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Billionaire's Debt Crusade Finally Center Stage

Tuesday, 24 May 2011 04:49 PM

He has been called the godfather of the anti-debt movement, a billionaire investment banker who has evangelized about the dangers of America's long-term deficit for more than 30 years.

He is so obsessed with federal red ink he even sank $1 billion of his own fortune to create a foundation to educate people about the dangers of allowing America to sink deeper into debt.

There are many in Washington who believe 84-year-old Peter G. Peterson's time has finally come.

After warning about the perils of budget gaps since the early 1980s -- when deficits were positively fashionable -- the Peter G. Peterson Foundation will on Wednesday bring together lawmakers, policy experts and top U.S. officials to tackle one question: how to reduce the federal deficit.

"My mind goes to a year ago, when we had our first fiscal summit -- and the question was: is there a serious problem?" Peterson told Reuters in an interview.

"Today there has been a sea change, a major opening of ears and eyes to the issue. The question now is not whether we are dealing with a very serious challenge -- the question is what we do about it."

The debate consuming Washington today is how Republicans and Democrats can strike a deal to cut the long-term deficit and clear a path for the Congress to raise the $14.3 trillion debt limit by Aug. 2.

If the borrowing cap is not lifted by then the United States will begin to default on its obligations, risking panic in the bond markets and another severe recession, according to the U.S. Treasury and market analysts.



Peterson believes there is little chance of achieving a detailed deficit-cutting plan in the "pre-election climate" of next year's presidential and congressional elections, though some sort of agreement should emerge to raise the debt limit.

"There is a pretty widespread view that it will take a crisis to get real action on the deficit," he says, citing conversations with "very serious, informed figures."

Unlike most Republicans in Congress, who oppose tax increases as part of a solution to reduce the debt, Peterson said "everything has to be on the table."

The fiscal conservative refused to be drawn on specifics, but said reforming America's notoriously tangled tax code, as well as government spending, must be tackled.

Peterson, raised in Depression-era Nebraska, is the self-made son of Greek immigrants who became opposed to debt at an early age.

He was Commerce Secretary under President Richard Nixon and chief executive of the now-defunct investment bank Lehman Brothers before going on to found the Blackstone private equity group, where he made his fortune.

He was already involved in economic policy by the early 1980s, running the board of the Institute of International Economic Policy which was later renamed after him.

But he says his epiphany on U.S. deficits came when he negotiated the purchase of a house in the Hamptons.

The seller said she would close the deal if he agreed to address the Women's Economic Round Table, which she ran, on the subject of President Ronald Reagan's budget.

As Peterson studied that budget, "I was struck by several things: a very large increase in defense expenditure, very substantial tax cuts and nothing being done about entitlement programs, which I knew would be a significant issue in the future."

His fiscal crusade began, Peterson said, because "I fear the American dream is threatened. And I am the very lucky beneficiary of the American dream."

"Pete was on this issue before it was cool," said Joe Minarik, the former chief economist at the Office of Management and Budget under President Bill Clinton.

"It's taken a long time to get people's attention and you have to give him a lot of credit for that. Pete and his foundation have been on the right side of waking people up."

Asked if the Wednesday deficits summit would be his last crusade, Peterson was unequivocal. "I'll be crusading until I die," he said.


© 2015 Thomson/Reuters. All rights reserved.

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