Spending Big to Stop Big Spending

Wall Street financier Pete Peterson got a decent return on his investment late June when Senate Republicans ended the Democrats' third attempt to push though an extension of unemployment benefits and President Barack Obama failed to persuade his European counterparts at the Group of 20 confab in Toronto to maintain economic stimulus programs. "I haven't seen anything like this kind of concern in the 30 years I've been talking and writing about this," says the 84-year-old fiscal hawk.

Peterson has committed $1 billion of the fortune he made as co-founder of private equity firm Blackstone Group to his personal crusade: raising the alarm about the $13 trillion national debt. He is paying the bills at a foundation that bears his name, supports a network of like-minded advocacy groups, backs The Fiscal Times, an online newspaper, formed a commission of experts, and organizes conferences with marquee guests such as former President Bill Clinton. The crusade appears to be in sync with the concerns of most voters, with a June 4 Gallup poll showing that the federal debt and terrorism were tied for first place (at 40 percent each) as the biggest threats to Americans' future well-being.

His influence is provocative even among those who agree the national debt is a long-term worry. "Everywhere you look, he's trying to buy the debate," says Roger Hickey, co-director of the liberal advocacy group Campaign for America's Future. He calls Peterson-backed organizations, such as the Concord Coalition, nothing more than "front groups" used to help "stampede" lawmakers into cutting Social Security and Medicare.

Some congressional Democrats criticize what they see as Peterson's single-minded emphasis. House Ways & Means Chairman Sander Levin (D-Mich.) says acting to narrow the deficit must be balanced against the need to "make sure we don't slip into another recession."

To his supporters, though, Peterson is the patron saint of fiscal responsibility. "He has devoted more personal wealth to reducing the deficit than anybody in the history of the world," says Representative Jim Cooper (D-Tenn.), a fiscal conservative who voted against the jobless benefits measure.

Peterson's interest in fiscal rectitude has deep roots: The onetime Commerce Secretary for President Richard Nixon has devoted four books and countless op-eds and speeches to the subject. "I've been boring people with it for decades," he said in a speech. Two years ago he kicked the campaign into high gear, vowing to devote a substantial portion of his $1.8 billion payout from Blackstone's 2007 initial public offering to the cause. As the son of Greek immigrants, he says his goal is to ensure that future generations aren't deprived of similar opportunities by a national debt his group estimates at $61.9 trillion, or $200,000 per American, including the cost of fully funding Social Security.

He has been careful to emphasize that he understands the "urgent need to create jobs." At the same time, he says, tough choices lie ahead, including tax increases and cuts in spending that could target entitlement programs. He supports a "well-targeted stimulus" so long as "it is accompanied by meaningful action on the longer-term structural debts and deficits." Peterson had disbursed $300 million of the $1 billion pledge by Mar. 31 of last year, according to tax records. His foundation says its next filing will show that those numbers have increased in the current fiscal year. One of the groups that receives funding from Peterson, AmericaSpeaks, on June 26 organized public meetings on the deficit in 19 venues across the U.S.—a gathering that drew 3,500 participants, according to its website.

The bottom line: By pledging to spend $1 billion on an anti-deficit crusade, Pete Peterson is winning converts—and making some enemies—for his cause.

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