Deficit Dialog An Exchange of Letters With Pete Petersons Foundation

Richard Eskow

Recently I wrote that the deficit-cutting projects and media campaigns sponsored by billionaire Pete Peterson all “focus on the same narrow band of options” that “reflect far-right positions,” but nevertheless are usually described in the media as “moderate” and “bipartisan.”

I received a response from an official at the Peterson Foundation. Out of courtesy, I will not name the person or quote their email in full. The official said that my statement was “patently untrue” and a “mischaracterization.” Some of their other statements can be found below, along with my observations about them. My reply to the Foundation then follows:

Foundation: “We strongly believe that Social Security must be preserved and protected. One of the goals of the Foundation is to ensure that this vital program is strong, solvent and secure for future generations, particularly America’s most vulnerable populations … “

Peterson-funded projects have consistently given the impression that Social Security is contributing to the deficit (which it is prohibited by law from doing); that its long-term shortfall must be met primarily by benefit cuts, and only secondarily by revenues; and that it is acceptable to increase tax payments for the wealthy so gradually that it will take forty years for the payroll tax to cover the same percentage of wealth it covered more than twenty years ago.

To be fair, Peterson-funded proposals have recently included modest benefit increases for the lowest-income recipients.

Foundation: “Mr. Peterson’s personal views include the need to increase benefits for the poorest Americans receiving Social Security and reduce benefits for the well-off. He has suggested that progressive benefit reforms such as progressive wage indexing, affluence testing and increasing the payroll tax cap be considered.”

“Reducing benefits for the well-off” sounds reasonable – until you realize that this billionaire’s definition of the “well off” includes people who earned an average of $43,000 per year during their work life. A 20-year-old who earned that average through their work life would see a 17% cut in benefits from one Peterson-backed proposal, and would see a 30% cut if they earned an average of $69,000. Under the Simpson-Bowles plan, even workers who made as little as $20,000 average would see benefit cuts starting in 2040.

As for the truly wealthy who receive Social Security benefits, the problem is that there aren’t enough of them to make a difference. Remember, retirement benefits only go up to a certain amount. It sounds reasonable to say that billionaires shouldn’t receive a Social Security check (although they’ve paid for the benefit, too). But when you calculate the number of wealthy people that would be excluded under any reasonable plan, there aren’t that many of them. When you add in all the time and expense of identifying them and tracking them (How would that be done? Cross-reference IRS returns and check their bank and real estate holdings?), studies have concluded you’d spend more to find them that you would save by cutting their benefits.

Foundation: “Mr. Peterson and the Foundation have also repeatedly stated that we must consider all viable solutions from across the political spectrum if we hope to meaningfully address our fiscal challenges. As part of this process, the Foundation believes that it will be imperative that wealthier Americans contribute significantly to help stabilize our nation’s finances, secure the social safety net and provide critically needed resources for education, research & development and infrastructure.”

Nevertheless, a recent Peterson-backed proposal (Rivlin/Domenici) would cut both Social Security benefits and Medicare spending, which would disproportionately harm seniors who are not wealthy. The same plan would also sharply lower the top marginal tax rate, from 35% to 27%, making up the difference with a highly regressive sales tax of 6.5% and percentage limits for tax deductions that would disproportionately benefit the wealthy.

That is a “right-wing” plan by any measure. It’s certainly not a plan in which “wealthier Americans contribute significantly to help stabilize our nation’s finances.”

My response to the Foundation follows:
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Dear X:

Despite your suggestion that my characterization of Mr. Peterson’s views is misleading, it seems to me that the consistent themes behind every organization, study, and communications campaign Mr. Peterson has funded have been:

  • An overemphasis on balancing the budget in a time of economic crisis, when stimulus is urgently needed;
  • A failure to note the critical role the banking sector has played in creating today’s deficits;
  • The mistaken notion that the country cannot continue to provide the current level of Social Security benefits;
  • A refusal to propose lifting the payroll tax cap to 100%, as polls show the public (including most Republicans) would prefer;
  • A refusal to consider returning to the marginal tax rates which were applied to high incomes in recent decades;
  • Proposals which would delay the process of returning the payroll to its 1980’s-era level, when it covered 90% of all income as intended by the Greenspan Commission. (No liberal, that Alan Greenspan!) Some proposals funded by Mr. Peterson would delay this re-stabilization by as much as a half a century;
  • Social Security proposals that give greater weight to benefit cuts than to tax increases;
  • Communication campaigns designed to fuel the misconception that Social Security contributes to the general deficit; and,
  • A desire to convince the public that levels of debt considered manageable in other nations pose a grave threat here.

I agree that long-term deficits are a grave and even critical problem. But these long-term debts are fueled almost exclusively by the truly staggering increases in health care costs that have been projected. Yet the projects funded by Mr. Peterson are notable for their lack of emphasis on health management programs that could contain these costs, as has been accomplished in other developed nations.

I respect Mr. Peterson’s accomplishments, which have given him the ability to promote his opinions in many different ways. But these opinions, however legitimate, are normally considered right-wing. The attempt to characterize these conservative views as “bipartisan” has been very successful from a marketing point of view, but has no basis in fact as far as I can see.

Thank you for writing, and best regards -

Richard Eskow

PS: I saw that Mr. Peterson signed the Millionaire’s Pledge. That’s admirable, and I thank him for it.
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Note: I have not yet received a reply.

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