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Pt 2 coming on Monday
President Obama, former President Bill Clinton, and others join Billionaire Peter Peterson in supporting new commission to solve long-term deficits.

Produced by Jesse Freeston.

Story Transcript

JESSE FREESTON, PRODUCER, TRNN: The financial world is focused on a debt crisis in Europe as many in Greece continue to resist further cuts to wages and pensions, as well as a 4 percent increase in their value added tax, now found at 23 percent. The so-called austerity measures are being demanded by the European Union and the International Monetary Fund in return for loans to cover Greece’s debts. On Tuesday, the IMF issued a warning to the United States that it should take measures to reduce its deficit. This comes one week after President Obama launched the first meeting of his newly convened Commission on Fiscal Responsibility.

PRES. BARACK OBAMA: We have an obligation to future generations to address our long-term structural deficits, which threaten to hobble our economy and leave our children and grandchildren with a mountain of debt.

FREESTON: This is Jesse Freeston for The Real News Network, reporting from Washington, D.C. I’m at the Ronald Reagan International Trade Center, which is playing host today to Fiscal Summit 2010. We’re hearing today from some of the big names of American economics—Bill Clinton, his former treasury secretary Robert Rubin, along with former Fed chairman Alan Greenspan. There’s a consensus here amongst participants that there’s a looming debt crisis. The event is hosted by the Peter G. Peterson Foundation. The founder of that foundation, Peter G. Peterson, a well-known Wall Street player, opened the conference with his understanding of the crisis.

PETER G. PETERSON, FOUNDER, PETER G. PETERSON FOUNDATION: For the first time in our history, generations of Americans could be facing a future less bright than the past. For our kids, there would be fewer jobs, greater burdens, more insecurity, and diminished dreams.

FREESTON: Attendees to the conference were given a series of Peterson-funded studies and DVDs, which project the national debt exploding from roughly 60 percent of GDP today to 300 percent by 2040. Former chairman of the Federal Reserve Alan Greenspan challenged Peterson on the reliability of his data.

ALAN GREENSPAN, FMR. FEDERAL RESERVE CHAIRMAN: In my experience, and I think the experience of all those who are putting these forecasts together, is that our ability to forecast is very poor.

FREESTON: I spoke to Tom Ferguson, a professor of political economy at the University of Massachusetts who has been following the so-called deficit hawks like Peterson for years.

THOMAS FERGUSON, PROF. POLITICAL ECONOMY, UMASS BOSTON: All these guys’ deficit projections, they begin to get scary decades out. And by simply burying the growth rate, you can produce almost any set of numbers you want.

FREESTON: Peterson has been predicting fiscal disaster for decades. In his October 1987 feature in The Atlantic Monthly, he wrote that, quote, “now the day of reckoning is at hand.”

FERGUSON: There are some people you just don’t want to listen to lectures from. Like, I’m not sure I’d listen to a lecture by Hugh Hefner on the dangers of sex. Well, frankly, listening to Peter Peterson on the dangers of the federal deficit is a little bit like that.

FREESTON: Ferguson believes that Peterson’s personal evasion of income tax puts in question the sincerity of his campaign to save the public coffers.

FERGUSON: This guy is a billionaire who has benefited for years from one of the largest tax breaks in the federal tax code, that so-called carried-interest provision, which allows hedge fund and private equity managers to pay taxes on their incomes as capital gains. You know, the rest of us pay at income tax rates. This guy is actually still defending this tax break, and, you know, he has the affrontery to start talking about the federal deficit. So, you know, I have a problem right there.

FREESTON: But it’s not just Peterson that’s preaching apocalypse. So were the cochairs of President Obama’s commission, Erskine Bowles and Alan Simpson.

ERSKINE BOWLES, FMR. CHIEF OF STAFF TO PRES. CLINTON: This is the most predictable economic crisis in history. And it is. This nation is on autopilot. And if we don’t change and make big changes, we are going to face disaster. Everything you love will not be there. How’s that for an answer? Everything you deeply love, and you button your shirt, your heart fell out, everything there in government, the children and the poor, is not going to be there. There won’t be any bucks for them because of automatic pilot.

FERGUSON: The whole thing reminds me, frankly, of the campaign to get the U.S. into the Iraq War. This time, instead of weapons of mass destruction being suspected, you’ve got, you know, claims of an economics of mass destruction.

FREESTON: A different Middle East analogy was employed by 60 Minutes correspondent Lesley Stahl, who served as moderator for the opening panel.

LESLEY STAHL, CORRESPONDENT, 60 MINUTES (CBS): And it reminds me of the Israeli-Palestinian endless, endless problem, where there’s a roadmap. There’s been a roadmap since President Clinton was in office. And everybody knows the answer. And to some extent, this is what you’re confronting. Everybody knows you’re going to have to raise taxes and cut things, and big things, like put restrictions on Social Security. Everybody knows that.

FREESTON: This belief that there is consensus on the nature of the problem and the solution to it was repeatedly reinforced. While there was some talk about new taxes and cutting some wasteful military spending, the major themes of the conference were how to cut Social Security and Medicare. Congressman Paul Ryan, another member of President Obama’s commission, has become a key voice in the campaign.

REP. PAUL RYAN (R-WI): The point is this. These programs must, have to change, if we’re going to avert a forthcoming debt crisis. Social insurance strategies of the 20th century are not sustainable in the 21st century, and so they have to be redesigned. We do not have a choice.

FREESTON: With the retirement of the baby boomer generation, the U.S. Social Security Fund is projected to go into deficit within the next decade, meaning it will take in less in payroll taxes than it will pay out in retirement benefits. But the fund has saved up almost $3 trillion over the last decades of surpluses, which is believed by many to be enough to cover 30 to 40 years into the future. Robert Greenstein of the Center on Budget and Policy Priorities called out Congressman Ryan on his claims of Social Security’s unsustainability. Greenstein argued that even the projected deficits are avoidable.


ROBERT GREENSTEIN, FOUNDER, CTR. ON BUDGET & POLICY PRIORITIES: To say that the fundamental problem is that Social Insurance by its nature is unsustainable seems to me entirely incorrect. The long-term imbalance in Social Security is about 0.7 percent of the gross domestic product, you know? That’s about the same cost as the cost of making permanent the Bush tax cuts for people over $250,000 a year.

RYAN: What about the $38 billion in Medicare?

GREENSTEIN: It is not because there’s something inherently inefficient in Medicare. It pays providers less than the private system. It has low administrative costs. The problem were health care costs systemwide.


FREESTON: Health care costs per person in the U.S. are well above the universal health care systems employed in the rest of the world, and Greenstein suggests that this is the key to the deficit problem.

GREENSTEIN: Transforming Medicare into something that no longer functions as an effective safety net and not dealing with health-care cost growth systemwide would greatly increase hardship among seniors, without dealing with the long-term fiscal problem.

FREESTON: On this front, Ferguson is troubled by the timing of this deficit campaign.

GREENSTEIN: The health-care bill did very little to rein in the cost in what—talking deficits suddenly, after doing a bad health-care bill, that’s made-to-order to for sort of the foolish remedies where, like, you just announce, we’re going to take $600 billion out of Medicaid or Medicare.

FREESTON: Join us for part two, when we examine the public-relations campaign to convince Americans of the need to cut their retirement benefits.



Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.

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Thomas Ferguson is Professor of Political Science at the University of Massachusetts, Boston and a Senior Fellow of the Roosevelt Institute. He received his Ph.D. from Princeton University and taught formerly at MIT and the University of Texas, Austin. He is the author or coauthor of several books, including Golden Rule (University of Chicago Press, 1995) and Right Turn (Hill & Wang, 1986). Most of his research focuses on how economics and politics affect institutions and vice versa. His articles have appeared in many scholarly journals, including the Quarterly Journal of Economics, International Organization, International Studies Quarterly, and the Journal of Economic History. He is a long time Contributing Editor to The Nation and a member of the editorial boards of the Journal of the Historical Society and the International Journal of Political Economy.