The most dangerous member
of the Wall Street mob:
Peter Peterson

THE PROGRESSIVE REVIEW

Greed, theft, fraud, lies and fiscal manipulation are par for the course for today's Wall Street mobsters, but Peter G. Peterson does them one better: he has used his excessive financial gains to try to ruin the lives of millions of American through the imposition of rightwing theories of budgeting and slashing Social Security. It's not just that his ideas are bad, it's that much of the media - such as the Washington Post and Charlie Rose - regularly suck up to him and that his capos have infiltrated the top levels of the Obama administration. So don't be too distracted by the more colorful scoundrels, it's the respeciable looking ones like Peterson who may really do you in.

DEAN BAKER, GUARDIAN - The latest round of attacks on Social Security and Medicare are especially pernicious because they come at a time when the baby boom cohorts have just seen much of their wealth disappear due to the collapse of the housing bubble and the stock market plunge. Tens of millions of baby boomers who thought they were well-prepared for retirement two years ago, now find themselves with little or no home equity and very little left in their retirement funds. As a result, they will be almost totally dependent on Social Security and Medicare.

The attacks are made even worse by the fact that the attackers, people like Robert Rubin and Peter Peterson, promoted policies that led to this collapse and personally profited to the tune of tens or even hundreds of millions of dollars. In other words, after pushing the economy into a severe recession and destroying the life's savings of tens of millions of working families, the Wall Street crew now wants to take away their Social Security and Medicare. This can almost make killing your parents look like a petty offence.

ROBERT KUTTNER, PROSPECT - Fiscal conservatives in Congress hope to hold recovery spending hostage for long-term caps on social outlay, and they have some company in the White House. Groups like the billion-dollar Peter G. Peterson Foundation are leading the charge.

For a quarter-century, Peterson has been exaggerating long-term costs of Social Security and Medicare. In truth, Social Security is close to balance -- its 75-year projected deficit is just one-half of 1 percent of gross domestic product. Medicare is seriously in deficit, but reform of Medicare consistent with high-quality health care depends on tackling the deeper drivers of medical inflation.

WILLIAM GREIDER, THE NATION - He's baaack -- the Wall Street billionaire who wants to loot Social Security. This time, Pete Peterson has invented his own "news network" to promote his right-wing rants about shrinking the only retirement security system available to millions of working people. Peterson styles himself as a patriot saving the nation from fiscal insolvency and has committed $1 billion to that cause (a chunk of the wealth he accumulated at Blackstone Group, the notorious corporate-takeover firm). His efforts might be dismissed as ludicrous -- except money does talk in Washington, and Peterson is now buying Washington reporters to spread his dire warnings.

The retired mogul has created a digital news agency he dubs "The Fiscal Times" and hired eight seasoned reporters to do the work there. "An impressive group of veteran journalists," Peterson calls them. . .

With his great wealth, Peterson could have also bought a newspaper to publish his dispatches, but he did better than that. He hooked up with the Washington Post, which has agreed to "jointly produce content focusing on the budget and fiscal issues." The newspaper is thus compromising its own integrity. It's like buying political propaganda from a Washington lobbyist, then printing it in the news columns as if it was just another news story.

The first TFT "dispatch" to appear in the Post -- "Support grows for tackling nation's debt" -- made no mention of Peterson's crusade. But it featured the same devious gimmick the financier has been peddling around Washington. Congress should create a special commission of eighteen senators and representatives empowered to make the "tough" budget decisions politicians are loathe to face -- slashing benefits, raising payroll taxes or both. Other members of Congress would be prohibited from changing any of the particular measures, and would cast only an up-or-down vote on the entire package, no amendments allowed. . .

So why do the TFT reporters (Elaine Povich and Eric Pianin) zero in on old folks and Social Security or entitlements like Medicare and Medicaid? Because those are Pete Peterson's favorite targets. He has flogged Social Security as a blight on our future for at least twenty years. He is a nut on the subject. His "facts" are wildly distorted or simply not true. Never mind, the establishment press portrays him as a disinterested statesman.

This crusade is dangerous for the people because the "respectables" in governing circles and both parties embrace the same reactionary logic. Does government have money problems? Don't restore the progressive income tax on the wealthy or capital, don't cut away some of the corporate boodle in the federal budget -- that politics is too difficult. Instead, let's whack Social Security while folks aren't watching.

ROBERT KUTTNER, WASHINGTON POST - With the enactment of a large economic stimulus package, fiscal conservatives are using the temporary deficit increase to attack a perennial target -- Social Security and Medicare. . .

The Peterson Foundation is joined by leading "blue dog" (anti-deficit) Democrats such as House Budget Committee Chairman John Spratt of South Carolina and his counterpart in the Senate, Kent Conrad of North Dakota. The deficit hawks are promoting a "grand bargain" in which a bipartisan commission enacts spending caps on social insurance as the offset for current deficits. . .

NY TIMES - President-elect Barack Obama said that overhauling Social Security and Medicare would be "a central part" of his administration's efforts to contain federal spending, signaling for the first time that he would wade into the thorny politics of entitlement programs. . .

DEAN BAKER - If Obama is successful he will have damaged two of the most successful programs ever devised by the Democratic Party. He will receive plaudits from the corporate media such as the NY Times, Washington Post and Wall Street Journal and from his major backers on Wall Street. But for other Americans it will be a continuation of the decay of social democracy that flourished under FDR and LBJ and has been collapsing (along with our economy and world standing) under Reagan, the Bushes and Clinton.

On the other hand, the game is a little different than when the Pete Petersons and others started their war on Social Security. Then it was possible to play the young against the old, blaming the latter for the former's difficulties. But the fiscal collapse has changed all that, and many more younger Americans may realize that its not senior citizens who are the problem, but senior officials and their campaign contributors.

SAM SMITH, PROGRESSIVE REVIEW - If Obama is successful he will have damaged two of the most successful programs ever devised by the Democratic Party. He will receive plaudits from the corporate media such as the NY Times, Washington Post and Wall Street Journal and from his major backers on Wall Street. But for other Americans it will be a continuation of the decay of social democracy that flourished under FDR and LBJ and has been collapsing (along with our economy and world standing) under Reagan, the Bushes and Clinton.

On the other hand, the game is a little different than when the Pete Petersons and others started their war on Social Security. Then it was possible to play the young against the old, blaming the latter for the former's difficulties. But the fiscal collapse has changed all that, and many more younger Americans may realize that its not senior citizens who are the problem, but senior officials and their campaign contributors.

DEAN BAKER - The deficit hawks, led by Wall Street investment banker Peter Peterson, either did not see the bubble or chose to ignore it. They ran around the country in the peak years of the housing bubble yelling about "fiscal irresponsibility" even as the housing bubble was growing to ever more dangerous level. They used their money and their political standing to dominate public debate and crowd out those of us who were trying to warn about the bubble. There were numerous television shows, radio shows and news stories devoted to their dire warnings about the deficit. . .

If the Wall Street deficit hawk crew hadn't dominated public debate on economic issues as the bubble was building, perhaps those of us warning of the bubble could have been heard. Maybe momentum would have grown to burst the bubble before it reached such dangerous levels.

Ironically, the collapse of the bubble was even a disaster from the standpoint of the issue that concerns the deficit hawks most: the deficit. The deficits that the nation is incurring as a result of the collapse of the housing bubble are projected to have added more than $4 trillion to the national debt by the end of this decade.

The people who allowed for this bubble to grow unchecked should be incredibly embarrassed and certainly should be apologetic about laying the basis for this wreckage. It is difficult to envision a more serious policy failure.

But no, the deficit hawks are as sanctimonious as ever. They are running around as though nothing happened. They are still preaching the exact same lines to the public that they did before the collapse of the bubble, but now with greater urgency due to the damage to the government's balance sheet caused by the downturn.

The media should be jumping on deficit hawks like Peterson, asking him why anyone should take him seriously now when he was so incredibly and disastrously wrong about the economy just a few years ago. Unfortunately, Peterson doesn't get questions like that; he just gets praise for his willingness to try to take Social Security and Medicare away from retired workers.

The problem is that Peterson has billions of dollars. To the national media and other actors in national policy debates, Peterson's wealth matters much more than whether or not what he is saying makes sense. That is good news for Peterson, but really bad news for the rest of us.

DEAN BAKER - It is worth noting that Peterson has a long history of being wrong in a big way about major economic issues. For example, in the 90s he argued for partially privatizing Social Security as a way to increase benefits. If Congress had taken his advice, beneficiaries today would be receiving much lower benefits.

Peterson also argued that the consumer price index, the main measure of inflation, substantially overstates inflation. Based on this claim, Peterson wanted to reduce the size of the annual cost of living adjustment to Social Security. Peterson's proposed cut would reduce benefits for older retirees by more than 20 percent. This is a major cut for the two-thirds of seniors who rely on Social Security for more than half of their income.

While Peterson used the claim that the CPI overstates inflation as a basis for cutting Social Security benefits, he never bothered to consider that this claim implies that incomes are rising much more rapidly than current data show. In other words, if Peterson had been right in his claim that the CPI overstated inflation, then our children (the supposed beneficiaries) would be far richer than we ever imagined possible because their incomes would be growing so rapidly. However, Peterson was so anxious to cut Social Security he never bothered thinking through the implication of his claim.

Now Peterson wants to use the bailout as a pretext for gutting Social Security and Medicare. There are two important ways in which the Peterson crew is trying to mislead the public on this issue.

First, the impact of the bailout on the debt is not as large as claimed. While the government is likely to lose money on these bailouts, it certainly will not lose everything invested. On the $700 bank bailout, it is unlikely to lose more than $200 billion to $300 billion. While this is not trivial, it is less than 2 percent of current GDP. The debt to GDP fluctuates by this amount all the time without even attracting any attention. It makes no sense to charge that we have to rethink our core social insurance programs because the debt to GDP ratio rose by 2 percentage points.

The other point on which the Peterson gang is misleading is the impact of deficit spending in an economic downturn. Such spending will not make our children poorer; in fact it is likely to make them wealthier by creating jobs and boosting the economy.

This point should be easy to see. If the government has a $300 billion stimulus (raising the debt by $300 billion), then the immediate effect on the economy will be to increase GDP by around $400 billion (assuming a well designed stimulus) and give jobs to approximately 4 million workers. The additional growth will lead to more tax revenues, so that the increase in the public debt will likely be closer to $240 billion rather than $300 billion.

But, even this is not a net loss to our children. While the country will owe $240 billion more than it would in the absence of stimulus, our children and grandchildren will also be the beneficiaries of the interest payments on this debt. (The fact that the money may be paid to foreigners who own the debt is immaterial, as I'll explain in future writings on this topic.) In short, there is no good reason not to try to use the government as a source of demand for the economy during an economic slump like the one we currently face.

Unfortunately, Mr. Peterson either knows little economics or opts not to be honest with the public. In this respect it is noteworthy that he somehow managed to miss the housing bubble and the fact that its collapse would create the largest financial crisis since World War II. But, Peter Peterson is not interested in warning the country about the real crises it faces. He is interested in cutting Social Security and Medicare.