Aghast at all the red ink
Do deficits matter? Not to Dick Cheney, apparently. Former Treasury Secretary Paul O'Neill says that is what the vice president told him in pointing out the economy's success during the deficit-laden Reagan years. But current Treasury Secretary John Snow has offered the opinion that having the government outspend its income does matter.
And if you ask Pete Peterson the same question, the answer is unequivocally affirmative. In fact, Peterson (who held the post of commerce secretary in the Nixon administration) is touring the country touting his new book, Running on Empty , telling just about anyone who will listen that deficits do matter--and why . He's finding quite an audience: The book was among the top 20 bestselling nonfiction offerings in late August. "I used to joke that my books were worst-sellers," he says.
Peterson, who warned in 1999 of the coming economic and social pressures of the aging of the American population in Gray Dawn, brings impressive credentials to the discussion of where the U.S. economy is headed. A former member of the boards of such august companies as Sony, 3M, and RCA, Peterson is chairman and cofounder of the Blackstone Group, a private capital firm that started in 1985 with $400,000 and now has combined corporate and real-estate holdings worth about $27 billion. He is also a former chief executive officer of Lehman Brothers and Bell & Howell Corp. "I've known Pete for a very long time," says former New Hampshire Sen. Warren Rudman, who is a cofounder of the antideficit Concord Coalition with Peterson. "He's been sounding the alarm for a long time that the light at the end of the tunnel is an oncoming train."
Peterson's affinity for public-policy debates is some three decades old. Aside from running the Commerce Department in the early 1970s, he has served on numerous commissions and was a member of the 1994 Bipartisan Commission on Entitlement and Tax Reform and a founder in 1982 of the Bipartisan Budget Appeal. But in his new book, it is quite apparent Peterson finds a lack of bipartisanship in the current economic debate. He faults his Republican colleagues for being spendthrifts and tax-cut addicts, while lambasting the Democrats for not having met an entitlement they don't like.
Future stakes. Yet he sees a need for politicians in Washington to rise above their own petty self-interest--namely, getting re-elected--and listen to a higher calling. He cites the German philosopher Dietrich Bonhoeffer, who said "the ultimate test of a moral society is the kind of world that it leaves to its children." At 78, with five children and nine grandchildren, Peterson is hoping his book will spur others to meet that test.
Peterson presents the numbers starkly: The federal government has gone from a 10-year projected surplus of $5.6 trillion when George W. Bush took office to an estimated debt of $6 trillion, if all of Bush's current tax cuts are made permanent. "That means deficits averaging $600 billion a year," Peterson writes, for those who have trouble with arithmetic.
He warns of a future in which an aging population will increasingly have to choose between finding the money to care for its elder citizens and having enough to meet future commitments to its younger ones. Add in the growing cost of protecting a world now facing threats such as terrorism, and it is easy to see why Peterson is so exercised.
Peterson's prescription is relatively simple to grasp but unfortunately difficult to employ. The brakes will have to be applied to the generosity of benefits such as Social Security, a point Federal Reserve Chairman Alan Greenspan recently reiterated. Republican fervor for tax-cutting will have to be stymied. The nation will have to save more, perhaps even be forced to put money aside. Caps will have to be placed on the total cost of Medicare. And the mean spirits that dominate politics will have to be held at bay. It's a tall order in the age of the TV sound bite. But in Peterson's mind, it's one that will have to be met if the country wishes to be considered a moral society.
This story appears in the September 13, 2004 print edition of U.S. News & World Report.
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