I.O.U.S.A - Addison Wiggin [68]
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140 The
Interviews
Q: Why aren ’ t we fi xing it? Why don ’ t people like to talk about this in Washington? Nobody disagrees with what you ’ re saying.
Peter Peterson: I call these long - term challenges undeniable and unsustainable but politically untouchable. When I speak privately to our senators and congressmen, they all agree these long - term challenges are unsustainable, and no one is denying them. They ’ re just saying that politically we have gotten so used to getting it all, to all of us being entitled, to never giving up anything or paying for anything, that it ’ s become politically incorrect to ask the American people to make any sacrifi ce. In fact, many of our politicians believe it would be politically terminal if they were to do that.
Q: What would you say to somebody who may not know this story as well as you do, but characterizes fi xing entitlements or reforming entitlements as something that the right wants, but that the left side can fi gure out just through tax reform?
Does that make sense? Is there any truth to that?
Peter Peterson: Well, let me give you an idea of the magnitude of the problem. If you look at the projected spending for Social Security and Medicare, it ’ s stunning. Just the increase is 9 percent of the GDP, but roughly three times what we spend on defense.
Now the left is inclined to say, “ Well, let ’ s just get rid of the Bush tax cuts, ” even though most Democrats are only talking about getting rid of the tax cuts on fat cats like myself. If we were to do that, we would increase revenues by 1 percent of the GDP, so it ’ s only one - ninth of the total increase in spending. If you tried to solve this problem with tax increases, you would end up having to more than double our income taxes and double our payroll taxes.
The payroll taxes are already the biggest tax, which 80 percent of people pay, and it falls on the middle class, whom everybody says deserves a tax cut, not a tax increase. Now I ’ m the fi rst to say that the solution to this problem will undoubtedly involve some increase in taxes, particularly on us fat cats, but there is no way you can solve this problem just through tax increases. It ’ s going to require benefi t reforms, and if we start early enough we can do c10.indd 140
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these in a way that is fair and protects the safety net for the truly needy. But if we wait, it ’ s going to be more and more diffi cult to solve this problem.
Q: Who was Wilbur Mills and what was his great idea?
Peter Peterson: I ’ m a little chagrined to tell you, because I was on the Nixon White House, fi rst as an economic adviser to President Nixon and then as secretary of commerce. Wilbur Mills was a Democratic Arkansas congressman who decided one day that he wanted to be president of the United States. And his opening bid was that we were going to 100 percent index Social Security benefi ts to infl ation, something that is very rarely done in the corporate sector. Not only that, but we ’ d increase the benefi ts by 20 percent. Now obviously the Democrats before us, LBJ, had been criticized for big spending. You ’ ll recall guns and butter.
But what I ’ m chagrined about is that we were supposed to be the fi scal conservatives, and we lost our fi scal mooring. The next administration caved in to Wilbur Mills and, without doing a serious systematic study of the long - term costs, which will have amounted to hundreds and hundreds of billions of dollars, they caved in and went along with it. These benefi ts have been going up ever since, up and up, in only one direction.
Q: How would you characterize or grade the fi scal record of the current administration?
Peter Peterson: I guess you ’ d call me a moderate Republican, maybe a Rockefeller Republican. I have a feeling that if that ’ s the case, there are only two of