Pete Peterson, retired investment banker and advocate of balancing the federal budget, said Republican presidential candidates engaged in “nonsense” when they opposed raising revenue to help cut the deficit.
Peterson, who said he has watched all of this year’s presidential debates, called today for an end to anti-tax “theology” that he said threatens the U.S.’s economic health. “The lowest” point of the debates was the response by the candidates at the Reagan Library on Sept. 7 when none said they would accept $1 in revenue increases for $10 in budget cuts.
“We’ve become so theological and locked into these positions,” Peterson said at a casual discussion with students at Dartmouth College’s Tuck School of Business before the presidential debate tonight in Hanover, New Hampshire.
“Let’s quit this ideology and theology where any revenue increase is going to destroy the country,” said Peterson, chairman emeritus and co-founder of Blackstone Group and chairman of the Peter G. Peterson Foundation. “Part of what has to happen is somebody has to step forward and say this is nonsense and why it’s nonsense and say we need a balanced program.”
Peterson, interspersing observations about the federal deficit with self-effacing humor about his own life, answered questions from students and the editor of Bloomberg Businessweek magazine at a forum the day of a Bloomberg News-Washington Post-sponsored debate of the Republican presidential candidates. The Peterson Foundation also is sponsoring tonight’s debate.
Was it true that Peterson, a former chief executive officer of Lehman Brothers, president of the Federal Reserve Bank of New York and U.S. commerce secretary under President Richard Nixon, had cashed out of his business with $1.8 billion, Businessweek Editor Josh Tyrangiel asked?
“Three times,” said Peterson.
What was it like receiving that wire, he was asked?
“Better than the alternative,” he said.
“I was a lucky American dreamer,” said Peterson, son of a Greek immigrant who worked for a railroad washing dishes, saved money and “started the inevitable Greek restaurant. His place was not noted for its cuisine, for sure.”
When he retired, he wanted to pursue a passion of his own, he said -- the burden of U.S. debt.
Threat to America
“I decided the most important threat to America’s future was the long-term debt,” said Peterson, calling the growing deficit “truly unsustainable.”
Peterson supports a balanced approach to combating debt espoused by the co-chairmen of President Barack Obama’s deficit commission, former Republican Senator Alan Simpson of Wyoming and Democrat Erskine Bowles, a chief of staff for former President Bill Clinton. Simpson and Bowles have called for a combination of tax increases, including elimination of exemptions, and budget cuts.
Peterson said that containing entitlement spending on programs such as Social Security and Medicare must be in the mix. “Never mind what the politicians say,” he said. “There is no solution to our long-term situation without reforming entitlements.”
Yet lower-income Americans shouldn’t bear the brunt of those cuts, he said.
The thought of reducing benefits for the poor is “immoral” and “unthinkable,” Peterson said. “But there are a variety of things you can do to reduce the benefits for people like me.”
“Given our demands for investment, the whole idea of universal entitlements in which all of us -- regardless of income or net worth or whatever -- are entitled to a subsidy is simply not sustainable,” he said.
“The thrust has to be that the wealthy get less and pay more,” he said. “It’s the moral thing to do, and ultimately the politically necessary thing to do.”
As a congressional supercommittee searching for ways to trim $1.5 trillion from the deficit by late November works behind closed doors, Peterson said he has found some optimism in the possibility of members making tough decisions.
“Where I get a little bit of hope is that in their privacy they are able to make deals that they are unable to make publicly,” he said.
That would include taxing carried interest, a staple of the business in which Peterson achieved success, as earned income instead of as a capital gain.
“I am often asked some very pointed questions,” he said. “It’s rather easy for me to answer it now that I am retired.” He said “it’s hard to argue” why carried interest shouldn’t be taxed at the higher rate applied to other forms of income.
If the advice of Simpson and Bowles were followed, Peterson said, higher taxes such as those would be offset by lowering top personal and corporate tax rates.
“The case for simplifying and reforming the tax system” and abolishing the many inequities in it, Peterson suggested, “is enormous.”