Don’t Confuse Pete Peterson’s Desire to Slash Medicare with the Goals of HealthCare Reform –Part 1

Summary:  Deficit Hawks want to slash both Medicare and Social Security, and they seem to be in control of the President’s National Commission on Fiscal Responsibility and Reform. Hovering in the wings, aging mogul Pete Peterson is eager to help them do the job.

 The Peter G. Peterson Foundation is spending lavishly to exploit anxiety about the economy –to a point that Americans now name “the deficit” as the No. 1 threat to America’s future. He uses that fear to justify cutting "entitlement programs."

Meanwhile, Peterson is posing as a liberal as he attempts to make common cause with health care reformers. In the process, he is blurring the very important distinction between what the health care legislation would do to reform Medicare, and his own proposals. Reformers would expand effective care while reducing waste; Peterson would shift costs to Medicare beneficiaries while restricting the number of Americans eligible for the Medicare program.

The irony is that cutting domestic spending is exactly what we shouldn’t do in the midst of this economic crisis. As George Soros explains, when you’re skidding you have to turn into the skid.

For decades, 83-year-old Wall Street billionaire Pete Peterson has been funding a campaign designed to convince the American public that Federal debt represents an unparalleled threat to this nation’s future. Unless we stem the flow of red ink, he says, our children face a world of “diminished dreams.”  Recently, the former Wall Street banker has stepped up his efforts, arguing that the budget deficit poses a greater menace than unemployment, the wars in the Middle East, or the rising cost of healthcare.  This country’s biggest problem, Peterson warns, is extravagant spending on “entitlement  programs” for seniors . The word “entitlement” says it all:  Peterson views Medicare and Social Security as programs that Americans feel “entitled to” but don’t really deserve.  As he puts it, today’s retirement system resembles nothing more than  a “well-padded hammock for middle- and upper-class retirees.”

Earlier this year, the Peter G. Peterson foundation hosted “Fiscal Summit 2010,” and there, Peterson explained that, unless we make some “hard choices,” the budget deficit will result in an economic apocalypse that destroys this country’s standard of living: “Everything you love will not be there,” the aging mogul told his audience, his voice quavering with concern. “Everything you deeply love will not be there – there won’t be any bucks for the children . . .  How that’s for an answer?” he demanded, managing to be at once querulous and belligerent.

Meanwhile, the former hedge fund manager has been using his billions to exert as much influence as possible on President Obama’s  new  National Commission on Fiscal Responsibility and Reform—  , a.k.a. the Deficit Commission.  In February, when the president signed an executive order creating the Commission, he announced that it would be charged with rolling back a deficit that threatens to "hobble our economy. . . cloud our future,” and if left unchecked, “will saddle every child in America with an intolerable burden . . .. .

Everything’s on the table,” the president added—including raising taxes and cutting Medicare and Social Security — “that’s how this thing is going to work.”

In that moment, the president seemed to be adopting the rhetoric of the “deficit hawks.” This is troubling. Without question, the deficit does matter. But hawks suggest that it should be our only and top priority, even in the midst of a recession. And they would find the money by weakening our two most successful domestic programs: Social Security and Medicare. Surely this is not the best way to strengthen the economy.

As for the need to cut “entitlement programs,” anyone who talks about “Social Security and Medicare” shortfalls in the same breath is lying to you.  Social Security is not under any immediate financial stress. The program’s trustees project that it will be able to continue to pay out promised benefits in full until 2037. More importantly, over the next 75-years the gap between promised benefits and committed taxes equals just 0.7% of GDP.  That’s a manageable shortfall that can be addressed through minor tweaks. Social Security will remain on solid financial footing for more than 75 years if Congress simply “raises  payroll taxes for higher-income workers by a modest amount,” says Century Foundation program director Greg Anrig. He explains that one way to do this would be “to raise the cap on annual wages subject to the Social Security payroll tax, which is currently $106,800.  If legislators decided to lift the cap, Anrig obsesrves “those workers paying more would receive higher benefits as a result.”

Moreover, Social Security pay-outs are hardly extravagant: “Compared to 30 OECD nations, the U.S. ranks 25th in the share of an average worker’s earnings that is replaced upon retirement by a country’s public pension program,” Anrig notes.“Social Security’s annual benefit of about $13,860 a year for an average retired worker is only slightly above the poverty level of $10,830.”  ( Apparently Pete Peterson isn’t familiar with the comparative numbers.  In the past, he has argued that “other countries are unencumbered by the illusion that their people have some sort of inalienable right to live the last third of their adult lives in subsidized leisure.” )

Here is the truth: a high-school senior can count on Social Security being there when she needs it. Medicare, on the other hand, is heading for a wall. In recent years, Medicare spending has been spiraling by 6 percent to 8 percent a year.  Let me be clear: healthcare inflation is not unique to Medicare. Since 2000 private insurers’ payouts to doctors, hospitals and patients have been rising even faster. We cannot continue to let health care spending grow faster than GDP.  If we don’t break the curve of health care inflation, before long the Medicare fund that reimburses hospitals will be paying out more than it takes in.  But the problem is not insurmountable.  We need to trim the growth of Medicare spending by only about 3 percent to 4 percent..  As I explained in my last post, “The Patient Protection and Affordable Care Act” that President Obama signed this spring would do just that.
Over the next 10 years, the Affordable Care Act (ACA) aims to reduce projected Medicare spending by some $500 billion. Here it is critical to understand the difference between the legislation’s goals and Peterson’s crusade: the reform legislation would not cut current benefits. Rather, it reins in future Medicare spending by reducing errors and squeezing waste out of the system while simultaneously improving the quality of care.  Under reform, Medicare pays primary doctors more, rewards providers for better outcomes, and expands benefits by eliminating co-pays for preventive care and filling the “donut hole” that left many Medicare beneficiaries paying the full cost of their medications.

The deficit hawks have a starkly different agenda. Peterson and his supporters would shrink Medicare by raising premiums for Part B and Part D, lifting the age when seniors become eligible for the program and “making better decisions about end of life care.”  (See the Peterson Foundation’s “Citizen’s Guide” to “The State of the Union’s Finances “)   Reforming Medicare in order to strengthen it and make sure that it is sustainable over the  long term is one thing; raiding it, to pay down the deficit, is something else again.

Is Pete Peterson Winning? A Shift in the Polls

Until very recently, the notion that we should limit Medicare and Social Security benefits in order to reduce the deficit was seen as a third-rail argument.  These are, by far, the two most popular domestic programs this country has ever seen. Virtually any politician who suggested restricting benefits was asking to be turned out of office. But now, the recession has frightened many Americans, and Peterson and other deficit hawks have learned how to play on public anxiety about the nation’s future while wrapping themselves in the flag of children and grandchildren.

 Certainly, there is reason for the public to be anxious.  Unemployment remains well over 10 percent. Virtually everyone knows someone who has lost a job, and many Americans are “working scared” without hope of a raise. The economy should have created some 3 million jobs for new entrants into the labor force over the past two years;  instead it has lost roughly 8.5 million.   Few  Americans are feeling the effects of a modest economic recovery. In this climate, perhaps it should come as no surprise that Peterson seems to be winning in the court of public opinion.

Polls show that the majority of Americans now list “the deficit” as their  No. 1 fear.  A shift in public sentiment became apparent in  early May, when a NBC/Wall Street Journal polled revealed that 20 percent of respondents rated “the deficit and government spending” as the top priority that the federal government should address– up from just 13 percent at the beginning of the year. Only job creation and economic growth topped the deficit on this list of the public’s concerns.

By the end of May, the widespread change of heart was even more apparent:  A USA/Gallup poll showed “federal government debt” tying terrorism as the No. 1 threat to our future well-being, trumping unemployment, the rising cost of health care and the presence of American troops in Afghanistan and Iraq.   (Thanks to Naked Capitalism for the table below.


The President’s Commission

This spike in mainstream interest in the deficit may be explained, in part, by the fanfare surrounding President Obama’s February announcement that he was establishing a National Commission on Fiscal Responsibility and Reform.  The President made it clear that the mission was urgent: the group of 18 has until Dec. 1 to come up with recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. 

It would seem that Peterson’s day has come. And if ripeness is all, he is more than ready.  Pete Peterson has waited a long time for just such an opportunity.

The Neiman Watchdog, published by the Neiman Foundation for Journalism at Harvard, reports on Peterson’s efforts: “A Peterson-funded foundation  is supplying  staff  to the  group of 18 that meets behind closed doors” debating the budget.  The day after the first meeting of the commission, the Watchdog notes, the co-chairs and two other members of the commission attended the Peterson Foundation’s “Fiscal Summit 2010.” 

 Although the panel is bi-partisan, it is stacked with fiscal conservatives who sympathize with Peterson’s agenda.  Even before the group held its first meeting, Bloomberg reports,  co-chair  Erskine Bowles went on record before the North Carolina Bankers' Association saying that if the Commission doesn't "mess with Medicare, Medicaid and Social Security … America is going to be a second-rate power."  After being appointed the commission’s co-chair, former Wyoming Republican  Senator Alan Simpson told PBS’ Newshour,   “This country  is going to go the bow-wow’s  unless we deal with entitlements, Social Security and Medicare.”   Lacking a knack for analysis, Simpson often resorts to colorful language.

The day after the Commission’s first meeting  in late April, Peterson’s  swanky “Fiscal Summit” reinforced the theme: “The symposium's core conviction is that ‘everybody’ (as moderator Leslie Stahl put it) recognizes what needs to be done to cut the long-term deficit,” observed the Huffington Post’s Dan Froomkin. “But the only concrete areas of agreement seem to be that cuts in Social Security and Medicare must be a part of deficit reduction, while cuts in military spending are (as moderator Gwen Ifil put it) ‘never an option.’It's a fundamentally banker-friendly agenda.  

And the campaign has just begun. Peterson’s foundation is funding  America Speaks, a series of high-profile town halls that will be held across the country later this month to launch  “a national discussion to find common ground on tough choices about our federal budget .” 

There’s that phrase again– “tough choices,” a reminder that the commission is targeting Medicare and Social Security—our two most successful domestic programs. 

Domestic Spending on Social Programs Did Not Create the Deficit

Over at Hullabaloo, Digby has commented on the cunning of deficit hawks who have set out to make people believe that government spending  on social programs is the cause of the current economic crisis.   “They are, quite obviously, attempting to use the crisis to dismantle the social safety net and avoid doing the real work of reforming the financial system.”

In truth, spending on Medicare and Social Security did not cause the real estate bubble, the sub-prime meltdown, the credit crunch, the wars in Iraq and Afghanistan, slow economic growth,  or soaring unemployment.  As veteran investigative reporter Jim Ridgeway notes: “The national treasury has been driven into deep deficits by a financial crisis caused by Wall Street greed, compounded by two wars, tax cuts for the rich, and the high prices charged by health care profiteers.

 And where [should] we turn to make up for this loss?” he asks.  According to some, we should take the money from “the poor and the old, who cling greedily to their ‘entitlements.’”

Economist James Galbraith points out that the deficit hawks did little to sound the alarm when the debt was building:   “. . .  did David Walker, Eugene Steuerle – or Peter G. Peterson himself — devote even five percent of the vast resources that they have lavished in recent years on the supposed ‘entitlement crisis’ to warning about the impending mess on Wall Street?

“Did they write anything about it? Did they speak out against the Bush administration's abandonment of supervisory responsibility in the financial system? Did they protest the massive abuse of unsophisticated home buyers by the loan originators in the subprime sector? Did they comment on ‘liars' loans,’ ‘neutron loans’ and ‘toxic waste’?  Were they heard about the risks involved in securitizing subprime loans? Did they foresee that credit default swaps could collapse like a house of cards? Did they caution that the stock market might crash, ruining the private retirements of millions of Americans?

“If they did, I must have missed it.

Peter G. Peterson is one of the leading figures on Wall Street. Isn't it reasonable to ask, that if he and his team wish to be taken seriously on matters of public finance, that they should have shown some leadership, some wisdom, some insight and some foresight on the disaster brewing in their own backyard?

As the disaster on Wall Street developed, George Soros was heard from. Warren Buffett was heard from. Was Peter G. Peterson heard from? Was David Walker heard from? Was Eugene Steuerle heard from? I think they were not.”

Peterson Appears To Make Common Cause with HC Reformers

In May, when I read that Peterson would be speaking at a health reform conference sponsored by the Institute for Healthcare Improvement, The Dartmouth Institute for Health Policy and Clinical Practice, the Harvard School of Public Health, and the Engelberg Center for Health Care Reform at Brookings— and that the Peter G. Peterson Foundation would be helping to fund the event– I was startled, but I shouldn’t have been surprised.

Peterson, who supported John McCain during the 2008 election, has a talent for infiltrating liberal groups, and saying what they want to hear —as needed. When Barack Obama was elected, he understood that it was time to change horses. "Obama's victory didn't change our mission in any way," Michael, one of Peterson' s four sons and the Peterson Foundation's vice-chariman told Elevator, a self-described high-end financial and luxury publication.."It simply changed who we're going to have to work with in the coming four years. During the course of the foundation's existence, there will be many," he added, implying that while U.S. presidents come and go, the Peterson dynasty will live on.

Those who do not know Peterson from his days on Wall Street can easily mistake him for a benevolent billionaire philanthropist—a wizened Warren Buffet, if you will. 

These days, even as he campaigns against “entitlement programs,” Peterson is impersonating a health care reformer.   In the  “Citizen’s Guide”  to “the State of the Union’s Finances,”  that Peterson’s Foundation published in April, Peterson pays lip service to the language of reform, talking about moving away from fee-for-service payments, unnecessary treatments, the Dartmouth research, comparative effectiveness research and electronic medical records.

Reading this section of the pamphlet one might begin to think that Peterson has been converted to a new way of thinking about Medicare. One would be wrong.

Peterson has always been clever about posing as a liberal, when necessary. As Robert S. McIntyre, director of Citizens for Tax Justice, noted in “The False Messiah” a profile of Peterson published by the American Prospect in 1994: “What is odd is that his pose as a friend of the common American succeeds; that he publishes in liberal journals like the Atlantic and the New York Review” even though, “Peterson is at the epicenter of a growing network dedicated to demonizing entitlements. . . Along with tax cuts for the rich, he explicitly endorses tax increases for the poor and the middle class as well as sharp reductions in what average families receive from the government. . . Peterson's bottom line is that the middle class gets too much from government and pays too little for it, while corporations and the rich deserve a break.  [But], that's not how he sells his program.”  Instead, McIntyre explains, he uses “seductive rhetoric” that will appeal to a liberal press.   (Note to readers: After 16 years, McIntyre’s piece holds up; it’s well worth reading).

In truth, Peterson’s agenda has never changed. This becomes clear in his Citizen’s Guide: In chapter 2 he praises the health care reforms proposed in the recent legislation, saying that they will  significantly reduce unfunded Medicare promises over the next 75 years . But, Peterson declares, this is not enough. These savings “will be needed to pay for the new health insurance subsidies” for those who cannot afford insurance. Consequently  “much work remains to stabilize health care costs as a percentage of the federal budget and the overall economy and keep total federal spending for health care from growing faster than our willingness to pay.”

How will we do that? In Chapter 3, titled “Solutions,” Peterson shows his hand, proposing the more Draconian solutions that have been part of his agenda for years. First, he suggests raising premiums for Medicare Part B and D.

Here, he ignores the fact that Medicare is already become close to unaffordable for many seniors: Between 2000 and 2007, Medicare beneficiaries faced average annual increases in the Part B premium of nearly 11 percent.  Meanwhile, monthly Social Security benefits, which averaged around $900 per month grew by only about 3 percent a year.  To put these numbers in context, keep in mind that most Medicare beneficiaries have limited incomes. In 2003,  60 percent of seniors on Medicare depended on Social Security for 75%, or more, of their total income.

Secondly, Peterson calls for gradually raising the eligibility age for Medicare

Americans in their sixties are in dire need of healthcare, especially now that so many in that age group are unemployed.  For many, checking off the months until they turn 65 means waiting too long. Forcing them to wait until they are 66 or 67 is simply a way of blindly shrinking  the program, without rhyme or reason. By contrast, reform legislation calls for knowing cuts, targeted to reduce errors or eliminate fraud, waste and overtreatment.

In chapter 3, Peterson also declares that we should create   a “Federal budget for  health care” (this sounds very much like a global cap on(healthcare spending) “create  smarter healthcare consumers” (code for making sure that Medicare patients have more “skin in the game” in the form of higher co-pays and deductibles) and “make better decisions about end-of-life care.” (It’s not at all clear who would be making the smarter decisions.  Since Peterson makes no mention of palliative care specialists laying out options so that the patient can make informed choices, I fear that these final decisions would be made by someone else.  But who? 

Under “Solutions” Peterson also takes a whack at Social Security, suggesting that we “gradually raise the retirement age” and “reduce cost-of-living adjustments” (COLA) –making it even harder for seniors to afford Medicare.  Just when does he think seniors are “entitled” to retire? In 1996 Peterson wrote: “In order to provide the same average number of years of retirement benefits in 2030 that were contemplated when Social Security was set up, in the 1930s, the retirement age would have to be raised from sixty-five to seventy-four by 2030.” Bad news for the baby-bust generation.  (Peterson believes that we are on the threshold of a “new paradigm for aging” in which the average life expectancy could reach 100 or more.  Apparently he hasn’t taken a close look at public health statistics.

It's worth noting that Peterson wouldn't reduce the deficit on the backs of the poor. When posing as a liberal, he presents himself as a champion of low-income Americans. He reserves his scorn for a group he refers to as "the middle-class" (those seniors whom he envisoins relaxing on those "well-padded hammocks" and the "long gray wave of baby-boomers" who are going to turn this into "a nation of Florida's". How does he define the "middle class"? In a 1996 article published in The Atlantic Monthly, he suggested that entitements should be reduced for households earning over $40,000–i.e. any family earning more than 5 percent above U.S. median income that year.

Medicare Reformers vs. Deficit Fetishists— Different Goals

Health Care reformers have one goal for Medicare: to make it a sustainable, high quality affordable program that does not add to the deficit.
By contrast, Peterson would slash Medicare spending by shifting costs to beneficiaries, while  raising the age when seniors become eligible for the program. He would  then use the savings, not to improve healthcare, but to cut federal debt.

But is reducing the budget deficit really Peterson’  primary goal? He was, after all, call for cuts to “entitlements” in the late 1990s, when this nation was running a surplus.  Arguably, Peterson’s real aim is to weaken, and ultimately dismantle the social safety net that the Roosevelt administration put in place some seventy years ago.  He is using our current economic problems simply as an excuse for a stepped up campaign, his critics say.

That his fear-mongering is succeeding can be seen, not only in the polls, but in Congress, where legislators are having a hard time putting together enough votes to extend much-needed unemployment benefits. Suspicion of anyone who receives benefits from the government has reached a point that, two days ago, Orrin Hatch proposed running drug tests on all Americans eligible for unemployment benefits. (This fits with the conservative fantasy that being unemployed is, for many, a “paid vacation.” Anyone who thinks that has never endured the anxiety of being laid off. .)

Meanwhile, in this recession, cutting domestic spending is exactly the wrong strategy argue observers such as George Soros., Paul Krugman and Joseph Stiglitz.  In a speech in Vienna last week, Soros explained that the action of righting an economy when it faces serious financial stresses is a lot like straightening out a car that has gone into a skid: you need to turn the wheels into the skid, which looks like taking it further off the track where you want it to go, until it regains traction and you can then steer it back to its proper path. In this case, we need an expansion of public debt to offset the needed contraction in private sector debt. Otherwise, as this blogger explains, “a resumption of the crisis is in the cards.” 

Again, I am not suggesting that deficit isn't important. But first, the government must create jobs. Then, it should address  theFederal debt. But even then, raiding  benefits that seniors want and need is not the answer. Structural changes need to be made and regulations must be put in place to rein in the true excesses in our economy.

In part two of this post, I’ll talk about how Peterson distorts the numbers to exaggerate the danger that Medicare will bankrupt the country. He uses Congressional Budget numbers, yet his charts look very different from CBO’s. And while Peterson pretends that he can project what Medicare will cost in 40 year, in 60 years in 70 years, CBO is very clear that any long-term projections will inevitably be wrong. There are just too many variables to allow for accurate guesstimates over long periods of time. Finally, I'll discuss the evidence –past and present–that the reforms outlined in the Affordable Care Act could cut Medicare inflation by 4 percent, or more, while improving care.  

20 thoughts on “Don’t Confuse Pete Peterson’s Desire to Slash Medicare with the Goals of HealthCare Reform –Part 1

  1. Maggie, Do you think that Obama will fall for Peterson’s stupid ideas? Besides the fact that this is morally wrong, if Obama goes along with this and cuts Social Security benefits, raises the retirement age etc., and cuts Medicare, he will be a one-term President and the Repugs will control the government again. I hope that Obama is smart enough to realize all of this, including your blog as well as my comments.

  2. Walter–
    In the end, I doubt that President Obama will go along with this.
    He created this Commission because he had to in order to appease both moderate Democrats and conservative Republicans during the health care reform negotiations.
    Meanwhile, the president is sticking to his usual M.O. “I want to hear all ideas”–without indicating where he might lean.
    But– if the American people respond to the fear-mongering, and younger Americans begin to support cutting Medicare and SS–we might have a problem.
    Obama might feel he has to do something major to signal that he takes the deficit seriously.
    And in Congress, there is definitely support for cutting entitlements among Repubicans and some “moderate” Democrats.

  3. Maggie,
    Pete Petersen may be fanning deficit flames, but that is not driving the polls. The $1.5 trillion annual deficit, the $40 trillion unfunded Medicare liability and the European debt crises are scaring the heck out of the public. President Obama either does not care or understand.
    The private sector has cut millions and millions of jobs, yet the gov’t just keeps hiring and raising taxes. The gov’t needs to tighten its belt. Not even a hard-core Keynsian believes we need a $1.5 trillion in deficit spending.
    The Medicare deficit is a multi-headed monster. It will crater the federal gov’t and is killing private health insurance through cost shifting. I hope you are right that recent legislation will squeeze waste out of the system. But that is only hope. The idea of increasing Medicare drug benefits while facing near term insolvency is nothing short of reckless.
    Please don’t dismiss the global health care cap. That is where we are inevitably headed like most Western European nations and Canada. Politicians do not have the stomach to deal with the issues head on. Health reform in the private sector is completely unworkable, and will quickly lead to a public option. The next step is the cap.

  4. This is a very good piece on the deficit hawks. It’s a “heads” up to those who have been lulled by the passage of PPACA. Thanks for arming health reform advocates with arguments to counter the expected anti-entitlement message of the upcoming AmericaSpeaks “town halls.”
    On June 17, Paul Krugman had this to say about Peterson et al: “In America, many self-described deficit hawks are hypocrites, pure and simple: They’re eager to slash benefits for those in need, but their concerns about red ink vanish when it comes to tax breaks for the wealthy.”
    Maggie, you and I disagree on reform initiatives. You believe we can save Medicare by shaving it–finding “savings” within that cost-effective program.
    I say we should take the money now absorbed by private insurance companies and their concomitant bureaucratic excesses, and use those “savings” to expand and improve Medicare. Hey–we could then afford to cover everybody–and cut the deficit as well.

  5. Peter G. Peterson is worried about the federal budget deficit while the private financial sector is taking $560 billion a year out of society. Banks, money managers, insurance companies and certainly annuity providers. Give me a freakin break!!!

  6. If Obama’s health care reform isn’t related to Peterson’s campaign to trash Medicare, Medicaid, and Social Security, why is the Dartmouth Index’s Elliot Fisher a consultant with the Peterson Foundation?

  7. Maggie:
    We have a lot of fiscal dysfunction currently in America.
    All the other problems you cited, unemployment, the wars, subprime loans, bailout of Wall Street, need to be addressed.
    In addition, the middle class has been losing ground.
    It seemed easier to raise 4 kids on one income 30 years ago, than 2 kids on 2 incomes today.
    The major entitlement programs need to be addressed, due to their sheer size in our budget.
    According to the 2009 Financial Report of the U.S. Government, on page 36, “Absent a change in policy, under this scenario,the interest costs on the growing debt together with spending on major entitlement programs
    could absorb 92 cents of every dollar of federal revenue in 2019. Clearly, this is not sustainable.”
    Go to:
    Don Levit

  8. I don’t think one has to agree with all of Pete Peterson’s proposed reforms to the federal budget to appreciate his concern about the problem. I agree with those who think the federal deficit is a bigger risk than terrorism. And at the risk of alienating a group who value healthcare, a runaway deficit is arguably a bigger risk to our descendants than our current poor health care. I have been a deficit hawk since before I heard Reagan accepted the ridiculous Laffer curve as valid in the early 1980’s. But I was initially bothered by the “budget” deficit, not really understanding the importance of the more significant off-budget unfunded mandates of Medicare and Social Security until reading Peterson’s easy book Running on Empty in 2004. I assure you that even if he is over-the-hill now, as you seem to imply, he understood then that Medicare was a much bigger problem than Social Security. And he did criticize both the Reagan and the GWBush tax cuts in the 2004 book. Running accelerating deficits during good times was inexcusable, leaving us needing to run even bigger deficits at much greater risk during this mega-recession.
    The Concord Coalition (Peterson, the late Paul Tsongas, Warren Rudman, Sam Nunn, Paul Volcker et al.) organized to highlight this subject in the early 1990‘s. And, yes, I do give President Clinton and his Congress credit for the surplus in the regular budget at the end of his second term, but remember, the calculated “surplus” did not consider the Medicare unfunded mandate. The Concord Coalition did not abandon their effort then because it recognized that fact. As for the criticism that Peterson didn’t warn of the 2008 financial collapse, his main public service interest in his extended retirement years has apparently been the more mundane aspects of the federal deficit.
    Certainly David Walker, the current president of the Peterson Foundation understands that dealing with the deficit (including the unfunded mandates) will need to wait until economic recovery is underway. So does President Obama, as I suspect does Erskine Bowles. But they also know that it cannot continue after recovery has been established. See Reinhart and Rogoff’s This Time is Different for some rather dry evidence that the deficit hawks are correct that ever-increasing debt/GDP is unsustainable. Perhaps your main disagreement with Republicans Peterson and Walker is how to match revenues with expenditures. As you said, in the past (and I believe still now) Medicare and SS cuts were the third rail. As we all know, since at least the Reagan era, tax increases are also on that electrified rail. So additional spending cuts are in order, and compromises regarding from whence they come will be politically necessary.
    I don’t share your objection to the term “entitlements.” But not because I am more conservative. My gripe is that comfortable voting seniors (I will soon be one of them) have been considered “entitled” to Social Security and Medicare while others including children and the poor have been often left out in the cold. Of course seniors argue that they paid into these programs for years and earned the benefits. But–Surprise!!–all that money they paid into it is gone, spent on other beneficiaries and other government expenses. So now somebody has to fund current and future expenses, and expenses have to be reduced. You know the facts: fewer workers, more retirees, more medical technology, etc. And though we are the USA, not Greece, the “here is different” argument probably isn’t going to fly regarding indefinite borrowing, either.
    I don’t want seniors to pay higher co-pays, deductibles, or premiums. But, I am pretty sure that under the ACA the under-65 population will be paying more out of pocket for medical care than seniors. This isn’t any more fair than it is sustainable. And I agree with Peterson and Walker that Medicare spending has to get under control, even more than the new law prescribes. You wrote, “Over the next 10 years, the Affordable Care Act (ACA) aims to reduce projected Medicare spending by some $500 billion.”–As you know, this is reduced relative to what expenses would have been without the health care reform legislation, but the past trajectory was far from sustainable. And I think the 500B calculation assumed the SGR on both sides of the equation (reality requires it be on neither side). I am not as confident as you that medical inflation will be held in check. If nothing else, consider that in 2017 Kathleen Sebelius probably won’t be in her current position, so who knows who will be making payment decisions, or kicking the can further down the road.
    Yes, other cuts must be made. And since Gwen Ifil isn’t on the advisory panel, her observation that defense spending is sacrosanct is her opinion. If we don’t quit blowing up people, property and funds in Afghanistan and Iraq, we are hopeless. And, unfortunately or fortunately, depending on your perspective, this is just an advisory panel.
    I look forward to trying to digest your math disputing Peterson’s actuarial work.

  9. Richard K–
    First, thanks for a thoughtful, well-supported comment.
    Let me say that I, too have been a deficit hawk–and continue to think that we must address the deficit–it’s an enormous problem.
    See my first book: “Bull: A History of the Boom . . ”
    There I write about the excesses of the 1980s and the 1990s. In the final chapter (written in 2002), I write about the “heap of debt” that serves as the foundation for our economy. I predict the real esate bubble–and its collapse.
    I recommended that readers buy gold (becuae the dollar would be falling, thanks to the deficit) and I warned that the U.S., standard of living was at risk because of the debt. I explained that the Bush administration was digging the hole deeper and deeper.
    But slashing Medicare & SS is not the way to adress our deficit problem. As I point out in the post, spending on dometic programs did not create this debt–
    And are we doing our children and grandchildren a favor if we leave them debt-free in a world where only the very rich have healthcare or a pension that allows them ot retire?
    Peterson has made it clear that he plans to leave his fortune to his children & grandhchildren. They will be fine. (In this, he is very different from Warren Buffet who has recentlyl called on billionaires to give at least 50% of their fortune to charity. He appealed to Peterson, among others. No suprise, Peterson has not replied. )
    And this year–or even next year– is not the right time for the federal govt to stop spending in hopes of bringing down the deficit.
    As the NYT pointed out a couple of months ago, Volcker (who I admire and trust as an extremely honest person) : “Mr. Volcker suggested that the economy remained too fragile to raise taxes or cut spending right now to reduce projections of dangerously high national debt.”
    This economy is not creating jobs–and it is not going to create jobs.
    The Federal govt needs to create jobs–jobs that will actually add to the health and wealth of the nation.
    Volcker said this while being interviewed by Pete Peterson at the Peterson Fiscal Summit.
    Also, note that Peterson would cut entitlements for “America’s middle-class” How does he define e middle-class?
    People who earn more than 5% of median income.
    Today, that would mean households earning more than $52,000 . . .
    I’m glad you’ll be reading part 2 of the post.
    You’ll find that Peterson is adept at distroting numbers when drawing charts.
    Finally, he doesn’t just want to raise premiums for Medicare beneficiaires– he wants to dismantle Medicare.
    I’ve been reading his writings for more than 20 years. His goal is always the same: undo the New Deal.
    And I’ve rarely read anyone expressing such hatred for “middle-class”
    American seniors.

  10. Don, Michael Lyon,
    Don–The same gov’t reports point out that long-term projections like these are inevitably “wrong.”
    No one can predict interest rates, inflation, the cost of health care, growth in GDP , how many new immigrants will be working and contributing to SS & Medicare etc. etc. over 20 30 year or more.
    Indeed, given the volatility of the current economy we can’t predict much over the next 10 years.
    And what can’t happen, won’t. This is how we know that entitlements won’t eat up 92% of federal revenues.
    Michael Lyon-
    As I note in the post, Peterson spoke at the recent IHI/Dartmouth conference. He is truying to infiltrate this group of liberal reforms.
    My first response is to say that the world of health care reformers in academe and the world of Wall Street hedge fund manager are two very different ponds.
    I’ve had a peculiar career and so have swum in both ponds (first as a prof of English LIt at Yale for many years, then as senior editor at Barron’s.)
    My guess is that the top health care reformers–people like Fisher– really don’t know much about Peterson.
    Meanhile, Peterson is cunning, smooth, and has become good at paying lip service to health care reforms’ ideals (which he ridiculed only a few years ago). See what his son says (in my post) after Obama was elected about having to deal with a different set of people–for a while . ..
    I’ll be talking to health care reformers about Peterson . .

  11. Ed & Greg–
    Ed– The deficit hawks want to dismantle FDR’s New Deal
    Even when the gov’t was running a surplus, in the late 1990s, Peterson wanted to privatize Medicare and gut Social Security.
    The deficit is just an excuse for the attack on “entitlements.”
    Greg–Yes, it is creepy.
    And scarey. Progressives need to pay attention.

  12. Harriette–
    Thanks for the kind words about the post.
    As for Medicare being “cost-effective”–see my most recent post “One Family’s Story”
    Note the percentage of people over 80 who receive pace-makers and the percentage of people in their 80s who are suffering from Alzheimers or some other form of senile dementia.
    It’s pretty easy to spot the patients suffering from dementia. Yet doctors and hospitals go ahead and recommend pacemakers. This story will tell you how cruel this is.
    When a person’s body has already outlived their mind, implanting a pace-maker is inexcusable (unless the patient’s family –and presumably the patient–wants it for religious reasons.)
    Harriette, before talking about Medicare as an “efficient” program, you really need to read the Dartmouth resreach, and many, many other articles and books about Medcicare over-paying for tests and treatments that PUT PATIENTS AT RISK WITHOUT ANY BENEFIT.
    Too many single-payer advocates would like to pretend that private insurers are the cause of
    the high cost of health care in this country. Unfortuately, some of them are health care providers who just don’t want to face up to the fact that providers are driving the hazardous over-treatment.

  13. Bill–
    I do take the deficit seriously. Please see my reply to Richard K toward the top of this thread– June 20, 6:44 p.m.
    You write that “The $1.5 trillion annual deficit, the $40 trillion unfunded Medicare liability and the European debt crises are scaring the heck out of the public.”
    Just what percentage of the American public do you think is following the European debt crisis?
    How many American know what our Federal debt represnts, or could explain the difference between the debt and the trade deficit?
    Americans listening to people like Rush Limbaugh or some commentators on Fox have picked up an inchoate message that there is something called “the deficit” that is bad, and might make us vulnerable to a take-over by China, while robbing our children.
    On unemployment: At the moment, this is the most immediate threat to our economy and society.
    Don’t know if you’ve ever been unemployed–and unable to find a job for 9 months — or more.
    Today, even people who have a job know someone who is unemployed, often for a long time. They are “working scared.”
    This means that they are not spending.
    Until fairly recently, this economy had been floating on consumer spending– for a long, long time. Now, consumers are pulling back.
    That is why this economy cannot create jobs.
    If we want jobs, the gov’t will have to create them, which is why gov’t is hiring.
    Gov’t is in a position to create jobs that will add to the health and wealth of the nation– education, community clinics, exploring alternative sources of energy, loan forgiveness for primary care docs, infrasture, reparing dangerous bridges, cleaning up our cities; the environment . ..
    If government does not keep on hiring, and does not create jobs, do you really want to live in a nation with 12% unemployment–and climbing? (This includes the people who are now working part-time but want full-time jobs( they are not included in published unemployment numbers) as well as those who have given up looking for work, sometimes after a year or more (also not included in the stats.)

  14. I worked for Social Security in the mid-70’s, when most beneficiaries were born in the early parts of the 20th century (and when Medicare was still under the jurisdiction of the Social Security Administration). Nobody who cares about the lives of fellow Americans would want to read about the lives of poverty and desperation that elders in our society lived after retirement (or when ill health, usually job-related, forced them into early retirement) before those programs were created, and widows and orphans lived after their wage-earners’ deaths. Both programs have saved retirees and their families from lives of abject povery and ill health–not the kind of society that hypocritical conservatives can reconcile with that “shining city on a hill.” The “solution” of the right wing ideologues is to rely on “charity” (while blaming the victim for it in the meantime). Americans have to understand that they will be required to totally support their elders in exchange for their misdirected priority to lower the debt, or else their elders will be forced to depend on “charity” (if it exists at all). Or perhaps they would advocate that elders go off into the woods or onto an ice floe to die, or perhaps the Soylent Green “solution”?

  15. ACarroll–
    Thank you.
    Yes, in the past, seniors have been the poorest of all Americans.
    SS & Medicare saved them, but as I note it’s not all that generous.
    Conservatives like to say that people should save for their own retirment.
    But when you consider that median household income is around $50,000–and that means that half of all Americans are living in households earning significantly less than $50,000 (before taxes) you can understand how little money parents have left over to save for their own retirement.
    Many put trying to save something for a child’s education first.
    As current unemplment numbers show, a child without a college education is likely to find himself jobless–for a very long time.
    And even with SS and Medicare, most seniors are not wealthy. A few years ago, a government report showed that median income for Americans over 65 is $20,000 –half are living on income that is less than $20,000.
    And income includes every penny that comes into the house– SS, food stamps, dividends, capital gains, interest on savings, etc.

  16. Maggie:
    Social Security is not as big of a problem compared to what happens with the rest of the budget.
    According to the Treasury Department, in a brief entitled “Issue Brief No. 4 Social Security Reform: Mechanics for Achieving True Pre-Funding:
    “The present Social Security system has its surpluses accumulate in the trust fund. These surpluses increase the government’s capacity to pay future benefits, only if they result in smaller amounts of public debt issuance that would occur if there were no surpluses. This is because reducing near-term debt increases the government’s capacity to issue future debt to pay benefits when the trust fund bonds are redeemed. Running a Social Security surplus today would instead lead to more debt outside the trust fund that must be paid by future generations.”
    Raiding the trust fund, spending the IOUs on other governmental expenses, and increasing publicly held debt is not a recipe of fiscal prudence.
    Go to:
    Don Levit

  17. David Walker (currently CEO of the Peterson Foundation) has been doing his
    “Fiscal Wakeup Tour” since 1997 when he worked in the Bush Administration, after
    all. This current round is obviously his brainchild. Several of the same
    (right-wing and centrist) organizations that supported that tour are involved
    with the America Speaks project.
    Incidently, David Walker made his round of talk shows (including NPR) and news
    shows this spring, making the case and spreading the propaganda for the deficit
    I think we are being primed, particularly with these “public town hall
    meetings”, for more bad news from the Obama Administration (considering his
    penchant for appointing Republicans, in spite of knowing who voted for him).
    Here is what at least one “Beltway bandit” is saying:
    Why David Walker should replace Peter Orszag at OMB\

  18. I meant to say that David Walker worked for the Clinton Administration but when the Republicans controlled Congress. His “Fiscal Wake-Up Tour” began in 2006 when he worked for the Bush Administration.
    Apparently it was also David Walker who appointed the Health Care Working Group members during that other dog-and-pony show–another exercise in “as-if” democracy (citizens participate “as if” they are really making decisions)–in 2005. As we all remember, the answers to their “4 vital questions” from the “public”, that the general preference was for a government-run single payer system, never made it to the President or Congress. Instead their report reflected their “preexisting” conclusions and policy. By no mere coincidence, America Speaks is listed as a contractor for that event too.
    “Fool me once, shame on you. Fool me twice, shame on me.”

  19. ACarroll–
    Walker replace Orszag? All I can say is OMG.
    I am pretty certain this will never happen, but it’s scarey that it could even be a serious rumor.
    “Fool me once, shame on your. Fool me twice. . .”