The Peter G. Peterson Foundation (PGPF) is sponsoring a "fiscal summit" on April 28 to elucidate perils besetting the nation, particularly anticipated retirement of the Baby Boomer Generation (b. 1946 - 1964) and rising demand for "social insurance." The foundation's focus is on curtailing entitlement spending, including an alleged backstage agenda of influencing Social Security and Medicare privatization.
As a foundation press release insists, "The purpose of this event is to further a national dialogue on solving America's fiscal challenges through several moderated discussions with leaders on the issue from across the political spectrum."
Robert Kuttner, Co-Founder and Co-Editor of The American Prospect and Huffington Post writer, views as hogwash the veneer of political balance in the forthcoming summit speaker lineup: "This is a propaganda event. For the most part, the featured speakers follow the Peterson line."
To appreciate the summit's predisposition before it starts, one must begin with the sponsoring foundation's founder, Peter Peterson, former Commerce Secretary under Richard Nixon and co-founder of the Blackstone Group.
In June 2007, Blackstone became a public company while attracting over $4.13 billion in its initial stock sale and ballooning the company market value to $33 billion. The company enjoyed a lucrative tax break, being taxed at 15 percent (the partnership rate) rather than at 35 percent (the corporate rate). Peterson allocated $1 billion of his wealth to form the Peter G. Peterson Foundation, with him, his wife and his son as sole directors.
Kuttner writes, "Peterson himself, who underwrites the work of the foundation with a billion dollar gift, made his money as one of America's private-equity moguls. Private equity companies have been among main offenders in the world of shadow banking that helped cause the collapse, and are now lobbying against tough financial reform and regulation."
Peterson also wrote a provocative book entitled Gray Dawn. Even the title reveals his sentiments. An aging population is, indeed, a gray prospect, literally and metaphorically. He writes, "If we do not reform tax and spending policies, the benefit outlays for just five programs -- Social Security, Medicare, Medicaid, and federal civilian and military pensions -- will exceed total federal revenues by the year 2030. This would leave zero tax revenue for any other purpose -- not even for interest payments, nor for national defense, nor for education, nor for child health, nor for the federal payroll."
The foundation's gloomy warnings about rising national debt rest on insistence that the government's liabilities have reached over $62.3 trillion, with "tens of trillions in unfunded social insurance promises and rising health care costs."
One-Dimensional Thinking about Fiscal Peril
Generational accounting, the "science" that foments financial fears about the future, tends to be one-dimensional: It's mostly about the numbers. It's by no means an exact science, but entitlement critics present their foreboding numbers as if irrefutable facts.
For example, on page 97 of his book, The Coming Generational Storm, author Laurence Kotlikoff explains how uncertainty interacts with their economic scenarios:
"So current decisions depend on future outcomes, but future outcomes depend on current decisions. The only way to solve this problem is to solve for both current decisions and future outcomes simultaneously -- hence the term simultaneity problem. In practice, the solution begins by simple guessing future outcomes. These guesses are then used to determine current decisions.
"Next, the current decisions are used to update the guesses of future outcomes, which are then used to generate a new set of current decisions, new updates of future outcomes, and on and on until the model has converged."
Dire prognostications being foisted by PGPF are based, just as Kotlikoff suggests, on guesses. They might be intelligent guesses, they might be guesses based on sophisticated computer modeling, with convergence of current public policy decisions and future anticipated outcomes, but they are nevertheless, guesses.
How much reliance should we place on their predictions?
Look at it this way: Show me a generational accountant who, in writing, successfully predicted two of the most significant business and technological changes in the 20th century just ten years before these transformations. Show me someone now warning of economic disaster in the mid-21st century who in 1975 predicted how desktop microcomputers would transform everything in business by 1985. Show me a generational accounting expert who in 1985 predicted the advent and adoption of the internet in 1995.
If entitlement doomsayers could not predict these major changes ten years before they happened, how reliable can they be at predicting our future 30 or 40 years from now? What possible future transformations in genetics, robotics, information technologies and nanotechnologies have they not considered?
Warren Buffet, who apparently is not on this summit's speaker list, has wisely observed that the proposed fiscal crisis due to entitlement spending does not take into full consideration expansion of the economy over the coming years, rendering the impact of entitlement spending as a percentage of overall GDP much less substantial than PGPF predictions.
Frankly, dire predictions do not show much sociological imagination about how Boomers and older generations can and will transform the future of aging. Prognostications do not consider entrepreneurial innovation, changing technologies, active life extension, liberalizing social conceptions of the aging process, and greater late-life engagement.
We can reasonably anticipate future transformations from the same generations that led the microcomputer and internet revolutions. But, as Mr. Kuttner observed, gloomy conclusions coming from the 2010 Fiscal Summit are pretty much foregone.
There's an agenda, and then there's the agenda.