I.O.U.S.A - Addison Wiggin [70]
Q: What factors led to infl ation?
Peter Peterson: In 1971, I joined the White House staff as an economic adviser to President Nixon and I became secretary of commerce. Infl ation became an issue. Recall that the energy problem got much worse with the embargo in 1973. Recall that food costs were going up. Recall that wages, particularly in manufacturing, were going up, and recall that during the ‘ 70s the money supply created by the Federal Reserve had gone up very dramatically, so we were confronted with a signifi cant infl ation problem. Now the president chose to do something that shocked a number of us on his staff. You may recall that they put in wage and price controls. That ’ s how concerned they were about c10.indd 143
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144 The
Interviews
infl ation. The Republican Party was not only supposed to believe in fi scal conservatism, but in allowing the market to make these adjustments. Wage and price controls were normally something that one thought of in socialist or state - controlled economies, and a number of us were utterly shocked by the decision to set up wage and price controls, but it was some indication of how concerned the president was about infl ation.
Q: When runaway infl ation occurs, what does it feel like for the country as a whole?
Peter Peterson: Runaway infl ation tends to hurt fat cats like myself considerably less, because we have a lot of reserves. But if you ’ re a poor or a middle - class family, and you spend a lot of what you make on necessities, on food, on clothing, on rent and mortgages and so forth, all of those things go up very substantially in an infl ation period and interest costs go very high. As a result of that, infl ation is often accompanied by recession, so that the less fortunate in our country end up not only having to pay much more for necessities, but lose their jobs because the economy is slowing down.
Q: It sounds like you know a little bit about growing up in a family that didn ’ t have a lot of money. Can you tell me what it was like growing up in Nebraska?
Peter Peterson: Yes. I ’ m the very fortunate recipient of the American Dream. My parents were Greek immigrants who came to this country at age 17. They came without a penny and without a word of English. My father took a job that no one else wanted, washing dishes in a caboose with no air - conditioning in the middle of the Nebraska plains, and he saved his money and saved it and worked and worked. His restaurant was open 24
hours a day, seven days a week, for 25 years. When it came time to close the restaurant he didn ’ t even have a key to lock the door because the place had never closed before, but during that period unemployment was 25 percent of the work force. We were in a true, true depression and all of us learned to live on a very, very, very low budget.
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Q: It sounds to me that, as you talk about fi nding a solution to this big problem that we have, you are thinking about people that are in that position. Are you not?
Peter Peterson: Yes. Call me a moderate. Call me whatever you will. I think that, whatever we do with our entitlement programs, we have to do everything we can to preserve the safety net for the people that really need them. We ’ ve gotten into some very bad habits in this country called entitlements for all, whether we need the benefi ts or don ’ t need the benefi ts. I have arguments with my Democratic friends in which I suggest that perhaps some of us who are well off should be willing to give up a lot of our benefi ts, and they say, “ Oh, no. You can ’ t do that because programs for the poor are poor programs and they don ’ t survive. ” And my question to them is, “ If you have to bribe the rich to pay the poor, and if everybody is entitled to be on the wagon, who ’ s going to pull it? ”
Now I would say something else about all this. It ’ s easy to get very gloomy about these things, but I remind you that this