The Guardian Unlimited, February 23, 2009
President Obama will be hosting a summit on “fiscal responsibility” this week. The exact purpose of such a summit at a time when the world economy is collapsing from a decade of financial irresponsibility is not clear. However, one name on the guest list does stand out: Peter G. Peterson. (Full disclosure: I am also on the list).
Those who follow debates on budget issues closely have probably heard of Peter G. Peterson. Mr. Peterson has been a prominent figure weighing in on budget debates for close to two decades.
Mr. Peterson was the Commerce Secretary in the Nixon administration. He then went on to make billions of dollars as one of the top executives at the Blackstone Group, a private equity fund. Mr. Peterson is known as one of the top beneficiaries of the fund managers’ tax break, through which he personally pocketed tens of millions of dollars.
Mr. Peterson has never been shy about using his Wall Street wealth to try to cut Social Security and Medicare, and he recently stepped up his efforts. Last year he spent $1 billion to endow the Peter G. Peterson Foundation, which seems to have destroying these programs at the top of its agenda. (Mr. Peterson also has a think tank named after him, the Peter G. Peterson Institute for International Economics.)
Peterson’s main story is that these programs are bankrupting the government and will impose an unbearable burden on future generations. Of course, the reality is that we have a broken health care system. The projections of scary budget deficits that Peterson’s crew constantly cites is based almost entirely on projections of exploding health care costs. If the United States can get its health care system in order, as every other country has done, then we would be projecting enormous budget surpluses as far as the eye can see.
It is remarkable that the Peterson crew can continue to whine about generation inequality even after we just saw the most enormous redistribution from older generations to younger generations in the history of the world. The $8 trillion in wealth lost in the collapse of the housing bubble was mostly held by older workers and retirees. The $7 trillion lost in the stock market collapse was also primarily held by older workers and retirees.
The beneficiaries of these huge price declines will be younger workers, and those yet to enter the labor force, who will be able to buy homes and stock at prices far lower than they would have paid just two years ago. This huge generational redistribution would cause serious economists to change their view of inter-generational fairness. After all, how much money do they think the baby boom cohort should be forced to surrender?
However, this massive redistribution from older generations to younger ones has just caused the Peterson crew to redouble their efforts. After all, the Peterson crew somehow couldn’t see an $8 trillion housing bubble as it was growing. Why should they pay any attention to it now, just because its collapse has thrown the world economy into the worst downturn since the Great Depression?
Unfortunately, instead of being subject to the ridicule they so richly deserve, the Peterson crew is treated reverentially by the media. Ostensibly serious news outlets suspend normal journalistic practices in discussing the Peterson gang.
This deference is best evidenced by the way the Peterson Foundation is described in news stories. Instead of describing the Peterson Foundation by its political leanings, in a recent article the Washington Post characterized the Foundation as an organization that “advocates for federal fiscal responsibility.” The New York Times described the Foundation as having been “formed to raise awareness about the nation’s economic challenges."
Every organization has boilerplate wording that describe its mission. (The Center for Economic and Policy Research “was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives.”) News outlets never use these descriptions in their coverage – except in the case of the Peter G. Peterson Foundation.
The public would be right to be outraged that a Wall Street billionaire is trying to take away the core social insurance programs that they will be dependent on in their old age. It was the Wall Street crew that wrecked the economy, costing millions of people their jobs and tens of millions their life savings. Now Peterson wants to use much of his Wall Street winnings to take away the only source of support that tens of millions of retirees have left.
But no one expects ethical behavior from Wall Street tycoons. The public does expect a little more from the media. The people who report on budget issues should be able to step back and assess the issues themselves rather than just parrot the lines that the Peterson Foundation has fed them. And they should be able to sufficiently contain their enthusiasm for Peterson’s quest that they describe his Foundation in the same sort of language they use to describe the other actors involved in this debate.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy. He also has a blog on the American Prospect, "Beat the Press," where he discusses the media's coverage of economic issues.