By Scot Lehigh
The Boston Globe
August 6, 2004

IF ONLY the publisher had disguised this book as a beach read. "The Generation that Crippled Its Children," perhaps, or "The Debt Demon that Stalks Today's Youth."

Instead, Peter G. Peterson has given his important volume a less catchy title: "Running on Empty." Still, the subtitle lets you know just where he's headed: "How the Democratic and Republican Parties are Bankrupting Our Future and What Americans Can Do About It."

The story the former commerce secretary and current president of the deficit-fighting Concord Coalition tells is must reading, particularly in the midst of a presidential campaign that has avoided serious discussion of the yawning federal deficit, pegged at $445 billion this year.

Republican George W. Bush calls for making his panoply of unaffordable tax cuts permanent, with no credible path to fiscal balance, paradoxically proclaiming himself a conservative even as he benefits politically from a torrent of spending financed by borrowing.

Not quite such a cynic, Democrat John Kerry, who promises to roll back the Bush tax breaks for the wealthy, nevertheless plays his own brand of deficit politics, proposing an array of new programs with the quiet caveat that some of his initiatives may have to be pared back due to the demands of deficit reduction.

"The deficit is being mentioned in the campaign, but it is not being treated seriously," observes Robert Bixby, the Concord Coalition's executive director.

Peterson affords the issue the seriousness it deserves.

The author's basic message is both simple and urgent: The two parties "have launched America into the new century on a course of vast and mounting budget deficits, which, if left unaltered, can only end in an economy-shattering crisis or crushing burdens on America's younger generations -- or both."

And he makes a point that should be, but sadly isn't, self-evident: Unless offset by long-term spending reductions, tax cuts are not tax cuts at all. Instead, they simply shift the cost of current programs on to future taxpayers. That's so because if the government must borrow to spend now, the dollars spent must be repaid later.

If the Bush tax cuts were made permanent and the increase in federal spending tracks economic growth, the federal government would incur an additional $90,000 in debt for every American household by the year 2014, the author warns.

Peterson, long a Republican, blasts GOP supply-siders for their almost theological devotion to tax cuts as appropriate in almost any circumstance. And he offers this damning judgment: "This administration and the Republican Congress have presided over the most reckless deterioration of America's finances in history."

But he's also tough on the Democrats for a desire to expand spending and benefits without careful consideration of the long-term cost. While "the Republican Party line often boils down to cutting taxes and damning the torpedoes," he writes, "the Democratic Party line often boils down to boosting outlays and damning the torpedoes."

Although that certainly encapsulates the congressional instinct, for my money Peterson, who is also chairman of the Council on Foreign Relations and former chairman of the Federal Reserve Bank of New York, gives short shrift to the Clinton-era record on fiscal discipline, which is unexampled among recent administrations.

Yet it's hard to argue with his observation about the new Medicare prescription drug benefit, which loads an additional $535 billion, 10-year bill onto the shoulders of future taxpayers. "It's astonishing how we can congratulate ourselves on our own civic virtue when we give ourselves bigger presents and send bigger bills to our kids," he writes.

Taxes are going to have to increase to redress the fiscal mess, Peterson says, but the long-term math also dictates that huge entitlement programs like Medicare and Social Security will have to be pared back.

The author's proposals for more provident policies include instituting a new indexing scheme to moderate Social Security cost of living adjustments, mandating that 2 to 3 percent of everyone's pay be put in individual retirement accounts, requiring that Medicare recipients have a primary "gatekeeper" physician, and reducing the amount spent on "heroic" interventions in the last months of a patient's life.

Not everyone will concur with those nostrums. Still, they should agree that Peterson has sounded an important warning about the nation's fiscal problems. Even without an eye-catching title, it's still gripping enough for the beach.

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