Pete Peterson Doesn’t Need His Social Security
He has said so himself many times. Peter Peterson first came to national prominence more than three decades ago as commerce secretary in the Nixon administration. However, he is far more widely known in his reincarnation as a crusader against Social Security and Medicare.
Fifteen years ago, Peter Peterson used some of the immense wealth he had accumulated as an investment banker to create and bankroll the Concord Coalition. The Concord Coalition was designed as a bipartisan organization promoting fiscal responsibility, with its primary targets being Social Security and Medicare. Peterson and his crew put out screeds, with titles like “Grey Dawn,” that attacked these programs and warned that the growing wave of elderly would bankrupt the country.
Like most of the granny bashers, Peterson routinely played fast and loose with the facts. For example, while warning about the poverty facing future generations, he suggested cutting the annual Social Security cost of living adjustment because the official consumer price index (CPI), to which retirees benefits are indexed, overstates the true rate of inflation. However, if the CPI really overstates inflation, then incomes are rising much more rapidly than the official data show; and future generations will be far richer than we could possibly imagine. (If income rises by 4 percent and the inflation rate is 3 percent, then real income has risen by 1 percent. But if our measure of inflation is wrong, and the rate of inflation is just 2 percent, then real income has risen by 2 percent.)
Peterson also did his best to conceal the real source of projected budget problems: a broken US health care system. As Peter Orszag, the director of the Congressional Budget Office, has repeatedly noted, the projections for exploding deficits are driven by projections for exploding costs for government health care programs like Medicare and Medicaid. The costs of these programs are in turn driven by rising private sector costs.
If we fix our health care system and get costs under control, then the growing population of elderly will pose no greater burden in the future than in the past. (We have always had an aging population. We live longer than our parents’ generation and our children’s generation will live longer than our generation.) If we don’t fix our health care system then it will inflict enormous damage on the economy, even if we eliminate Medicare, Medicaid, and other public health care programs altogether.
But Peterson’s priority is not fixing health care, it is cutting Social Security and Medicare; and he is not a man to let facts or logic get in his way. He used his wealth to buy a substantial audience for his books and his views, most often in forums where they could not be challenged by real experts.
I recall hearing Mr. Peterson pontificate for an hour, completely unchallenged, on a major public radio talk show. At one point, he assured his audience, with reference to the solvency of Social Security, “trust me, there is no trust fund.” Mr. Peterson repeated this lie verbatim, just in case the meaning escaped his audience.
Of course, there is a Social Security trust fund that holds more than $2 trillion in government bonds. Under the law, these bonds are to be repaid from general revenue, which comes almost entirely from the personal and corporate income tax. In other words, the bonds held by the Social Security trust fund, which are supposed to pay the Social Security benefits of retired workers, are effectively tax obligations for wealthy people like Mr. Peterson. If the bonds held by the Social Security trust fund are never repaid, Mr. Peterson and/or his heirs could save tens of millions of dollars from their future taxes. It shouldn’t be surprising he is trying to convince the public that the trust fund doesn’t really exist.
But, this is just one side of Peter Peterson. He was in the news last week for a totally different reason. It turns out, a loophole in the current tax code allows hedge fund and equity fund managers (like Mr. Peterson) to pay taxes on their compensation at a much lower rate than ordinary workers. While middle income workers like school teachers and firefighters typically face a 25 percent income tax rate, Peter Peterson and other fund managers get to pay the much lower 15 percent capital gains tax rate on the tens of millions they earn each year.
According to The Washington Post, Mr. Peterson was actively lobbying Congress to ensure he and his ilk are not taxed like ordinary workers. The Post reported that Mr. Peterson’s efforts apparently paid off: He and his fellow fund managers will continue to enjoy special tax breaks. As Pete Peterson says, he doesn’t need his Social Security.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer ( www.conservativenannystate.org). He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.
“They, with the Gold, make the Rules…” as we enter a neo-’Gilded-Age’.
More vomit and bile rising. Looks like the housing debacle was so central in pumping money into our economy that the same “ilk” are shrieking for more handouts today. The rich are protected.
I agree with most of what this article is saying. However, its dead wrong with respect to the wealthy “wanting” the government to not repay some (say, social-security related) government bonds.
Government bonds are tax free (federal level at least), so their payments don’t really increase a wealthy bond-owners tax bill in the first place. The second point is that government bonds (treasury certificates, municipal) are paid for in real money. So, in your scenario, Mr. Peterson (or whichever wealthy owner/investor) not only wouldn’t get their 5% yearly interest payment, they also wouldn’t get repaid when the bond matures. This is like the argument that people who are unemployed “make out like bandits” because they “saved” having to pay income taxes since they no longer have an income. You hurt the credibility of an otherwise good article with this type of mistake.
Be certain that Mr. Peterson and his ilk WANT to get paid on those treasury bills (interest and principal when due). And they are even more egregious in not wanting to even be taxed at the level that a salaried working making $50-100K per year gets taxed. Some of the Republican presidential hopefuls (I think it was Romney, maybe others as well), have gone back to the old canard that ANY investment-related income should not be taxed whatsoever.
How RICH do you need to be? I mean really? You make Tens of Millions every year for 10-12 years and you mean to tell me thats not enough ? The fact that 5 generations down the way will enjoy that same wealth is not enough ?
I am all for those of us that want to make it big, but at somepoint you have to realize that even if you bought everything you ever wanted twice in the same day, you couldn’t spend that much money. It’s insane!!
I just want to make more money so I can leave work and travel the world. SO I started planning retirement early, i’m 24.
SO it’s a good chance I will be a millionaire when I am 55 or so.
Thats about it, thats good enough for me. I mean $129 million bonuses? $29 million annual salaries not including stock options ?
And you mean to tell me you can’t pay your fair share of taxes ?
You think that you have to have everyone elses cake as well as yours ?
You could buy a freakin island and somepeople can’t afford to feed there kids while working 3 jobs!!!!
Something has got to change, there needs to be a role reversal and soon.
~Future~
circle the date on your calendars: on oct 16, 1793, marie antoinette was beheaded by the long-suffering people of france, and on the same date in 1946, ten nazi war criminals were hanged.
any interest in arranging the same kind of ceremony for our lower-taxes-than-yours crowd?
My aunt is in her 80s and tells me about her wealthy friends who owns their own home, plus vacation homes, and NONE of it is in their own names. Why? So if they end up in nursing homes, their property doesn’t get used to pay the bills. It’s already in the hands of their offspring. So WHO pays the bills for these people? WE DO! It’s fraud, plain and simple. Pete Peterson isn’t the only one.
Although Peterson and others rail on about the supposed evils of Social Security, the point we should grab out of this article is this: The Social Security Trust Fund is owed $2 trillion dollars (that’s 2,000 billion dollars) from “general revenue” (from corporate and personal INCOME taxes) for the bonds held in the Trust Fund. This amount due to Social Security still grows every year, not only by the interest accruing on the bonds, but also by the fact that our SocSec taxes collected still exceed SocSec administration expenses and actual benefits paid, each year, and this trend is expected to continue about a decade yet before it begins to reverse.
Republicans want to modify, reform or privatize Social Security because they do not want to see the corporate and personal income taxes that will be required to repay even one penny of the Trust Fund bonds EVER.
The simple answer to this is for us to elect lots and lots of Democrats (or independent “progressives”) to The White House and Congress for the next 50 years during the aging phase of the baby boom. That is all that is required to fix Social Security, period. It’s a simple matter. Republicans will not ask corporations and wealthy individuals to repay any of the Trust Fund bonds. Democrats and progressives will.
The correct answer to fixing Social Security has nothing to do with raising the “cap” on individual earnings subject to Social Security Tax, although a lot of people are calling for this. They could eliminate the “cap” today, collect more Social Security taxes, put them in the Trust Fund, and then spend that money too on other things (such as income tax cuts), just as they have been for the last 20 years. The answer is to be certain we have politicians with enough integrity to balance a combined federal budget without borrowing any more from Social Security, plus arrange for “general revenue” sufficient to pay back what’s been borrowed already. This is going to take getting rid of all the “Bush” tax cuts at the high end, and Democrats (plus a few “progressives, if we actually elect any) are the only ones who will do it.
Pete’s secret to success: never let the facts get in the way of a good story.
“Of course, there is a Social Security trust fund that holds more than $2 trillion in government bonds.”
Peterson might be wrong about privatizing Social Security, but he does have a valid point. The Government does not have $2 trillion sitting in a bank account. It will have to raise taxes, cut spending, borrow, or print money to deal with this.
You can’t call your own debt an asset, or else I could make myself the world’s first trillionare just by saying:
VAGreen,
IOU $1,000,000,000,000
VAGreen
So who supports the elderly when Social Security and Medicare are eliminated? And what if they have no children or if their children can’t even make ends meet with their current obligations?
Bankrupt everybody (except the super rich, of course)
VAGreen:
Social security debt is included in the budget projection, just like the rest of the Public Debt. The cost to the federal government is exactly the same as to the highway dept, USDA, Military, etc.
HabitatVic:
The social security bonds are a different class from the other debt instruments (”special issue securities”). If the trust fund held T-Bills and T-Bonds, I’d agree with you, but since it has a different kind of “paper”, the government could (theoretically) call those bonds and certificates unredeemable.
All:
Apparently a lot of the “there is no trust fund” line comes from the idea that, in an economic analysis, it might not actually count as “savings”. At least, that’s the Wikipedia rundown, subject to change at moment’s notice.
2 Trillion? Hmmn? I’ve heard that number before. 2 trillion…2 trillion? Ah! Now I remember. 2 trillion in tax cuts. Gee what a coincindence!
Peter G. Peterson…
Senior Chairman and Co-Founder, The Blackstone Group
Peter Peterson — CEO of the Blackstone Group, parent corporation of one of three lease-holders for WorldTradeCenter 7! on 9-II; also chairman of the CFR and the Federal Reserve Bank of New York on 9-II; CEO of the Institute for International Economics in October 2000
–
http://www.whodidit.org/cocon.html
In case you haven’t noticed the richest 0.01% of americans are at war with the rest of mankind, and they’re winning.
Think they’ve got it figured out this time; and they won’t be controled or exterminated.
A shame really they haven’t figured out a way to take it with them.
Someone said, Behind every great fortune, lies a great crime.
Since the criminals own the government, well, don’t expect much.
Golly, gee, it seems to me if we gut SS and Medicare, there will be no problem in repaying the bonds. No costs, no problem. Who will get the money owned by SS?
But the AMA, American Medical Association, came to a conclusion, that all the money spent by Americans for health insurance, co-pays, employment costs for insurance companies, and medical billing by hospitals and DRs would be less than is spent now.
Duh! I just can’t figure out what is the real solution, here. Do not forget there are 50+ million Americans that can not afford insurance, and when visitors come to USA on vacation, they NEED to by health insurance during their stay or else.
Future.me October 16th, 2007 1:32 pm
“How RICH do you need to be? I mean really? You make Tens of Millions every year for 10-12 years and you mean to tell me thats not enough?”
Future.me, it certainly is nice to know there are some young people around now who have their heads screwed on right. This is exactly the point I’ve been making for years. As an addendum to your statement I would like to add, “Quit all this bitching about paying your taxes!!!” Doesn’t it correlate that the more you PAID in taxes the more you MADE!!! Unless the government takes 100% of what you made you are still way ahead, AND have also gained moral capital by knowing you helped people less fortunate than yourself. But nooooo, the greedy bastards just want everything they can get their filthy hands on, and live by the philosophy of, “I got mine, and screw you!”
Well that’s ok, because I have seen more than enough evidence that karma is real, and though I might go to my grave in the impoverished state I presently am it will be with a clear conscience.
A few years back one of the poems I wrote was about a greedy person, who had accumulated great wealth in his lifetime by taking advantage of his less fortunate peers & contemporaries. One great wish in his miserable life of grubbing for a buck, above even taking the time to realize his lifelong dream, was to be able to spread his wings and soar like a bird. Well he got his wish in the next lifetime (sort of) when he was re-incarnated as a common fly sitting on a big pile of shit. I should probably re-visit that poetic story, and add that it was the poor person he had deprived a chance of happiness in his first life who had (in their second lives) defacated that big smelly pile that the previously wealthy person must endure for a lifetime. Ahhh…poetic justice; don’t you just love it?
I know, I know, I’m a sick puppy, but at least I can still laugh in the face of misfortune (or none), and with a clear conscience at that. LOL LOL LOL
On a more serious & tragic note I reply to BugsBBunny III October 16th, 2007 10:32 pm
“2 Trillion? Hmmn? I’ve heard that number before”
Yes we have. That’s the same estimate of what the short & long term costs of this fiasco in Iraq will end up costing. When you add the 1-2 trillion the neo-CON tax cuts have CONNED the majority of the citizens out of these numbers make the slight re-adjustment needed to correct our social safety-nets seem like a minor effort.
One of the biggest outrages the right uses to slime the left is the term “Tax & spend Democrat/liberal”. I don’t know about you, but it seems to be much more fiscally responsible than to be a “Borrow & spend Republican/conservative”, right? (or better yet correct?)
This 2 trillion isn’t going to be called all at once. Baby boomers are starting to collect but the fund is still getting money put into it.
DANIEL DAVID___ You have contributed a very informative post on Social Security and I encourage all to read it carefully. I believe Bush and some Republicans wish to do more than modify or privatize though, and that is to wreck it and eventually end it. Let the faith-based organizations take over the existence of the elderly and disabled is their plan. Also, raising the cap from around $90,000 to $200,000 or so would keep the system in the black for a much longer period and would reassure the younger people that it should still be there for them. Of course the government can always raid it for war as is being done now, but hopefully we can get some sane people in control shortly and get back on course. The bigger immediate problem is Medicare and Mcaid but Bush is dead set on knocking out Social Security as he and his rich friends will of course not need it.
If there’s anyone around to ask in some future age what brought down the economy of the mighty United States in the early part of the 21st century, this example of the short-sighted greed of Pete Peterson and his ilk can be cited as one major reason.
Of course BushCo intends to empty the trust. Remember that little charade he went through, when trying to push privatization? Opening the drawer & finding it empty. He waren’t playacting! The Senior editor of FOrtune MAgazine wrote an article, and I’m sorry I didn’t bookmark it to pass it on. He said that 78 BILLION, dollars collected THIS YEAR, ( THAT”S YOURS) for social security, was appropriated by the treasury dept for other purposes. ( missile shields in Poland to annoy Putin? Blackwater salaries?)….Even tho I’m on SS, retired at $3.50 per hour I have to suppliment. And when I was cleaning the town office, they took social security out of that paycheck. Isn’t that double dipping?
I dispute the statement ” people are living longer now”! Another MSM, AMA, talking point!……….My ancesters, have lived into their 80’s for 3 centuries or more. One was shipwrecked at Sandy Hook, captured by the Indians, then taken by them to NY City ( Ransome of Red CHief?) SHe married an English man there and had 10 children; lived to be 112! More immediatly, my Great Grandparents lived to be 94 & 96, IN THEIR OWN COTTAGE…………………No assisted care facility, no nursing home! I’m sure the neuighbors probably brought in hot meals in their last years………but I was 6 whenthey died and I remember Nanny cooking meals, laundry, cleaning the house, & baby sitting her high energy, Great Grandaughter! My Mother just turned 92 this month & is in great shape although she has lost her memory and is in a nursing home…….
This year; 75% of my friends who needed medical procedures, either almost died and required lengthy stays in nursing homes or were inconvenienced for months….with staph infections, contracted in the hospitals, ( 2 out of the 3 local) ( which send out quarterly full color brochures advertising their services!) WHen I was a kid, there was a hospital, you got sick you went there! No advertising needed. One of these friends was there for elective knee replacement!
Survival of the Fittest used to be about natural selection, those with the strongest genes and immunity systems. Now, since Modern Medicine it’s about who can afford to eat mercury free salmon & fresh fruit, instead of McDonalds! ( And suffer less stress!)
What survival instinct made those 2 women scram out of the WTT in spite of the loud speaker saying it was safe to return to your offices.? Survival Instinct, taught? in the genes?…………..