40:52,730
indexed to the price level.

928
00:40:52,730 --> 00:40:55,260
Social Security benefits are indexed

929
00:40:55,260 --> 00:40:56,970
to the consumer price index,

930
00:40:56,970 --> 00:41:00,410
and when that price index
goes up, benefits go up,

931
00:41:00,410 --> 00:41:03,690
and so if we ran at a
high rate of inflation,

932
00:41:03,690 --> 00:41:05,510
Social Security benefits would keep up,

933
00:41:05,510 --> 00:41:08,400
and we really wouldn't
make any ground there.

934
00:41:08,400 --> 00:41:12,530
Likewise, Medicare benefits
are basically benefits in kind.

935
00:41:12,530 --> 00:41:15,210
That is, it entitles you the
right to go to the doctor,

936
00:41:15,210 --> 00:41:16,730
to go to the hospital.

937
00:41:16,730 --> 00:41:18,870
To the extent that prices in general rise

938
00:41:18,870 --> 00:41:21,930
because of monetary policy,

939
00:41:21,930 --> 00:41:24,560
that's gonna cause the
prices of doctors to rise,

940
00:41:24,560 --> 00:41:27,080
the prices of hospitals to rise,

941
00:41:27,080 --> 00:41:30,090
and that will mean the cost
of the Medicare program

942
00:41:30,090 --> 00:41:30,985
will rise.

943
00:41:30,985 --> 00:41:34,180
- There's one thing I do
in my role at Vanguard

944
00:41:34,180 --> 00:41:35,013
as an economist.

945
00:41:35,013 --> 00:41:37,103
One of my jobs is to forecast the future.

946
00:41:38,160 --> 00:41:39,430
There's one forecast

947
00:41:39,430 --> 00:41:42,350
that I'm the most confident
in in my entire career,

948
00:41:42,350 --> 00:41:44,750
and that will be that our longterm,

949
00:41:44,750 --> 00:41:48,183
50, 60, 70-year trajectory
of the U.S. debt,

950
00:41:48,183 --> 00:41:50,720
that that forecast will not be realized,

951
00:41:50,720 --> 00:41:53,240
in many ways because something
will happen before then

952
00:41:53,240 --> 00:41:55,260
to prevent that from actually occurring.

953
00:41:55,260 --> 00:41:56,950
It's just unsustainable.

954
00:41:56,950 --> 00:41:59,940
- What I worry about is
the debt stay so high,

955
00:41:59,940 --> 00:42:01,210
we make tiny little fixes,

956
00:42:01,210 --> 00:42:03,660
but never enough to really
get it under control,

957
00:42:03,660 --> 00:42:07,880
and as a result our
economy just muddles along.

958
00:42:07,880 --> 00:42:08,970
It's sluggish.

959
00:42:08,970 --> 00:42:11,020
It doesn't grow in a sustained way.

960
00:42:11,020 --> 00:42:12,980
Resources become constrained.

961
00:42:12,980 --> 00:42:15,560
That actually leads to
bigger political tensions.

962
00:42:15,560 --> 00:42:17,593
The continued kind of tension
we're feeling in this country,

963
00:42:17,593 --> 00:42:19,110
and the unraveling of people

964
00:42:19,110 --> 00:42:20,880
believing in the economic dream,

965
00:42:20,880 --> 00:42:24,050
and it's just a slow, slow spiral.

966
00:42:24,050 --> 00:42:25,120
Sometimes people refer to it

967
00:42:25,120 --> 00:42:26,800
as the frog in the boiling water,

968
00:42:26,800 --> 00:42:28,010
where they don't even notice

969
00:42:28,010 --> 00:42:30,210
that it's constantly
going up and up and up,

970
00:42:30,210 --> 00:42:32,330
and then they're in big trouble
and you can't reverse it.

971
00:42:32,330 --> 00:42:33,560
The Soviet Union,

972
00:42:33,560 --> 00:42:36,170
all the time I was growing
up and was a young man,

973
00:42:36,170 --> 00:42:38,650
was our major nemesis.

974
00:42:38,650 --> 00:42:42,040
It was the most powerful
military force on the planet

975
00:42:42,040 --> 00:42:43,350
next to ours.

976
00:42:43,350 --> 00:42:45,500
The Soviet Union doesn't exist today,

977
00:42:45,500 --> 00:42:48,320
and it wasn't because they
were defeated militarily.

978
00:42:48,320 --> 00:42:52,130
They defeated themselves
by bankrupting themselves,

979
00:42:52,130 --> 00:42:55,935
and that's the path that
our country is now on.

980
00:42:59,400 --> 00:43:01,820
The politicians have been really adept,

981
00:43:01,820 --> 00:43:06,150
for the last six decades,
really starting with Eisenhower,

982
00:43:06,150 --> 00:43:09,660
of borrowing money,
promising to pay it back,

983
00:43:09,660 --> 00:43:12,130
but keeping those
obligations off the books.

984
00:43:12,130 --> 00:43:14,810
What's an example of a debt
that's been kept off the books?

985
00:43:14,810 --> 00:43:17,610
Well, think about a young worker, Joe,

986
00:43:17,610 --> 00:43:20,920
who Uncle Sam comes to and
takes some money from Joe,

987
00:43:20,920 --> 00:43:24,190
and promises to give him
back money in the future.

988
00:43:24,190 --> 00:43:25,730
Let's suppose that Uncle Sam

989
00:43:25,730 --> 00:43:29,630
calls the money he takes from
Joe Social Security taxes,

990
00:43:29,630 --> 00:43:33,280
and the money he's going to
pay back to Joe in the future

991
00:43:33,280 --> 00:43:35,350
he calls transfer payments.

992
00:43:35,350 --> 00:43:37,770
So, he's in effect
borrowed this money now,

993
00:43:37,770 --> 00:43:39,440
promised to pay it back,

994
00:43:39,440 --> 00:43:41,515
but hasn't used the words borrowing

995
00:43:41,515 --> 00:43:44,770
and repayment of principal plus interest,

996
00:43:44,770 --> 00:43:48,803
so as a consequence, that
doesn't get put onto the books.

997
00:43:52,750 --> 00:43:54,800
So, it doesn't add to the deficit.

998
00:43:54,800 --> 00:43:57,170
It's an off-the-books liability.

999
00:43:59,170 --> 00:44:01,770
if you add together all the
debts that are off the books

1000
00:44:01,770 --> 00:44:03,970
to all the debts that are on the books,

1001
00:44:03,970 --> 00:44:06,610
you get a number that's much, much bigger,

1002
00:44:06,610 --> 00:44:09,040
and we economists call
this the fiscal gap,

1003
00:44:09,040 --> 00:44:11,160
so it's the present
value of all the outlays

1004
00:44:11,160 --> 00:44:13,080
minus the present value
of all the receipts.

1005
00:44:13,080 --> 00:44:16,750
The fiscal gap in the
U.S. is not $20 trillion,

1006
00:44:16,750 --> 00:44:19,833
which is the size of
the gross official debt

1007
00:44:19,833 --> 00:44:22,260
that is outstanding right now.

1008
00:44:22,260 --> 00:44:23,973
No, it's actually $200 trillion.

1009
00:44:24,870 --> 00:44:27,230
It's 10 times as big.

1010
00:44:27,230 --> 00:44:32,170
Our official debt-to-GDP ratio is 100%.

1011
00:44:32,170 --> 00:44:35,793
Our fiscal-gap-to-GDP ratio is 1,000%.

1012
00:44:38,653 --> 00:44:41,540
- I was on the Fiscal Wake-Up
Tour for a number of years

1013
00:44:41,540 --> 00:44:45,360
with Comptroller General,
at the time, David Walker,

1014
00:44:45,360 --> 00:44:48,140
along with folks from
the Brooking Institution.

1015
00:44:48,140 --> 00:44:50,510
I was at the Heritage Foundation,

1016
00:44:50,510 --> 00:44:52,150
and then from the non-partisan

1017
00:44:52,150 --> 00:44:55,360
or, I guess, bipartisan Concord Coalition.

1018
00:44:55,360 --> 00:44:57,220
People were absolutely shocked

1019
00:44:57,220 --> 00:44:59,570
at the financial condition of the country

1020
00:44:59,570 --> 00:45:02,510
and the unsustainability
of these programs.

1021
00:45:02,510 --> 00:45:04,650
They were angry,

1022
00:45:04,650 --> 00:45:07,440
and they also were largely concerned

1023
00:45:07,440 --> 00:45:09,460
not only about their own future,

1024
00:45:09,460 --> 00:45:12,810
but they were really concerned
about their grandkids.

1025
00:45:12,810 --> 00:45:16,540
- I've looked at this for many
years now, almost 30 years.

1026
00:45:16,540 --> 00:45:17,373
What we really need

1027
00:45:17,373 --> 00:45:19,940
is to come to grips
with what we're facing,

1028
00:45:19,940 --> 00:45:22,610
and that requires some
adults down in Washington.

1029
00:45:22,610 --> 00:45:24,680
Unfortunately we don't
have too many of those.

1030
00:45:24,680 --> 00:45:27,880
The $200 trillion fiscal gap that we owe

1031
00:45:27,880 --> 00:45:29,460
is not a bill that's gonna come due

1032
00:45:29,460 --> 00:45:31,960
in 50 years or 100 years.

1033
00:45:31,960 --> 00:45:33,950
It's a bill that's due today.

1034
00:45:33,950 --> 00:45:37,160
It's the U.S. government's
credit card bill,

1035
00:45:37,160 --> 00:45:41,640
and if you don't pay that balance off,

1036
00:45:41,640 --> 00:45:43,430
it's going to grow with interest,

1037
00:45:43,430 --> 00:45:47,460
so the fiscal gap is growing
at about six trillion a year.

1038
00:45:47,460 --> 00:45:49,230
That's our true deficit.

1039
00:45:49,230 --> 00:45:51,940
You might say, well, this
economist must be crazy.

1040
00:45:51,940 --> 00:45:54,520
We can't have a fiscal
gap that's that big.

1041
00:45:54,520 --> 00:45:55,890
Let me tell you some other people

1042
00:45:55,890 --> 00:45:58,690
who have endorsed fiscal-gap accounting.

1043
00:45:58,690 --> 00:46:02,310
If you go to a website
called theinformact.org,

1044
00:46:02,310 --> 00:46:04,220
and the Inform Act is a bill

1045
00:46:04,220 --> 00:46:06,450
to force our government agencies,

1046
00:46:06,450 --> 00:46:08,450
including the Congressional Budget Office,

1047
00:46:08,450 --> 00:46:10,570
to do fiscal-gap accounting,

1048
00:46:10,570 --> 00:46:12,260
as many other countries around the world

1049
00:46:12,260 --> 00:46:13,820
actually are now doing.

1050
00:46:13,820 --> 00:46:15,200
It never got passed.

1051
00:46:15,200 --> 00:46:18,208
Most politicians don't wanna
tell us what's going on.

1052
00:46:18,208 --> 00:46:21,640
theinformact.org will
show you endorsements

1053
00:46:21,640 --> 00:46:23,730
by thousands of economists.

1054
00:46:23,730 --> 00:46:26,820
Every college and university,
really, around the country,

1055
00:46:26,820 --> 00:46:28,900
almost all of them is represented

1056
00:46:28,900 --> 00:46:32,140
because you have several
thousand economists

1057
00:46:32,140 --> 00:46:32,973
who have endorsed this,

1058
00:46:32,973 --> 00:46:35,670
but in addition you have
20 Nobel Prize winners,

1059
00:46:35,670 --> 00:46:39,448
American Nobel Prize winners,
and there are not many more

1060
00:46:39,448 --> 00:46:42,690
American Nobel laureates
in economics than 20,

1061
00:46:42,690 --> 00:46:44,970
so we have almost the entire set

1062
00:46:44,970 --> 00:46:46,930
of American Nobel Prize
winners in economics

1063
00:46:46,930 --> 00:46:49,349
saying do the accounting this way.

1064
00:46:53,489 --> 00:46:56,230
I have unbelievable news for you today,

1065
00:46:56,230 --> 00:46:59,890
because I have David McKnight in studio.

1066
00:46:59,890 --> 00:47:02,690
- And as these folks
move out of the workforce

1067
00:47:02,690 --> 00:47:04,350
and onto the rolls of Social
Security and Medicare,

1068
00:47:04,350 --> 00:47:05,880
they stop putting money
into these programs,

1069
00:47:05,880 --> 00:47:07,260
they start taking money out,

1070
00:47:07,260 --> 00:47:09,610
and as they do take these dollars out

1071
00:47:09,610 --> 00:47:11,930
we start to approach this day
of reckoning for our country.

1072
00:47:11,930 --> 00:47:14,370
- What do
you see nine years from now?

1073
00:47:14,370 --> 00:47:17,430
Will that discussion resurface
then, and finally then?

1074
00:47:17,430 --> 00:47:19,310
Or is it gonna creep up a lot sooner?

1075
00:47:19,310 --> 00:47:21,890
We've got about nine or 10 years

1076
00:47:21,890 --> 00:47:24,120
to get our fiscal house in order.

1077
00:47:24,120 --> 00:47:26,470
If we don't dramatically increase revenue,

1078
00:47:26,470 --> 00:47:29,610
dramatically reduce the
promises that we've made

1079
00:47:29,610 --> 00:47:30,770
to all of these baby boomers,

1080
00:47:30,770 --> 00:47:34,340
or some combination of the
two, we face fiscal insolvency.

1081
00:47:34,340 --> 00:47:36,480
We have to start making
some tough decisions,

1082
00:47:36,480 --> 00:47:38,020
and it's a question of morality,

1083
00:47:38,020 --> 00:47:38,970
because what we're doing is,

1084
00:47:38,970 --> 00:47:41,810
any money that we borrow in the short term

1085
00:47:41,810 --> 00:47:45,350
is a increased tax on the back end.

1086
00:47:45,350 --> 00:47:47,580
Our fiscal situation is probably worse

1087
00:47:47,580 --> 00:47:49,860
than any developed country in the world.

1088
00:47:49,860 --> 00:47:50,890
We're worse than Japan.

1089
00:47:50,890 --> 00:47:53,460
We're probably far worse
than Greece at this point

1090
00:47:53,460 --> 00:47:57,440
in terms of our fiscal
gap as a share of GDP.

1091
00:47:57,440 --> 00:47:59,090
We're worse than Russia.

1092
00:47:59,090 --> 00:48:01,810
I think much worse than China.

1093
00:48:01,810 --> 00:48:03,880
Korea, which is aging rapidly,

1094
00:48:03,880 --> 00:48:05,880
I think we're in worse
shape than they are.

1095
00:48:05,880 --> 00:48:08,840
This is not something we're
gonna be able to get around

1096
00:48:08,840 --> 00:48:10,220
by printing money

1097
00:48:10,220 --> 00:48:13,990
and just expecting the rest
of the world to pay our bills.

1098
00:48:13,990 --> 00:48:15,170
It's not gonna happen.

1099
00:48:15,170 --> 00:48:17,630
It's gonna affect our ability to grow,

1100
00:48:17,630 --> 00:48:20,100
because if we have to have sky-high taxes

1101
00:48:20,100 --> 00:48:23,160
people's incentives to work
are gonna be much lower.

1102
00:48:23,160 --> 00:48:25,710
They're gonna peel off and
start going to other countries.

1103
00:48:25,710 --> 00:48:27,290
So in the long run,

1104
00:48:27,290 --> 00:48:30,640
we're gonna have to either cut spending,

1105
00:48:30,640 --> 00:48:33,770
that is to provide less services,

1106
00:48:33,770 --> 00:48:36,263
or we're gonna have to increase tax rates,

1107
00:48:37,280 --> 00:48:40,550
and the tax increases are significant.

1108
00:48:40,550 --> 00:48:42,880
What the generational accounts do is

1109
00:48:42,880 --> 00:48:46,610
they give us projections
about what these tax rates,

1110
00:48:46,610 --> 00:48:49,530
how much these tax rates
need to be increased,

1111
00:48:49,530 --> 00:48:51,220
and that informs the debate.

1112
00:48:51,220 --> 00:48:54,970
You've got over 2,000 top economists

1113
00:48:54,970 --> 00:48:56,210
around the country,

1114
00:48:56,210 --> 00:48:59,400
20 Nobel Prize winners,
people like George Shultz,

1115
00:48:59,400 --> 00:49:01,060
he had four cabinet positions.

1116
00:49:01,060 --> 00:49:03,490
So, I've struggled with these issues,

1117
00:49:03,490 --> 00:49:05,450
and I think the situation right now

1118
00:49:06,700 --> 00:49:08,520
is really dire.

1119
00:49:08,520 --> 00:49:10,120
But then you have the government

1120
00:49:10,120 --> 00:49:13,150
actively trying to hide the information,

1121
00:49:13,150 --> 00:49:16,110
and actively censoring
the studies that come out.

1122
00:49:16,110 --> 00:49:18,470
We've had a number of
different government agencies

1123
00:49:18,470 --> 00:49:21,180
I've been involved with or known about

1124
00:49:21,180 --> 00:49:23,200
have tried to do fiscal-gap accounting,

1125
00:49:23,200 --> 00:49:25,280
and it all gets censored
at the last minute.

1126
00:49:25,280 --> 00:49:27,020
It doesn't show up in
the president's budget,

1127
00:49:27,020 --> 00:49:31,270
and that was censored once
by Clinton and once by G.W.

1128
00:49:31,270 --> 00:49:33,800
I think most economists would agree

1129
00:49:33,800 --> 00:49:37,780
that actually solving the
debt trajectory is not hard.

1130
00:49:37,780 --> 00:49:39,080
Economically it's not hard.

1131
00:49:39,080 --> 00:49:41,500
It means some very important

1132
00:49:41,500 --> 00:49:44,420
and sensitive political choices,

1133
00:49:44,420 --> 00:49:45,670
which are not easy to solve,

1134
00:49:45,670 --> 00:49:49,440
but economically it is
not a hard solution.

1135
00:49:49,440 --> 00:49:53,920
Well, the areas that you have to look at

1136
00:49:53,920 --> 00:49:56,023
are very difficult politically,

1137
00:49:56,860 --> 00:50:01,710
but I think, from the strictly
analytical standpoint,

1138
00:50:01,710 --> 00:50:06,050
it's clear enough what to
do about Social Security

1139
00:50:06,050 --> 00:50:08,290
and the health care spending.

1140
00:50:08,290 --> 00:50:10,913
It's the health care spending
that's the big gusher.

1141
00:50:14,080 --> 00:50:15,330
It's ideology,

1142
00:50:15,330 --> 00:50:19,020
and that's one reason why
we're not solving our problems.

1143
00:50:19,020 --> 00:50:22,050
- Gridlock, of course,
is a major problem in DC,

1144
00:50:22,050 --> 00:50:23,670
but it always was,

1145
00:50:23,670 --> 00:50:27,920
from the time I moved
there in 1979 to present,

1146
00:50:27,920 --> 00:50:30,210
there's always been gridlock.

1147
00:50:30,210 --> 00:50:33,910
I think now, though, that it's
probably worse than I recall,

1148
00:50:33,910 --> 00:50:36,980
and really neither political party

1149
00:50:36,980 --> 00:50:39,010
has the monopoly on that.

1150
00:50:39,010 --> 00:50:40,660
I have been involved in both parties

1151
00:50:40,660 --> 00:50:42,510
at some point in time,

1152
00:50:42,510 --> 00:50:45,640
but I found that they were
dominated by extremists.

1153
00:50:45,640 --> 00:50:47,860
If I was willing to flatten the tax code

1154
00:50:47,860 --> 00:50:51,430
and take deductions away from
the wealthy to pay down debt,

1155
00:50:51,430 --> 00:50:54,690
would you reform entitlements
by extending the age

1156
00:50:54,690 --> 00:50:57,050
based on the fact we're all
living like Strom Thurmond?

1157
00:50:57,050 --> 00:50:58,150
Absolutely not.

1158
00:50:58,150 --> 00:50:59,300
- Not at a time when we have
- 'Kay, well,

1159
00:50:59,300 --> 00:51:00,461
- so much income--

1160
00:51:00,461 --> 00:51:02,359
- that was a moment of
bipartisanship that quickly passed.

1161
00:51:03,192 --> 00:51:04,700
We don't seem to have the ability

1162
00:51:04,700 --> 00:51:08,030
to get along and find common ground.

1163
00:51:09,760 --> 00:51:13,290
we're so polarized, and we
have people on both sides that,

1164
00:51:13,290 --> 00:51:15,630
if you're not, if you
don't see it exactly my way

1165
00:51:15,630 --> 00:51:18,730
you're not pure, you're
not part of the team.

1166
00:51:18,730 --> 00:51:21,130
They come into office with that ideology

1167
00:51:21,130 --> 00:51:24,800
because they are the puppets

1168
00:51:24,800 --> 00:51:26,440
of particular groups

1169
00:51:27,452 --> 00:51:28,300
that dominate

1170
00:51:30,660 --> 00:51:33,530
the party bases of both parties,

1171
00:51:33,530 --> 00:51:35,090
so when they get into office

1172
00:51:35,090 --> 00:51:37,170
they have to respond to those party bases

1173
00:51:37,170 --> 00:51:40,110
or else they're going to
be challenged in primaries

1174
00:51:40,110 --> 00:51:41,830
and lose their seats.

1175
00:51:41,830 --> 00:51:45,800
- Politicians have no incentive
to think about the future

1176
00:51:45,800 --> 00:51:48,640
unless they personally have
a deep commitment to it,

1177
00:51:48,640 --> 00:51:51,450
which not very many of
them do, unfortunately,

1178
00:51:51,450 --> 00:51:54,200
or unless voters discipline them to do it,

1179
00:51:54,200 --> 00:51:55,140
and very few voters

1180
00:51:55,140 --> 00:51:57,330
are thinking about such
long-range considerations,

1181
00:51:57,330 --> 00:51:59,060
even if they have children
and grandchildren,

1182
00:51:59,060 --> 00:52:01,010
and should care about things like that.

1183
00:52:01,010 --> 00:52:01,940
There was a study done

1184
00:52:01,940 --> 00:52:04,420
by Princeton and Northwestern University.

1185
00:52:04,420 --> 00:52:05,253
The study found

1186
00:52:05,253 --> 00:52:07,730
that a wealthy individual or corporation

1187
00:52:07,730 --> 00:52:10,980
had a 60% chance to drive a bill through

1188
00:52:10,980 --> 00:52:13,650
and a 100% chance to stop one,

1189
00:52:13,650 --> 00:52:15,550
compared to the general public,

1190
00:52:15,550 --> 00:52:20,340
which only had a 30%
success rate for or against.

1191
00:52:20,340 --> 00:52:22,620
I think what we've found,

1192
00:52:22,620 --> 00:52:25,053
and what people sensed already,

1193
00:52:26,070 --> 00:52:28,300
is, does their vote matter?

1194
00:52:28,300 --> 00:52:29,263
Does it count?

1195
00:52:30,720 --> 00:52:32,210
Not as much as we would like,

1196
00:52:32,210 --> 00:52:35,500
and certainly not as much as
the founding fathers intended.

1197
00:52:35,500 --> 00:52:36,440
I ran for president

1198
00:52:36,440 --> 00:52:40,120
because I see these
problems as an economist,

1199
00:52:40,120 --> 00:52:42,150
and I realized they're
not being addressed.

1200
00:52:42,150 --> 00:52:43,810
They're not even being discussed.

1201
00:52:43,810 --> 00:52:46,253
You have a fiscal gap of $200 trillion.

1202
00:52:47,590 --> 00:52:48,640
You have a Social Security system

1203
00:52:48,640 --> 00:52:50,770
that's underfunded by $34 trillion,

1204
00:52:50,770 --> 00:52:53,930
that you have a Medicare system

1205
00:52:53,930 --> 00:52:55,750
that's running out of money through time.

1206
00:52:55,750 --> 00:52:57,830
Medicaid is same story.

1207
00:52:57,830 --> 00:53:00,210
I love America.

1208
00:53:00,210 --> 00:53:03,570
America tells you to be
fiscally responsible,

1209
00:53:03,570 --> 00:53:05,053
financially responsible,

1210
00:53:06,060 --> 00:53:07,760
responsible in your choices,

1211
00:53:07,760 --> 00:53:10,180
but the government is not an example

1212
00:53:10,180 --> 00:53:11,900
of fiscal responsibility.

1213
00:53:11,900 --> 00:53:13,560
The truth is the federal government

1214
00:53:13,560 --> 00:53:15,940
has lost control of the budget.

1215
00:53:15,940 --> 00:53:17,647
If our fiscal gap is 200 trillion

1216
00:53:17,647 --> 00:53:20,630
and our GDP is 20 trillion,

1217
00:53:20,630 --> 00:53:22,480
that's a 10 to one ratio,

1218
00:53:22,480 --> 00:53:25,000
that means we'd have to work for 10 years,

1219
00:53:25,000 --> 00:53:26,587
consume nothing out of the GDP

1220
00:53:26,587 --> 00:53:29,550
out of all the output
that we make for 10 years,

1221
00:53:29,550 --> 00:53:31,160
starve for 10 years,

1222
00:53:31,160 --> 00:53:33,010
in order to have enough money

1223
00:53:33,010 --> 00:53:38,010
to pay all the bills that are coming due,

1224
00:53:38,030 --> 00:53:41,550
bills to the federal
government, to Uncle Sam,

1225
00:53:41,550 --> 00:53:44,563
for which Uncle Sam will not
have the tax revenue to pay.

1226
00:53:45,600 --> 00:53:48,363
- The government is an
example of the worst kind,

1227
00:53:49,320 --> 00:53:51,970
the worst kind of management of money.

1228
00:53:51,970 --> 00:53:53,160
Why?

1229
00:53:53,160 --> 00:53:54,523
'Cause it's not their hard-earned money.

1230
00:53:54,523 --> 00:53:56,640
They don't work, as the Bible tell you,

1231
00:53:56,640 --> 00:53:58,040
by the sweat of their brow.

1232
00:53:58,040 --> 00:54:01,820
They don't know what it's like
to work in the beating sun,

1233
00:54:01,820 --> 00:54:03,540
and the dead cold of winter.

1234
00:54:03,540 --> 00:54:06,140
No, all they get to do is,

1235
00:54:06,140 --> 00:54:08,410
from your hard-earned work,

1236
00:54:08,410 --> 00:54:11,240
your work ethic, your
discipline, your sacrifice,

1237
00:54:11,240 --> 00:54:13,010
money that you could have
more for your household,

1238
00:54:13,010 --> 00:54:15,730
for your kids to go to school,
more choices for yourself,

1239
00:54:15,730 --> 00:54:19,431
they take that money and they waste it.

1240
00:54:19,431 --> 00:54:21,790
It is amazing what we're paying for.

1241
00:54:21,790 --> 00:54:25,730
In 1912, the federal government

1242
00:54:25,730 --> 00:54:28,853
was only 2% of the economy.

1243
00:54:29,720 --> 00:54:32,040
Now it's 21% of the economy.

1244
00:54:32,040 --> 00:54:33,640
Stated differently, the federal government

1245
00:54:33,640 --> 00:54:38,180
is 10 1/2 times bigger
than it was in 1912.

1246
00:54:38,180 --> 00:54:39,903
- If you need something,
go to the government.

1247
00:54:39,903 --> 00:54:41,377
If you want something,
go to the government.

1248
00:54:41,377 --> 00:54:42,980
If you don't have enough,
go to the government.

1249
00:54:42,980 --> 00:54:45,860
you are the government.

1250
00:54:45,860 --> 00:54:47,780
It is your money.

1251
00:54:47,780 --> 00:54:49,950
In various states, what we see now

1252
00:54:49,950 --> 00:54:54,180
is that people are standing up
and saying, we want services.

1253
00:54:54,180 --> 00:54:56,770
Someone has to then raise the point

1254
00:54:56,770 --> 00:54:59,940
that if you want services you're
gonna have to pay for them.

1255
00:54:59,940 --> 00:55:04,110
- I'm a student, so I like
how you want free education,

1256
00:55:04,110 --> 00:55:06,938
but what is your plan to
possibly achieve this?

1257
00:55:06,938 --> 00:55:10,180
- So, the three core demands
of the National Day of Action

1258
00:55:10,180 --> 00:55:13,880
are free public college, a
cancellation of student debt,

1259
00:55:13,880 --> 00:55:16,000
and a $15-an-hour minimum wage

1260
00:55:16,000 --> 00:55:17,580
for people who work on the campus.

1261
00:55:17,580 --> 00:55:20,989
And how's that gonna be paid?

1262
00:55:20,989 --> 00:55:25,340
- Um, great question, uh,
I mean, you know, so--

1263
00:55:25,340 --> 00:55:27,310
But there sure is an honest discussion

1264
00:55:27,310 --> 00:55:28,210
that needs to be had,

1265
00:55:28,210 --> 00:55:29,840
and we haven't been having it at all,

1266
00:55:29,840 --> 00:55:32,530
with all sorts of promises
on all different sides

1267
00:55:32,530 --> 00:55:35,590
about how we can have everything
and the cost is nothing,

1268
00:55:35,590 --> 00:55:37,530
which just, I think if
people think about it,

1269
00:55:37,530 --> 00:55:39,930
would understand really can't be true.

1270
00:55:39,930 --> 00:55:43,160
I heard Senator Kirsten Gillibrand,

1271
00:55:43,160 --> 00:55:44,610
who wants to be president,

1272
00:55:44,610 --> 00:55:46,750
saying if she were to win the White House,

1273
00:55:46,750 --> 00:55:47,740
if she were president

1274
00:55:47,740 --> 00:55:51,240
she'd want the government to
guarantee everybody a job.

1275
00:55:51,240 --> 00:55:52,800
Everybody a job.

1276
00:55:52,800 --> 00:55:54,360
It is absolutely insane.

1277
00:55:54,360 --> 00:55:56,590
It is crazy to believe

1278
00:55:56,590 --> 00:55:59,735
that we have such loony
tune thinking in America.

1279
00:55:59,735 --> 00:56:02,004
- How many of you guys have
ever seen the Road Runner?

1280
00:56:02,004 --> 00:56:02,837
I know most of you guys

1281
00:56:02,837 --> 00:56:03,700
were weaned on the Road Runner, right?

1282
00:56:03,700 --> 00:56:05,913
Who is always trying to
kill the Road Runner?

1283
00:56:05,913 --> 00:56:07,423
- Coyote.
- Coyote, what's his name?

1284
00:56:07,423 --> 00:56:09,190
- Wile E.
- Wile E, 'kay,

1285
00:56:09,190 --> 00:56:11,090
so a couple of years
ago I was with my kids,

1286
00:56:11,090 --> 00:56:12,400
we were watching the Road Runner,

1287
00:56:12,400 --> 00:56:14,470
and in this particular episode

1288
00:56:14,470 --> 00:56:16,570
the Coyote was trying
to kill the Road Runner,

1289
00:56:16,570 --> 00:56:17,987
and he was building a
bomb with which to do so,

1290
00:56:17,987 --> 00:56:19,280
and what company makes his bombs?

1291
00:56:19,280 --> 00:56:20,690
- Acme.
- Acme, now we're cooking.

1292
00:56:20,690 --> 00:56:23,450
Okay, so he's building a bomb made by Acme

1293
00:56:23,450 --> 00:56:24,980
inside a shed that was also made by?

1294
00:56:24,980 --> 00:56:26,220
- Acme.
- Acme,

1295
00:56:26,220 --> 00:56:29,440
and he was so focused and
intent on finishing this bomb

1296
00:56:29,440 --> 00:56:30,273
that he didn't realize

1297
00:56:30,273 --> 00:56:34,170
that the Road Runner had pushed
his shed onto a train track.

1298
00:56:34,170 --> 00:56:35,920
Maybe you've seen the episode,

1299
00:56:35,920 --> 00:56:38,110
and he was so focused and
intent on finishing this bomb

1300
00:56:38,110 --> 00:56:41,120
that he also didn't realize
until the last possible moment

1301
00:56:41,120 --> 00:56:44,170
that there was a huge freight
train bearing down on him.

1302
00:56:44,170 --> 00:56:45,630
Gonna ask you a very important question,

1303
00:56:45,630 --> 00:56:47,410
most important question

1304
00:56:47,410 --> 00:56:50,230
if you found yourselves on a train track

1305
00:56:50,230 --> 00:56:52,380
with a huge freight train
bearing down on you,

1306
00:56:52,380 --> 00:56:54,036
what would you do?

1307
00:56:54,036 --> 00:56:55,020
You'd step off.

1308
00:56:55,020 --> 00:56:56,000
You'd get out of the way.

1309
00:56:56,000 --> 00:56:59,560
Coyote sees this huge freight
train bearing down on him,

1310
00:56:59,560 --> 00:57:01,610
and instead of jumping out
of the way, what does he do?

1311
00:57:01,610 --> 00:57:04,373
He simply pulls down the window shade,

1312
00:57:06,522 --> 00:57:08,060
thinking that the act of doing so

1313
00:57:08,060 --> 00:57:09,200
would make the problem go away.

1314
00:57:09,200 --> 00:57:10,850
Did the problem go away?

1315
00:57:10,850 --> 00:57:11,960
No, there's a huge explosion,

1316
00:57:11,960 --> 00:57:14,120
and does the Coyote ever really die?

1317
00:57:14,120 --> 00:57:15,030
No, it's frustrating, right?

1318
00:57:15,030 --> 00:57:17,610
But as the smoke and fire cleared away

1319
00:57:17,610 --> 00:57:19,500
you could see him sort of
dragging himself off screen,

1320
00:57:19,500 --> 00:57:21,140
very much the worse for wear.

1321
00:57:21,140 --> 00:57:22,990
Why did we gather here today in Charlotte

1322
00:57:22,990 --> 00:57:23,940
to talk about the Road Runner?

1323
00:57:23,940 --> 00:57:26,110
Well, as Americans,

1324
00:57:26,110 --> 00:57:29,220
who do most of our saving for retirement

1325
00:57:29,220 --> 00:57:32,900
in what we call tax-deferred
- vehicles like 401
- Ks and IRAs,

1326
00:57:32,900 --> 00:57:35,417
we have a very real freight
train that's bearing down on us,

1327
00:57:35,417 --> 00:57:38,973
and it's bearing down on us
in the form of higher taxes.

1328
00:57:40,050 --> 00:57:42,250
Higher taxes driven by debt.

1329
00:57:42,250 --> 00:57:44,130
I'm trying to get this message out.

1330
00:57:44,130 --> 00:57:46,020
I don't sell any financial products.

1331
00:57:46,020 --> 00:57:48,300
I don't work for any one company.

1332
00:57:48,300 --> 00:57:51,400
I'm driven by trying to
help as many people as I can

1333
00:57:51,400 --> 00:57:54,480
avoid this disaster that's
gonna come up in retirement.

1334
00:57:54,480 --> 00:57:56,750
When taxes go up and the market goes down,

1335
00:57:56,750 --> 00:57:58,160
what are these people gonna do

1336
00:57:58,160 --> 00:58:00,034
if they haven't planned ahead of time?

1337
00:58:04,703 --> 00:58:06,340
- Well, the reason I
like to take my message

1338
00:58:06,340 --> 00:58:08,120
directly to financial advisors

1339
00:58:08,120 --> 00:58:10,220
is because financial advisors are the ones

1340
00:58:10,220 --> 00:58:12,160
that can take the message
directly to their clients,

1341
00:58:12,160 --> 00:58:15,770
so if I speak to 50 financial advisors

1342
00:58:15,770 --> 00:58:18,040
in any given speaking engagement,

1343
00:58:18,040 --> 00:58:20,130
their sphere of influence might number

1344
00:58:20,130 --> 00:58:21,940
in the five to 10,000,

1345
00:58:21,940 --> 00:58:25,150
so it's just an efficient
and effective way

1346
00:58:25,150 --> 00:58:28,930
to deliver my message to
the 75 million baby boomers

1347
00:58:28,930 --> 00:58:29,853
who badly need it.

1348
00:58:34,740 --> 00:58:36,090
There's a couple of
things we can do about it.

1349
00:58:36,090 --> 00:58:38,330
We can pretend like the
problem doesn't really exist.

1350
00:58:38,330 --> 00:58:41,010
We could pretend like the math
to which David Walker refers

1351
00:58:41,010 --> 00:58:42,200
doesn't really add up,

1352
00:58:42,200 --> 00:58:43,370
but isn't that a little bit

1353
00:58:43,370 --> 00:58:45,120
like pulling down the window shade?

1354
00:58:46,230 --> 00:58:49,640
Or we can implement some strategies

1355
00:58:49,640 --> 00:58:50,590
with our clients,

1356
00:58:50,590 --> 00:58:52,223
starting this year,

1357
00:58:52,223 --> 00:58:55,120
that can help remove them
from the train tracks,

1358
00:58:55,120 --> 00:58:57,510
thereby insulating and buffering them

1359
00:58:57,510 --> 00:58:59,490
from the impact of higher taxes.

1360
00:58:59,490 --> 00:59:02,290
You are simply doing what
you'd always been told to do.

1361
00:59:02,290 --> 00:59:04,370
- Of course.
- You were told

1362
00:59:04,370 --> 00:59:06,300
- to plow your money into 401
- Ks and IRAs,

1363
00:59:06,300 --> 00:59:07,921
get the deduction today

1364
00:59:07,921 --> 00:59:09,773
'cause tax rates would likely
be lower in your retirement

1365
00:59:09,773 --> 00:59:10,780
than they were today.

1366
00:59:10,780 --> 00:59:12,170
Mathematically that makes sense,

1367
00:59:12,170 --> 00:59:14,647
and that may have even made
sense back in the '70s and '80s,

1368
00:59:14,647 --> 00:59:16,230
but guess what?

1369
00:59:16,230 --> 00:59:17,120
That's all different now.

1370
00:59:17,120 --> 00:59:18,730
We're $21 trillion in debt.

1371
00:59:18,730 --> 00:59:19,640
We gotta raise revenue.

1372
00:59:19,640 --> 00:59:21,240
Tax rates are gonna be
higher in the future

1373
00:59:21,240 --> 00:59:22,073
than they are today,

1374
00:59:22,073 --> 00:59:23,460
which means we've gotta completely change

1375
00:59:23,460 --> 00:59:25,433
how we think about saving for retirement.

1376
00:59:25,433 --> 00:59:27,280
Now, there's all sorts of
different investments out there,

1377
00:59:27,280 --> 00:59:28,113
but I'm here to tell you

1378
00:59:28,113 --> 00:59:29,720
that all of those different investments

1379
00:59:29,720 --> 00:59:33,740
basically fit into only
three types of accounts,

1380
00:59:33,740 --> 00:59:35,300
and today we're gonna
talk about these accounts

1381
00:59:35,300 --> 00:59:37,320
in terms of buckets of money.

1382
00:59:37,320 --> 00:59:40,380
- The first
bucket is the taxable bucket,

1383
00:59:40,380 --> 00:59:44,070
meaning every year as your
money grows you pay a tax.

1384
00:59:44,070 --> 00:59:46,770
- So, we're talking stocks,
bonds, mutual funds,

1385
00:59:46,770 --> 00:59:48,850
CDs, money markets, you name it.

1386
00:59:48,850 --> 00:59:50,780
You can have too much money in this bucket

1387
00:59:50,780 --> 00:59:53,000
from a tax efficiency perspective,

1388
00:59:53,000 --> 00:59:54,150
but you can have not enough

1389
00:59:54,150 --> 00:59:55,760
from an emergency fund perspective,

1390
00:59:55,760 --> 00:59:57,610
so what we're looking for in this bucket

1391
00:59:57,610 --> 00:59:59,600
is just the right amount,

1392
00:59:59,600 --> 01:00:02,270
and just the right amount
is about six months worth

1393
01:00:02,270 --> 01:00:04,330
of basic living expenses.

1394
01:00:04,330 --> 01:00:07,640
- The second bucket
is the tax-deferred bucket,

1395
01:00:07,640 --> 01:00:10,340
meaning you pay taxes at
the time of withdrawal.

1396
01:00:10,340 --> 01:00:12,480
- We're talking 401
- Ks and IRAs,

1397
01:00:12,480 --> 01:00:14,670
457s, SEPs, SIMPLEs.

1398
01:00:14,670 --> 01:00:17,510
- Well, qualified plans

1399
01:00:17,510 --> 01:00:21,220
they defer the tax and
the tax calculation.

1400
01:00:21,220 --> 01:00:24,210
Now, let that run past
your brain real slow.

1401
01:00:24,210 --> 01:00:26,740
The part you're interested
in as the customer

1402
01:00:26,740 --> 01:00:28,250
is deferring the tax.

1403
01:00:28,250 --> 01:00:29,690
I don't wanna pay the tax today.

1404
01:00:29,690 --> 01:00:31,660
Well, who does?

1405
01:00:31,660 --> 01:00:34,030
But the real question you
need to be asking yourself is,

1406
01:00:34,030 --> 01:00:37,300
what tax rate will I be
in when I take the money?

1407
01:00:37,300 --> 01:00:39,600
The government said defer.

1408
01:00:39,600 --> 01:00:42,680
I've got a different word
it's postpone.

1409
01:00:42,680 --> 01:00:45,410
Why didn't they come up
with tax postponement plans?

1410
01:00:45,410 --> 01:00:48,163
Everybody in America would
understand what that means.

1411
01:00:49,050 --> 01:00:51,697
- Is the government trying
to trick you right now,

1412
01:00:51,697 --> 01:00:54,400
and the answer is very simply yes.

1413
01:00:54,400 --> 01:00:57,730
Historically, taxes are as
low as they've ever been

1414
01:00:57,730 --> 01:00:59,740
in our country, historically.

1415
01:00:59,740 --> 01:01:03,130
Second, they tell you to
take a small amount of money

1416
01:01:03,130 --> 01:01:05,720
and get a small tax deduction on it,

1417
01:01:05,720 --> 01:01:07,380
and then they tell you to build up

1418
01:01:07,380 --> 01:01:10,590
this huge pile of tax-deferred money

1419
01:01:10,590 --> 01:01:12,410
out into the future

1420
01:01:12,410 --> 01:01:15,990
where they can come and
tax the bejeezers out of it

1421
01:01:15,990 --> 01:01:18,010
so they can get the
revenue they're gonna need

1422
01:01:18,010 --> 01:01:19,790
to pay for all of these things

1423
01:01:19,790 --> 01:01:22,250
that they haven't set aside money for.

1424
01:01:22,250 --> 01:01:24,170
People's retirement savings

1425
01:01:24,170 --> 01:01:27,010
are at risk of future higher taxes.

1426
01:01:27,010 --> 01:01:28,280
It's the deficits.

1427
01:01:28,280 --> 01:01:31,090
I mean, it doesn't take
a genius to realize

1428
01:01:31,090 --> 01:01:34,020
at some point tax rates are
gonna go through the roof,

1429
01:01:34,020 --> 01:01:37,670
and you don't wanna have your
money in taxable vehicles

1430
01:01:37,670 --> 01:01:39,430
when that happens.

1431
01:01:39,430 --> 01:01:42,780
- So, some people look at 401
- Ks

1432
01:01:42,780 --> 01:01:45,210
merely as a way

1433
01:01:45,210 --> 01:01:46,350
to save money in taxes.

1434
01:01:46,350 --> 01:01:48,290
They're not even thinking
about retirement.

1435
01:01:48,290 --> 01:01:50,710
But the real purpose
of a retirement account

1436
01:01:50,710 --> 01:01:53,640
is to maximize cash flow

1437
01:01:53,640 --> 01:01:54,890
at a period in your life

1438
01:01:54,890 --> 01:01:56,930
when you can least afford to pay taxes,

1439
01:01:56,930 --> 01:01:58,130
and that's during retirement.

1440
01:01:58,130 --> 01:01:59,010
You call me one day,

1441
01:01:59,010 --> 01:02:00,820
say, "Don, I'd like to borrow 10 grand."

1442
01:02:00,820 --> 01:02:02,370
I hand you the check.

1443
01:02:02,370 --> 01:02:03,860
You're gonna ask two questions.

1444
01:02:03,860 --> 01:02:04,870
The first one is gonna be,

1445
01:02:04,870 --> 01:02:07,287
what rate of interest
am I gonna charge you?

1446
01:02:07,287 --> 01:02:08,810
And the second's gonna be,

1447
01:02:08,810 --> 01:02:11,010
when do you have to have it paid back?

1448
01:02:11,010 --> 01:02:12,000
What if I said to you,

1449
01:02:12,000 --> 01:02:14,020
you know, I'm doing pretty well right now.

1450
01:02:14,020 --> 01:02:15,410
I don't need any money.

1451
01:02:15,410 --> 01:02:18,400
But there's gonna come a day
when I'm gonna need the money,

1452
01:02:18,400 --> 01:02:20,230
and when I know how much I need,

1453
01:02:20,230 --> 01:02:24,070
then I can calculate how
much interest to charge you

1454
01:02:24,070 --> 01:02:25,710
to get how much I need.

1455
01:02:25,710 --> 01:02:27,630
Would you cash that check?

1456
01:02:27,630 --> 01:02:29,110
Not in a million years,

1457
01:02:29,110 --> 01:02:30,040
but you're standing in line

1458
01:02:30,040 --> 01:02:31,610
to do that with the federal government,

1459
01:02:31,610 --> 01:02:35,520
who at this date is $21 trillion in debt.

1460
01:02:35,520 --> 01:02:38,550
- So, you could have a
million dollars in your IRA,

1461
01:02:38,550 --> 01:02:40,400
but unless you can accurately predict

1462
01:02:40,400 --> 01:02:41,800
what tax rates are gonna be,

1463
01:02:41,800 --> 01:02:43,530
and the year you take that money out

1464
01:02:43,530 --> 01:02:45,410
you don't really know
how much money you have,

1465
01:02:45,410 --> 01:02:47,380
and it's hard to plan for retirement

1466
01:02:47,380 --> 01:02:49,090
if you don't know how much money you have.

1467
01:02:49,090 --> 01:02:49,923
You gotta remember

1468
01:02:49,923 --> 01:02:52,660
that the IRS wants to tax
you on this money so badly

1469
01:02:52,660 --> 01:02:54,170
that at a certain point in time

1470
01:02:54,170 --> 01:02:55,890
they will force you to take the money out.

1471
01:02:55,890 --> 01:02:56,723
What age is that?

1472
01:02:56,723 --> 01:02:57,556
70 1/2.

1473
01:02:57,556 --> 01:02:59,370
They call it a required
minimum distribution,

1474
01:02:59,370 --> 01:03:01,140
and what happens if you
don't take the money out?

1475
01:03:01,140 --> 01:03:02,770
Say you're supposed to take out $10,000.

1476
01:03:02,770 --> 01:03:05,080
You chose not to or forgot to.

1477
01:03:05,080 --> 01:03:08,430
You will get a bill in
the mail for $5,000,

1478
01:03:08,430 --> 01:03:10,730
so that includes state
and federal income tax.

1479
01:03:11,670 --> 01:03:14,810
No, throw another 30% on the margin.

1480
01:03:14,810 --> 01:03:17,380
You just lost 80% of what
you were supposed to take out

1481
01:03:17,380 --> 01:03:18,213
but did not.

1482
01:03:18,213 --> 01:03:21,110
Is the IRS serious about
getting their money?

1483
01:03:21,110 --> 01:03:23,490
What happens if you
take out too much money

1484
01:03:23,490 --> 01:03:24,840
- from your IRAs and 401
- Ks?

1485
01:03:24,840 --> 01:03:28,460
The IRS keeps track of something
called provisional income.

1486
01:03:28,460 --> 01:03:31,630
Provisional income is the income
that the IRS keeps track of

1487
01:03:31,630 --> 01:03:34,880
to determine if they're going
to tax your Social Security.

1488
01:03:34,880 --> 01:03:36,830
What counts as provisional income?

1489
01:03:36,830 --> 01:03:39,010
Well, any 1099s out of your taxable bucket

1490
01:03:39,010 --> 01:03:40,340
count as provisional income.

1491
01:03:40,340 --> 01:03:43,490
Any distributions at all
from your tax-deferred bucket

1492
01:03:43,490 --> 01:03:44,930
count as provisional income,

1493
01:03:44,930 --> 01:03:47,680
and 1/2 of your Social Security

1494
01:03:47,680 --> 01:03:49,260
counts as provisional income,

1495
01:03:49,260 --> 01:03:50,430
and if, as a single person,

1496
01:03:50,430 --> 01:03:52,640
that adds up to greater than 34,000,

1497
01:03:52,640 --> 01:03:53,820
or if, as a married couple,

1498
01:03:53,820 --> 01:03:55,860
it adds up to greater than 44,000,

1499
01:03:55,860 --> 01:03:59,370
then up to 85% of your Social Security

1500
01:03:59,370 --> 01:04:03,080
becomes taxable to you at your
highest marginal tax bracket.

1501
01:04:03,080 --> 01:04:05,480
Why do I even bring this stuff up?

1502
01:04:05,480 --> 01:04:07,560
I bring it up because I've
done the math a hundred times

1503
01:04:07,560 --> 01:04:09,380
in a hundred different ways on
a hundred different clients,

1504
01:04:10,960 --> 01:04:14,720
I have concluded that when
your Social Security gets taxed

1505
01:04:14,720 --> 01:04:17,730
you run out of money five
to seven years faster

1506
01:04:17,730 --> 01:04:20,330
than people who do not have
their Social Security taxable,

1507
01:04:20,330 --> 01:04:23,870
because the act of compensating
for Social Security taxation

1508
01:04:23,870 --> 01:04:26,420
by drawing money out
- of your IRAs and 401
- Ks

1509
01:04:26,420 --> 01:04:29,840
forces you to spend down
all your other assets

1510
01:04:29,840 --> 01:04:31,630
that much faster.

1511
01:04:31,630 --> 01:04:33,090
I don't think anybody believes

1512
01:04:33,090 --> 01:04:36,980
that taxes are gonna get
lower the more years you live,

1513
01:04:36,980 --> 01:04:40,910
so by the time I'm 65, or
when I'm ready to retire,

1514
01:04:40,910 --> 01:04:43,183
I'm gonna be paying
more taxes at that time

1515
01:04:43,183 --> 01:04:45,070
than I ever will.

1516
01:04:45,070 --> 01:04:47,830
- The third bucket
is the tax-free bucket.

1517
01:04:47,830 --> 01:04:50,390
- Now, there's all sorts of
different investments out there

1518
01:04:50,390 --> 01:04:52,240
that masquerade as tax-free,

1519
01:04:52,240 --> 01:04:54,000
but I'm here to tell
you, to be truly tax-free

1520
01:04:54,000 --> 01:04:55,850
it's gotta qualify in two different ways.

1521
01:04:55,850 --> 01:04:58,160
First, it's gotta be really tax-free,

1522
01:04:58,160 --> 01:05:00,970
and when I say tax-free, I'm
talking free from federal tax,

1523
01:05:00,970 --> 01:05:02,400
free from state tax,

1524
01:05:02,400 --> 01:05:04,140
and free from capital gains tax.

1525
01:05:04,140 --> 01:05:05,660
The second thing I'm looking for

1526
01:05:05,660 --> 01:05:09,360
in a true tax-free investment
is no Social Security tax.

1527
01:05:09,360 --> 01:05:10,430
In other words,

1528
01:05:10,430 --> 01:05:13,380
when you take distributions
from a true tax-free investment,

1529
01:05:13,380 --> 01:05:15,520
it should not count as provisional income.

1530
01:05:15,520 --> 01:05:17,540
It should not count against the thresholds

1531
01:05:17,540 --> 01:05:19,913
which cause Social Security taxation.

1532
01:05:20,780 --> 01:05:21,784
So, people ask me,

1533
01:05:21,784 --> 01:05:24,610
how do we handle this
rising tax rate environment

1534
01:05:24,610 --> 01:05:25,610
that we're likely to see?

1535
01:05:25,610 --> 01:05:28,540
And I say, yes, these are
likely the lowest tax rates

1536
01:05:28,540 --> 01:05:30,220
you're ever gonna see for
the rest of your life,

1537
01:05:30,220 --> 01:05:32,680
so what I would encourage
people to do is, number one,

1538
01:05:32,680 --> 01:05:35,440
convert as many things as
they can to a Roth IRA.

1539
01:05:35,440 --> 01:05:36,940
- If you can get money out of your 401
- K,

1540
01:05:36,940 --> 01:05:39,570
convert that to a Roth,
your IRA to a Roth,

1541
01:05:39,570 --> 01:05:42,090
because you'll be able to
take that money out tax-free

1542
01:05:42,090 --> 01:05:42,923
in the future.

1543
01:05:42,923 --> 01:05:45,450
Yes, you're gonna have
to pay some taxes now,

1544
01:05:45,450 --> 01:05:47,840
but you'll get that money
out tax-free in the future.

1545
01:05:47,840 --> 01:05:50,220
- And when you take money
out of your Roth IRA

1546
01:05:50,220 --> 01:05:53,270
it does not count as provisional income.

1547
01:05:53,270 --> 01:05:55,400
It does not count against the thresholds

1548
01:05:55,400 --> 01:05:57,620
which cause Social Security taxation.

1549
01:05:57,620 --> 01:06:00,380
Roth IRAs are truly tax-free.

1550
01:06:00,380 --> 01:06:04,240
And to me, the two most obvious,

1551
01:06:04,240 --> 01:06:06,500
biggest benefits in the tax code

1552
01:06:06,500 --> 01:06:09,960
are those Roth IRAs and the tax exemption,

1553
01:06:09,960 --> 01:06:13,420
the income-tax exemption for
permanent life insurance.

1554
01:06:13,420 --> 01:06:14,950
So, when we talk about life insurance,

1555
01:06:14,950 --> 01:06:17,610
there's the minimum one can pay
for life insurance coverage,

1556
01:06:17,610 --> 01:06:20,040
and there's the maximum
premium one can pay.

1557
01:06:20,040 --> 01:06:22,770
Well, who determines the
minimum amount of coverage?

1558
01:06:22,770 --> 01:06:25,580
Well, the companies, the actuaries.

1559
01:06:25,580 --> 01:06:27,890
They have calculators,
and what they calculate

1560
01:06:27,890 --> 01:06:31,500
is how much can they make
and still sell this product?

1561
01:06:31,500 --> 01:06:32,960
And that is the low end.

1562
01:06:32,960 --> 01:06:34,570
What's the lowest premium

1563
01:06:34,570 --> 01:06:36,410
for the maximum amount of coverage?

1564
01:06:36,410 --> 01:06:37,750
Well, at the other end

1565
01:06:37,750 --> 01:06:39,790
there's the maximum amount of contribution

1566
01:06:39,790 --> 01:06:42,040
that one can put in a
life insurance policy,

1567
01:06:42,040 --> 01:06:44,570
and who determines that
besides you, the customer?

1568
01:06:44,570 --> 01:06:47,240
Well, it's the federal government.

1569
01:06:47,240 --> 01:06:50,800
The fact that the federal
government of the United States

1570
01:06:50,800 --> 01:06:54,080
is even remotely concerned
about how much money

1571
01:06:54,080 --> 01:06:57,163
someone would put in a life
insurance policy says what?

1572
01:06:58,050 --> 01:06:59,980
it must be good.

1573
01:06:59,980 --> 01:07:00,813
Why?

1574
01:07:00,813 --> 01:07:03,440
Because you can take that money
out in retirement tax-free.

1575
01:07:03,440 --> 01:07:05,950
It's one of the few tax-free ways

1576
01:07:05,950 --> 01:07:07,750
of taking money out in the future.

1577
01:07:07,750 --> 01:07:09,250
I'm a tax advisor.

1578
01:07:09,250 --> 01:07:13,240
I don't sell stocks, bonds,
funds, insurance, annuities,

1579
01:07:13,240 --> 01:07:14,420
none of that.

1580
01:07:14,420 --> 01:07:17,000
But as a tax advisor I have to tell you

1581
01:07:17,000 --> 01:07:20,000
the single biggest
benefit in the tax code,

1582
01:07:20,000 --> 01:07:23,650
and the most unused, is the tax exemption,

1583
01:07:23,650 --> 01:07:26,630
the income-tax exemption
for life insurance,

1584
01:07:26,630 --> 01:07:29,070
and people are not taking advantage of it.

1585
01:07:29,070 --> 01:07:31,420
The only way to truly insulate yourself

1586
01:07:31,420 --> 01:07:32,910
from the impact of rising taxes

1587
01:07:32,910 --> 01:07:34,530
is to get to the 0% tax bracket.

1588
01:07:34,530 --> 01:07:35,363
Why?

1589
01:07:35,363 --> 01:07:36,820
Because if you're in the 0% tax bracket,

1590
01:07:36,820 --> 01:07:40,330
and tax rates double, two
times zero is still zero.

1591
01:07:40,330 --> 01:07:44,310
- And moving money to tax-free
territory is the way to go.

1592
01:07:44,310 --> 01:07:47,230
I mean, you can't beat a 0% tax rate,

1593
01:07:47,230 --> 01:07:49,260
no matter what Congress does.

1594
01:07:49,260 --> 01:07:51,590
This is why it's so important

1595
01:07:51,590 --> 01:07:53,410
that we, as individuals,

1596
01:07:53,410 --> 01:07:56,160
take charge of our finances,

1597
01:07:56,160 --> 01:07:57,810
take charge of our future,

1598
01:07:57,810 --> 01:08:01,840
and find a way to create a
tax-free income for ourselves.

1599
01:08:01,840 --> 01:08:03,630
- People hear this message
for the first time,

1600
01:08:03,630 --> 01:08:05,940
the first thing that
comes to mind is that,

1601
01:08:05,940 --> 01:08:09,280
hey, I've been doing
this wrong my whole life,

1602
01:08:09,280 --> 01:08:11,180
and there's no way to undo it,

1603
01:08:11,180 --> 01:08:14,340
but the reality is, this is
actually the perfect time

1604
01:08:14,340 --> 01:08:16,020
in the history of our country

1605
01:08:16,020 --> 01:08:18,240
to start repositioning dollars

1606
01:08:18,240 --> 01:08:20,380
from tax-deferred to tax-free.

1607
01:08:20,380 --> 01:08:22,740
- Many times, when I do
seminars around the country,

1608
01:08:22,740 --> 01:08:23,930
people come up to me and said,

1609
01:08:23,930 --> 01:08:26,910
Ed, I saw you on TV on your
public television special,

1610
01:08:27,920 --> 01:08:30,920
I've had a financial advisor for years,

1611
01:08:30,920 --> 01:08:33,770
and I wasn't getting
this kind of information

1612
01:08:33,770 --> 01:08:36,730
from my current financial advisor.

1613
01:08:36,730 --> 01:08:40,140
- CEOs are taking advantage
of tax-free accounts,

1614
01:08:40,140 --> 01:08:42,240
and have been for quite some time.

1615
01:08:42,240 --> 01:08:45,570
- So, I think the biggest
lesson here is uncertainty.

1616
01:08:45,570 --> 01:08:48,110
If you don't put things
on a sustainable path,

1617
01:08:48,110 --> 01:08:49,640
we're not certain about
what the future is.

1618
01:08:49,640 --> 01:08:52,840
That makes it harder to
plan, in terms of retirement.

1619
01:08:52,840 --> 01:08:55,250
We also know that our Social
Security system isn't sound,

1620
01:08:55,250 --> 01:08:58,223
so that makes it harder to
figure out how much we need.

1621
01:08:59,090 --> 01:09:02,570
That leaves a lot of people
very confused, concerned,

1622
01:09:02,570 --> 01:09:05,800
and uncertain about what the
future holds, financially.

1623
01:09:05,800 --> 01:09:07,160
The goal is to, hopefully,

1624
01:09:07,160 --> 01:09:11,460
get that level of knowledge and behavior

1625
01:09:11,460 --> 01:09:13,910
filtering and trickling
down to the public,

1626
01:09:13,910 --> 01:09:15,810
but I think it's absolutely crucial.

1627
01:09:15,810 --> 01:09:18,570
- Right now we've got
75 million baby boomers

1628
01:09:18,570 --> 01:09:19,640
who are on the clock,

1629
01:09:19,640 --> 01:09:21,640
and every year that goes by

1630
01:09:21,640 --> 01:09:22,910
where they fail to take advantage

1631
01:09:22,910 --> 01:09:24,640
of these historically low tax rates

1632
01:09:24,640 --> 01:09:26,560
is potentially a year on the back end

1633
01:09:26,560 --> 01:09:28,340
where they may have to pay taxes

1634
01:09:28,340 --> 01:09:31,150
at the highest tax rates
they've seen in their lifetime.

1635
01:09:31,150 --> 01:09:34,950
So, here is the essence of
the Power of Zero paradigm.

1636
01:09:34,950 --> 01:09:36,970
In a rising-tax-rate environment,

1637
01:09:36,970 --> 01:09:40,130
there is a mathematically
perfect amount of money

1638
01:09:40,130 --> 01:09:42,920
to have in your taxable
and tax-deferred buckets.

1639
01:09:42,920 --> 01:09:44,850
Taxable bucket you wanna
have about six months worth

1640
01:09:44,850 --> 01:09:46,560
of basic living expenses.

1641
01:09:46,560 --> 01:09:47,410
Tax-deferred bucket,

1642
01:09:47,410 --> 01:09:51,630
you want your balance
- in your IRAs and 401
- Ks

1643
01:09:51,630 --> 01:09:54,380
to be low enough that when
the IRS starts forcing you

1644
01:09:54,380 --> 01:09:56,260
to take money out at age 70 1/2,

1645
01:09:56,260 --> 01:09:58,010
those required minimum distributions

1646
01:09:58,010 --> 01:10:01,143
are equal to or less than
your standard deduction.

1647
01:10:03,170 --> 01:10:05,700
Anything else above and
beyond those ideal balances

1648
01:10:05,700 --> 01:10:09,270
should be systematically
repositioned to tax-free,

1649
01:10:09,270 --> 01:10:10,110
little by little,

1650
01:10:10,110 --> 01:10:12,490
stretching the tax liability
out over a lot of years,

1651
01:10:12,490 --> 01:10:13,930
and hopefully getting all
the heavy lifting done

1652
01:10:13,930 --> 01:10:16,120
before January 1st, 2026.

1653
01:10:16,120 --> 01:10:19,400
- I think people of this
baby boom generation

1654
01:10:19,400 --> 01:10:21,700
and the tail end of it

1655
01:10:21,700 --> 01:10:24,860
have new tax strategies that
we've never seen before.

1656
01:10:24,860 --> 01:10:27,440
When tax rates are low, like right now,

1657
01:10:27,440 --> 01:10:29,130
it means they're on sale.

1658
01:10:29,130 --> 01:10:32,170
Remember, these taxes have to be paid.

1659
01:10:32,170 --> 01:10:34,290
It's not if, but when,

1660
01:10:34,290 --> 01:10:38,100
so if you have to actually
buy something like these taxes

1661
01:10:38,100 --> 01:10:39,560
to get to your money,

1662
01:10:39,560 --> 01:10:42,357
why not get them while they're on sale?

1663
01:10:48,100 --> 01:10:50,840
can you be in the 0% tax
bracket and be a good person?

1664
01:10:50,840 --> 01:10:53,720
And look, we're not suggesting
that people not pay taxes.

1665
01:10:53,720 --> 01:10:56,900
In fact, the price of getting
into the 0% tax bracket is

1666
01:10:56,900 --> 01:10:58,250
you gotta be willing to pay a tax.

1667
01:10:58,250 --> 01:11:00,910
We're simply suggesting
that when given the choice

1668
01:11:00,910 --> 01:11:04,000
between paying taxes at today's
historically low tax rates,

1669
01:11:04,000 --> 01:11:05,730
or postponing the payment of those taxes

1670
01:11:05,730 --> 01:11:07,740
till some point much
further down the road,

1671
01:11:07,740 --> 01:11:09,820
that you're probably better
off paying them today.

1672
01:11:09,820 --> 01:11:10,900
One thing we do know

1673
01:11:10,900 --> 01:11:14,020
is that during this time of
relative economic prosperity,

1674
01:11:14,020 --> 01:11:15,540
the economy's doing well,

1675
01:11:15,540 --> 01:11:17,740
we're the only nation

1676
01:11:17,740 --> 01:11:19,940
where our debt is continuing to grow

1677
01:11:19,940 --> 01:11:21,290
relative to the economy.

1678
01:11:21,290 --> 01:11:22,123
Other countries

1679
01:11:22,123 --> 01:11:24,320
are all getting their
fiscal houses in order,

1680
01:11:24,320 --> 01:11:26,800
which is what you'd wanna do
when the economy is strong.

1681
01:11:26,800 --> 01:11:28,030
The problem here is

1682
01:11:28,030 --> 01:11:31,240
you don't know where the
kind of invisible fence is,

1683
01:11:31,240 --> 01:11:32,810
when you hit a tipping point

1684
01:11:32,810 --> 01:11:35,610
and potentially some
kind of a fiscal crisis,

1685
01:11:35,610 --> 01:11:39,350
and yet the political leaders
seem intent on finding out

1686
01:11:39,350 --> 01:11:41,100
by continuing to bring our debt

1687
01:11:41,100 --> 01:11:44,160
into basically unprecedented territory.

1688
01:11:44,160 --> 01:11:46,620
- But you know, everyone
has their pork project.

1689
01:11:46,620 --> 01:11:48,400
They have their community center.

1690
01:11:48,400 --> 01:11:50,240
They have people they
wanna curry favor with

1691
01:11:50,240 --> 01:11:51,470
to make sure they get votes.

1692
01:11:51,470 --> 01:11:53,170
It's all about votes.

1693
01:11:53,170 --> 01:11:55,223
It's all about numbers.

1694
01:11:56,310 --> 01:11:58,070
It's not about you.

1695
01:11:58,070 --> 01:12:00,800
And listen, you think you're paying

1696
01:12:02,380 --> 01:12:04,430
astronomical taxes now.

1697
01:12:04,430 --> 01:12:06,420
We're not gonna get this under control

1698
01:12:06,420 --> 01:12:07,800
no matter how you cut it.

1699
01:12:07,800 --> 01:12:10,750
Your taxes may double,

1700
01:12:10,750 --> 01:12:12,710
triple, quadruple.

1701
01:12:12,710 --> 01:12:15,373
- What's too high for
the top personal rate?

1702
01:12:16,380 --> 01:12:17,290
It's not about a number.

1703
01:12:17,290 --> 01:12:19,430
That's what negotiations are all about.

1704
01:12:19,430 --> 01:12:20,263
It's that--

1705
01:12:20,263 --> 01:12:21,720
Is 50% obviously too high?

1706
01:12:21,720 --> 01:12:26,030
- Look, there was a time, in
a very prosperous America,

1707
01:12:26,030 --> 01:12:29,037
where the top marginal
rate was well above 50%.

1708
01:12:29,037 --> 01:12:30,070
Was 90%.

1709
01:12:30,070 --> 01:12:31,960
That's exactly right.

1710
01:12:31,960 --> 01:12:34,220
Why wouldn't America take a look at this

1711
01:12:34,220 --> 01:12:37,400
if they knew that they were
gonna have to pay a lot more

1712
01:12:37,400 --> 01:12:38,920
in taxes in the future?

1713
01:12:38,920 --> 01:12:42,300
Why wouldn't every American
wanna be in control

1714
01:12:42,300 --> 01:12:43,620
of their tax rates?

1715
01:12:43,620 --> 01:12:46,250
And that's the kind of information

1716
01:12:46,250 --> 01:12:49,220
that needs to be provided
to the American people

1717
01:12:49,220 --> 01:12:52,190
so that they know that
they can stay in control

1718
01:12:52,190 --> 01:12:55,370
of their financial and
their retirement futures.

1719
01:12:55,370 --> 01:12:56,620
All you need to do,

1720
01:12:56,620 --> 01:13:00,170
all you need to do is go to
these socialist countries,

1721
01:13:00,170 --> 01:13:01,490
'cause this is what we're becoming,

1722
01:13:01,490 --> 01:13:04,850
and just ask what they pay in taxes.

1723
01:13:04,850 --> 01:13:08,670
In some places 50 to 60% of
their money is paid in taxes.

1724
01:13:08,670 --> 01:13:11,440
I know that's almost unheard
of in the United States,

1725
01:13:12,550 --> 01:13:15,090
it's coming to a place in America soon.

1726
01:13:15,090 --> 01:13:16,410
You know what that place is?

1727
01:13:16,410 --> 01:13:19,943
Your wallet, your pocketbook,
your hard-earned money,

1728
01:13:19,943 --> 01:13:22,020
they're coming from you,

1729
01:13:22,020 --> 01:13:23,880
and unless we

1730
01:13:24,960 --> 01:13:27,300
awaken a sleeping giant,

1731
01:13:27,300 --> 01:13:29,040
which is the American people,

1732
01:13:29,040 --> 01:13:31,890
and we lead these scoundrels in Congress,

1733
01:13:31,890 --> 01:13:34,240
Republicans and Democrats, independents,

1734
01:13:34,240 --> 01:13:35,080
whatever they call themselves,

1735
01:13:35,080 --> 01:13:37,460
unless we tell them, respect our money,

1736
01:13:37,460 --> 01:13:40,350
because I can't spend
more than I can earn.

1737
01:13:40,350 --> 01:13:42,470
I can't live off credit.

1738
01:13:42,470 --> 01:13:44,130
I can't live off debt.

1739
01:13:44,130 --> 01:13:45,870
I can't live of that interest rate.

1740
01:13:45,870 --> 01:13:47,080
It will destroy me.

1741
01:13:47,080 --> 01:13:48,590
It will destroy my way of life,

1742
01:13:48,590 --> 01:13:49,840
and my children, my grandchildren,

1743
01:13:49,840 --> 01:13:52,070
and generations to come
will have no future.

1744
01:13:52,070 --> 01:13:54,140
It will be destroyed in my lifetime.

1745
01:13:54,140 --> 01:13:55,230
We're not having it.

1746
01:13:55,230 --> 01:13:56,217
We're not gonna stand for it.

1747
01:13:56,217 --> 01:13:58,580
You've gotta become fiscally responsible.

1748
01:13:58,580 --> 01:14:00,040
You've gotta lower the debt.

1749
01:14:00,040 --> 01:14:02,510
You gotta stop paying for
programs you cannot afford,

1750
01:14:02,510 --> 01:14:04,660
and we've gotta wean ourself off this.

1751
01:14:04,660 --> 01:14:05,850
The time is now.

1752
01:14:05,850 --> 01:14:08,330
We must start this movement today.

1753
01:14:08,330 --> 01:14:10,050
While these other marches are going on

1754
01:14:10,050 --> 01:14:11,160
throughout the United States,

1755
01:14:11,160 --> 01:14:12,710
what you need to be marching for

1756
01:14:12,710 --> 01:14:14,360
is the security of your future

1757
01:14:14,360 --> 01:14:16,630
for your children and generations to come.

1758
01:14:16,630 --> 01:14:19,420
Stop this overspending where
we don't have the money.

1759
01:14:19,420 --> 01:14:21,763
Stop this nonsense and stop it now.