Buying deficit reduction

In a Bloomburg article this morning, Peterson’s $1 Billion Investment Shows Returns as Deficit Concerns Mount, reporters Max Berley and Brian Faler take a look at Wall Street billionaire Peter G. Peterson’s largely successful attempt to influence the discussion around the deficit, Social Security, and other social programs.

Peterson has committed $1 billion of the fortune he made as co-founder of the New York-based private-equity firm Blackstone Group LP to his personal crusade: raising the alarm about the $13 trillion national debt, Bloomberg Businessweek reports in its July 5 issue.

He is paying the bills at a foundation that bears his name, supports a network of like-minded advocacy groups, backs The Fiscal Times, an online newspaper, formed a commission of experts, and organizes conferences with marquee guests such as former President Bill Clinton. The crusade appears to be in sync with the concerns of most voters, with a June 4 Gallup poll showing that the federal debt and terrorism were tied for first place (at 40 percent each) as the biggest threats to Americans’ future well-being.

It may be that fears about the future damage of the federal debt do worry Americans. However, Peterson’s prescription–cut Social Security benefits, Medicare, and Medicaid–may not receive the same level agreement.

His fortune also was the major funder of the America Speaks national town meeting, Our Budget, Our Economy, last Saturday, which I attended.

Interestingly enough, while Beltway officials and pundits may be falling for the Peterson rhetoric around cutting priorities, the general public seems less gullible. Yesterday, Tom Frank, in his Op-Ed, Avoiding the Austerity Trap: Deficit reduction is an unhealthy obsession in the Wall Street Journal reported the results of the town meetings:

The event took place as scheduled last Saturday, with thousands of citizens meeting in different cities. They duly absorbed a booklet alerting them to the danger of deficits. They deliberated. And then something funny happened on the way to the consensus.

According to a preliminary compilation of results, participants supported “an extra 5% tax” on incomes of greater than $1 million per year (by 68%) and an increase in the corporate income tax rate (59%). They thought a “carbon tax” was a good idea (64%) as well as a “securities transactions tax” (61%). On Social Security, austerity was nowhere in sight as 85% backed raising the limit on taxable income, and only a miserable 27% thought that we should “create personal savings accounts.” Majorities favored cutting defense spending and expressed support for further recovery measures even if they increase the deficit.

These liberal results have been brought to you in part by a distinctly conservative foundation—bipartisanship at its best. Will Washington listen? Probably not. One reason we are rushing to austerity these days is because that’s what the comfortable people who chat so amiably in the green room are utterly certain we ought to be doing. The deficit numbers, they think, are just too big, too frightening. And deep in their hearts, they also know that the costs of austerity will always be borne by others.

Beware the stacked deck of the Peterson “Fiscal Conference”

You’ll undoubtedly be hearing all about it; the Peter G. Peterson Foundation has a tremendous press operation with a huge budget to support it. Here’s how the April 28th event is being touted:

What do they mean by "our"?

On behalf of the Peter G. Peterson Foundation, I cordially invite you to attend the 2010 Fiscal Summit:  America’s Challenge and a Way Forward.   This event will take place in Washington, DC on April 28, 2010, featuring a moderated discussion of the issues with President Bill Clinton.   We will send a more detailed agenda shortly, but we hope that you will save the date and plan to join us for this important forum.

The date of the event is significant–one day after the opening of the president’s Fiscal Commission. And the keynote speaker is a former Democratic president. It seems as though this conference will at least give voice to the liberal and progressive side of the debate.

But read further and you’ll find that the deck is firmly stacked on the Peter G. Peterson side (well, this is his party; he’s paying for it, after all). Here are the other people listed: Alan Greenspan, Judd Gregg, Bob Rubin, Alice Rivlin, John Castellani, Paul Volcker, and John Podesta. There’s only one liberal in that group. (Also only one woman, but that’s another story.)

Robert Kuttner, in today’s Huffington Post, has some acerbic comments about the conference:

If the orgy of financial deregulation that led to the crash had two prime sponsors, the Democratic one was Rubin and the Republican one was Greenspan. Inviting these characters to a fiscal summit to devise a way out of the crisis is like inviting arsonists to design a seminar on fire prevention.

Peterson himself, who underwrites the work of the foundation with a billion dollar gift, made his money as one of America’s private-equity moguls. Private equity companies have been among main offenders in the world of shadow banking that helped cause the collapse, and are now lobbing against tough financial reform and regulation.

…

This is billed as a “national dialogue on solving America’s fiscal challenges,” but spare me. This is a propaganda event. For the most part, the featured speakers follow the Peterson line. John Podesta, the closest thing to a liberal playing a headliner role, accepts that there is a serious deficit problem, but would entertain a value-added tax as part of the remedy. But the speakers’ list is clearly stacked and there is no one to Podesta’s left.

The Peterson Foundation and its president, David Walker, already know exactly what they want — strict budget caps on social outlay, enforced by a rigid formula, with cuts in Medicare and Social Security leading the way.

Will the mainstream media continue to swallow the Peterson story? Kuttner suggests two sources for the other side:

• fiscalhighroad.org, a partnership of the Economic Policy Institute, Century Foundation and Demos.
• Scholars’ Strategy Network, founded last year by Harvard’s Theda Skocpol

Take a look yourself, and help correct the almost ubiquitous but incorrect impression in the press and the public that Social Security and Medicare are to blame for the deficit and must be cut.