Will America Grow Up Before It Grows Old? - book reviews

Washington Monthly, Nov, 1996 by Paul Hewitt

By Peter G. Peterson Random House, $21

There are moments in the History of great nations when a single choice can mean the difference between alternative futures--one bright, the other dark." So writes Peter G. Peterson in his wake-up call to politicians on the dangers of merely representing, rather than leading, an electorate woefully unprepared for the agewave soon to overtake American society.

In his latest book, Will America Grow Up Before It Grows Old?, Peterson gives voice to a growing anxiety that we are fast approaching the day when, if we do not act, we will pay a terrible price. As we have come to expect from his writings, he carefully documents how well-meaning and popular old-age benefit promises have launched the American economy on a perilous journey into darkness. Yet in the past, Peterson's recommendations have centered mainly on balancing the budget. This time he makes a comprehensive, urgent case for a savings policy--an expansion of government's regulatory powers in the interests of protecting posterity.

"Graying means paying," Peterson observes. Indeed, much of this fact-laden book is devoted to disproving claims that America can wriggle out of its demographic future. As the baby boomers retire over the next three decades, America will experience a sustained rise in consumption by persons who no longer produce as much as they consume. Finance this consumption with deficits, he warns, and the economy will collapse amid soaring interest rates and debt service costs. Finance it with taxes, and you will drastically lower the living standards of middle-class families. In the process, taxes will crowd out savings and investment, and with it our ability to compete in world markets.

Instead, Peterson calls on Congress to replace the "vicious cycle" of debt and dependency with a new "virtuous cycle" of saving and self-denial. In the broad sweep of things this concept is hardly radical. He reminds us that it is essentially the same model being followed by our new competitors, the fast-growing economies of Southeast Asia--not to mention our own forbears.

But by Washington standards, his proposals are bold. Among his prescriptions: a mandatory savings plan that initially supplements and then gradually replaces the unfunded Social Security program; a consumedincome levy that taxes what people spend, not what they earn; and pareddown, means-tested health benefits that stop lavishing the most expensive care on those at the very end of life.

Yet when it comes to the politics of change, Peterson is no bomb-thrower. He does denounce "the unspoken truce between `supply soldiers' opposed to any tax increase, and `liberals' opposed to any cut in domestic spending" who settle their differences by borrowing. He castigates the special interests that flooded the Kerrey-Danforth Eneitlements Commission with 350,000 postcards before it considered a single recommendation. But confrontation isn't his style. Instead, Peterson appeals to the sensibilities of decent people. He calls for public education, and for the vast, dependent middle class to become part of the solution.

But however he may have intended it, this book isn't really written for the vast middle class. Implicit in Peterson's sometimes technical, sometimes rambling narrative is a personal appeal for Congress to act first and explain later. Aided by the superb research of Neil Howe and Richard Jackson, he combines the latest official data and studies on the future of the budget and the economy to systematically explode the myths used to rationalize the unsustainable age-based welfare state. He offers clear-headed advice on what must be done, and why. These are the arguments Congress must use not only to educate the public on what must be done, but to justify its actions afterward. More than anything, Will America Grow Up is about leadership.

Over the years, no public figure has more consistently sounded the alarm over the financial devastation that awaits if we fail to prepare for the baby boomers' retirement. One of Wall Street's leading investment bankers, Peterson is a very wealthy guy. He and his children are likely to do fine in any future our policy makers create, bright or dark. Yet he rarely misses an opportunity to use his formidable intellect and powers of persuasion to further the twin causes of economic growth and generational equity. Would that all business leaders--and more politicians--had such heart.

Paul Hewitt is the executive director of the National Taxpayers Union Foundation.