Peter Peterson Spends $1 Billion to Balance America's Budget
Pete Peterson is spending $1 billion to convince the country it needs to tighten its belt. Benjamin Sarlin talks to the philanthropist, his detractors, and Warren Buffett about a very expensive plan to balance America’s budget.
Pete Peterson has a plan to save America, and a billion dollars to advertise it.
Flush with cash after the Blackstone Group he founded went public in 2007, Peterson decided to devote the bulk of his newfound fortune to getting America's fiscal house in order. To that end, the Peter G. Peterson Foundation has spent tens of millions of dollars doling out grants to fund think tanks, nonprofits, and even a feature film, IOUSA, as part of an effort to persuade the public that the country needs major sacrifices to avert a debt crisis.
“Many Republicans have what I call a ‘tax-cut syndrome’ where they have never seen a tax cut they didn’t really like and didn’t see a tax increase they didn’t hate and do everything they could to block.”
A child of the Depression, Peterson’s experience enduring the economic collapse in small-town Nebraska is central to his worldview. He cites the thrifty values of his father, a Greek immigrant, as the inspiration for his advocacy for their national equivalent.
"His whole theory was we should keep a car more years than most people, that my bicycle after seven years was still good enough, a whole bunch of decisions where it was important to save for the future," he said. After Blackstone was sold, "the idea that I'd go somewhere and play golf every day didn't appeal to me at all and I decided therefore that I should remember my father’s model and do something that involved investing in the future."
But the deficit is a political buzz-saw in Washington, and Peterson's plans have attracted intense criticism, especially on the left. Critics allege that Peterson's talk of deficit reduction is a Trojan Horse for massive entitlement cuts, especially to Social Security, where Peterson supports raising the retirement age and means-testing benefits. To The Nation's William Greider, Peterson’s advocacy is "propaganda" designed to spread "falsehoods" about a phony entitlement disaster. To Dean Baker, head of the Center for Economic Policy Research, he's a " granny basher." To RJ Eskow of the Campaign for America's Future, his plan is " The Fountainhead meets Death Race 2000."
"Peterson money is everywhere," said Eric Kingson, co-director of Social Security Works, which opposes cuts to the program. "They've managed to insinuate themselves as centrists when what we have in my mind is a really far-out anti-government conservative perspective."
Many liberals are particularly concerned with Peterson's influence on President Obama's deficit commission, a bipartisan group chaired by former Clinton Chief of Staff Erskine Bowles and retired Republican Senator Alan Simpson. In the run-up to its creation, a news startup funded by Peterson, the Fiscal Times, caused an uproar when a piece by its reporters on growing support for the Peterson plan ran in The Washington Post without mentioning its source’s funding.
Critics also point to a Peterson-funded fiscal summit in April featuring Simpson and Bowles as evidence that the jury is rigged in favor of the foundation's preferred cuts. Recently, a national discussion group organized by the Peterson-funded America Speaks sparked fears that it would turn into an infomercial for slashing benefits, and The Huffington Post pounced after the group corrected survey results from the event to show less support for raising the retirement age than their initial claim indicated.
Peterson dismisses as “non-credible” claims that his advocacy work has tainted the commission.
"I laughed when you said we have this kind of influence," he said. "I've known Alan Simpson and Erskine Bowles and they're two of the most independent people I've ever known in my life and the thought we could somehow bend their views I find really beyond my capacity to believe."
• Check out the Beltway Beast blogOn an ideological level, caricatures of Peterson as Grover Norquist-lite do not stand up to scrutiny. Peterson accurately noted to the Beast that he includes many dissenting views from the right and left at his events. The Fiscal Summit, for example, featured President Clinton and the chairmen of major progressive think tanks, the Center for American Progress, the Center on Budget and Policy Priorities, and the Economic Policy Institute. And the America Speaks discussion group, despite its embarrassing correction, ended up finding participants in favor of protecting benefits and taxing the rich.
Peterson’s emphasis on entitlement cuts rankles progressives, but many of his recommendations for closing the budget gap would be perfectly at home in a Democratic administration. He favors a carbon tax to raise revenue and combat climate change, and advocates cuts to defense spending. Much like Obama, he identifies growing health-care costs as a bigger driver of red ink than Social Security and his proposed solution, weaning doctors off of a fee-for-service system, is in line with the ideas of Democratic wonks like Atul Gawande. He supports running up the short-term deficit to overcome the recession, including extending unemployment benefits. He begins most of his speeches with an attack on Republicans' zealous obsession with tax cuts—a trend he's been pushing against since the 1980s, when he decried Ronald Reagan's supply-side economics.
"Many Republicans have what I call a 'tax cut syndrome' where they have never seen a tax cut they didn't really like and didn't see a tax increase they didn't hate and do everything they could to block," he said. "The Democrats have many people who have what you might call an 'entitlement syndrome,' that somehow we're all entitled to this benefit or that benefit whether we are in need or low-income or not."
Republican aversion to tax increases may indeed be the biggest obstacle to the deficit commission's—and Peterson's—hopes of reaching a bipartisan agreement. Many GOP leaders say that tax cuts pay for themselves, a notion that Peterson and mainstream economists strongly reject. With Republicans fighting to keep President Bush's tax cuts for the wealthiest Americans intact, Peterson insisted that their expiration was healthy for the economy.
"The idea... that it would be very damaging to the economy if taxes were increased somewhat on the well-off, I have great trouble with," he said, "not only in terms of the economic effects, but it's my strong view that we have to combine fiscal responsibility with social justice."
Social justice? The phrase that has Glenn Beck running for the hills? Peterson isn’t exactly Robin Hood, and has justifiably taken heat for his opposition to closing corporate tax loopholes and raising taxes on hedge funds. Nonetheless, he volunteered to The Daily Beast that the rich would have to pay higher taxes in order to reduce income inequality. Such talk is heresy in Republican circles.
"I remind you that we have a case study in the 1990s, where taxes on people like me, my marginal taxes, were increased and combined with spending caps and 'pay as you go' rules, we had one of the great decades of our history and ended up with a budget surplus," Peterson said. "This is what I mean by ‘everything on the table’: Those of us who are fortunate to be well-off should accept the idea that our taxes will increase."
With the Republican Party overtaken by militant anti-tax sentiment and an unprecedented zeal for obstructionism, it’s difficult to imagine many of Peterson’s proposals being enacted. President Obama’s favored plan, an idea endorsed by Peterson, was to make the deficit commission more powerful, with the ability to force tough votes in the Senate and House on cuts and tax increases. But, in a vivid illustration of the partisanship the commission faces, a number of Republican senators who previously co-sponsored a bill to do just that switched their votes in order to deprive the White House of a political victory. Obama created a weaker presidential panel instead, which Peterson supports as “better than nothing.”
"I don't think I've ever heard of anyone doing that before," Peterson said of the Republican flip-flop. "It shows you how political the situation is."
Warren Buffett, a friend of Peterson's who is featured in his documentary IOUSA, described Peterson and the deficit commission's work as a “worthy cause,” but one that was "thankless and unbelievably tough" in the current political environment.
"It is the real conundrum of a democratic society, that when you in effect have a printing press existing with the government and you have people who are understandably involved in the process of determining how you use that printing press facing reelection every two years, it puts a lot of strains on making the right decisions," Buffett said in an interview with The Daily Beast. "It's a real tension in society. We've handled it pretty well for a couple of hundred years, but the problem has not gotten easier in the last few."
For Peterson, the only hope for progress is calm bipartisanship with no sudden movements. He likens the standoff to what he calls the “turkey-shoot phenomenon.” Just as turkeys who lift their heads during a hunt are immediately shot, any lawmaker who unilaterally comes forward with substantive cuts or tax hikes faces a political pile-on.
"The solution to our extraordinary long-term fiscal debt and unsustainability requires shared sacrifice,” he said, “and shared sacrifice these days is not only politically incorrect, but it's perceived as being politically terminal."
Benjamin Sarlin is Washington correspondent for The Daily Beast. He previously covered New York City politics for The New York Sun and has worked for talkingpointsmemo.com.