September 19, 2020

A Few Billion Off the Top?

Forty-eight stories above Fifth Avenue, Mr. Peterson, sitting among the views of Central Park and photos of himself with presidents and premiers, considered the wrangling in Washington with a distant disappointment: a sort of New York Establishment dismay.

“There are thousands of people focused on the short term,” he said, “on whether spending cuts will be 23 or 33 billion dollars. But the transcendent problem, the potentially terminal problem, is the long term. That’s what interests me.”

At 84, Pete Peterson embodies the long term, especially where the national debt is concerned. He has been talking — some would say droning on — about the subject for more than 30 years. He used $1 billion of his Wall Street fortune to create the Peter G. Peterson Foundation, whose sole purpose is to educate Americans about the dangers of the debt. He provided staff members to President Obama’s fiscal commission last year. He speaks endlessly about the debt in public, writes countless editorials on the topic and travels regularly to Washington from his East Side home to confer on the matter with high-ranking senators.

“I think of him as the godfather of this whole effort of trying to bring sanity to our nation’s finances,” said Erskine B. Bowles, co-chairman of the presidential commission.

Aside from being a godfather, Mr. Peterson is also a former adviser to Richard M. Nixon, a onetime chief executive of Lehman Brothers, a co-founder of the Blackstone private equity group and an ex-president of the Council on Foreign Relations. It would be hard to find a more established establishmentarian and yet, in a strange-bedfellows twist, his passionate, persistent and personal “last crusade” against the debt is one he shares — albeit with differences — with Paulists (as in Ron and Rand), critics of the Federal Reserve and the man on the corner with the sign saying, “Lo, the End Is Nigh!”

Both he and they insist that spending cuts, as they are currently conceived, are small to the point of being meaningless. Both he and they suggest that long-untouchable portions of the budget, like entitlements and defense, must be reduced; both he and they describe the multitrillion-dollar debt as an existential threat to future generations.

“The Tea Party crowd, if you want to call it that, is not Pete Peterson’s crowd, but his message speaks to the political mob,” said Leslie H. Gelb, president emeritus of the Council on Foreign Relations. “Pete may be using them as leverage to get to the Establishment, which is his natural audience — to force the Establishment to act.”

Maybe, maybe not. The tonal differences between Mr. Peterson and the Tea Party crowd — he is measured, they are loud; he is patrician, they are populist — are distinct enough that he himself admitted last week to an odd, even aloof, ignorance of the group.

“I don’t know much about them,” he said, adding that he recently had his staff compile a dossier on the group. Cautious, methodical, devoted to analysis, he did what he often does when he feels uninformed: his homework.

DOING homework has long been Mr. Peterson’s way. Raised in Depression-era Nebraska, he is the self-made son of a Greek diner owner who arrived in America speaking no English. Fiscal prudence was banged into Mr. Peterson’s childhood skull. He claims to have bathed with his brother in the lukewarm water that his parents left behind in the tub. A sign on the diner’s paper-towel dispenser read, “Why Use Two When One Wipes Dry?”

After stints at M.I.T. (he was expelled for plagiarizing a term paper) and at Northwestern (he paid his way by waiting on tables at a sorority house), Mr. Peterson worked in advertising, in Chicago, in the Mad Men era, and at 34, he became the president of the electronics manufacturer Bell Howell (where he laid claim to the invention of the boom box). A connection to John J. McCloy, a Wall Street mandarin, helped secure a position in the Nixon administration, where he became known as “the economic Kissinger.”

In 1973, Mr. Peterson went to Wall Street, serving as the chief executive at Lehman Brothers, where he earned a reputation as a cautious, if standoffish, leader focused on long-term profits. After a struggle between the firm’s investment bankers — whom he epitomized — and its aggressive bond-trading desk, he was forced out. Within a year, he founded Blackstone, which he turned into a multibillion-dollar firm with a partner, Stephen A. Schwarzman.

Mr. Peterson’s epiphany about the debt came, aptly enough, while he was looking for a house in the Hamptons. It was 1981, and he recounts making a deal with the seller who ran the Women’s Economic Round Table: she would accept his offer on the house if he would give an address about Ronald Reagan’s budget to her group. He started researching, and “what I found astonished me,” he wrote in his autobiography, “The Education of an American Dreamer”: unbridled government spending, unbridled federal tax cuts and no attention to “the elephants in the room” — Social Security and Medicare.

“He viewed it as a bad approach that would damage the country in the long term,” Mr. Schwarzman said in an interview. “So he started writing articles.”

The first, “Social Security: The Coming Crash,” appeared, in 1982, in The New York Review of Books, and was so controversial for its analysis and apocalyptic tone that the journal set aside an entire issue for rebuttals.

“He strongly anticipated the debate that’s going on right now,” said Robert Silvers, who edited the piece. “Every theme that’s in play at the moment was in that article, particularly health care costs and entitlements.”

Article source: http://feeds.nytimes.com/click.phdo?i=87a49233a71d493e8564050347d4fdde

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