The case of Pete Peterson

I.

In today’s New York Times there is an excellent, excellent profile of Pete Peterson, co-founder of Blackstone Group, former Chairman of the Council on Foreign Relations, and anciently, Secretary of Commerce during the Nixon administration. I have always had a genuine respect for Mr. Peterson due to his relentless advocacy for fiscal and budgetary matters. In my estimation Mr. Peterson picked the least sexy (but most important) issue on which to pin his legacy throughout the years, and as one would expect, not many folks have paid attention to him, except for a brief spell during the Clinton years when some degree of fiscal responsibility reigned in Washington. But he has been steadfast in his pursuit of raising his fellow Americans’ awareness of just how important the public purse is, or as the Times had it,

“For Mr. Peterson, a former commerce secretary under President Richard M. Nixon, his giving reveals who he really is – less a Wall Street titan than a persistent Jeremiah who for 26 years now has prophesied that fiscal and trade deficits will lead to a financial Armageddon.”

The occasion for the Times article was Peterson’s announcement of a new philanthropic enterprise, a foundation bearing his name that will seek to “increase public awareness of fiscal imbalances, Social Security deficits and nuclear proliferation.”

Of course, Mr. Peterson attempted something in this vein before with the creation of the Concord Coalition in the early nineties. It was an active force for a few years, but once President Clinton managed to balance the budget for a brief spell, a lot of the vigor of the organization slowly drained away, despite the persistence of the underlying problems with the federal budget – the runaway growth rates of entitlement programs, chiefly healthcare-related.

So now Mr. Peterson tries again, and this time he is putting his millions where his mouth is. I look forward to seeing his foundation at work and applaud Mr. Peterson for his resolve and selflessness.

II.

Not everyone, however, is as unquestioningly effusive in their praise of Mr. Peterson. In the aforementioned news article The New York Times couches the announcement of the Peterson Foundation within the current debate over the 15% tax rate on carried interest that has helped to buoy the profits of private equity firms, such as Mr. Peterson’s Blackstone Group. The Times posits,

“Can a man who has scored riches from an industry that has benefited from a generous, controversial tax break emerge as a credible voice in favor of broad fiscal constraint in Washington?”

To my mind this is like questioning the credibility of Al Gore on global warming simply because Mr. Gore owns a large, kilowatt-guzzling mansion. On questions like global warming or the dangerous growth of government entitlements who is beyond blame? Besides, even if private equity’s carried interest were taxed like ordinary income, who among us believes our deficits and debts would be less than they are today? Part of Mr. Peterson’s shtick all these years has been talking precisely about this conundrum – the more we collect via taxes, the more we spend. Clearly, fiscal sanity cannot be achieved solely through tax increases, but must be joined with a concomitant decrease in public spending.

The Times profile of Mr. Peterson was certainly provocative, even beyond the mere politics of his convictions, dwelling on Mr. Peterson’s pathological compulsion to namedrop and his obvious concern for building a lasting personal legacy. I think Mr. Peterson’s personality quirks can be well understood by simply examining his background. His ancestry is Greek; he came from humble Midwestern origins. The postwar world in which he ascended could be awfully cruel on both counts. High finance and big business were still dominated by Ivy-educated WASPs (there’s a reason Jewish law firms like Paul, Weiss, Rifkind, Wharton & Garrison or Proskauer Rose Goetz & Mendelsohn came into being), and it is a rather common characteristic of bootstrappers such as Mr. Peterson to carry with them an almost neurotic concern with social acceptance, identity, and prestige. I should say here that the Times article is largely positive and a good read to boot. Check it out.