U.S. 'deficit hawks' keep up fight despite fading interest

Reuters News
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Posted: Aug 26, 2015 1:04 AM

By Susan Cornwell

WASHINGTON (Reuters) - As the U.S. government's budget deficit has declined, so has anxiety about it in Congress and on the presidential campaign trail, but one family and the Washington "deficit hawk" community it bankrolls are unfazed.

Among the capital's many activists, few names are as closely linked to one issue as the Peterson family is with attacking the deficit and the federal debt.

Yet they face a growing struggle to win attention for the cause as the deficit has shrunk to less than a third of its level when President Barack Obama took office, making it a less pressing issue for politicians and the public alike.

The Congressional Budget Office (CBO) said on Tuesday the deficit will likely be $426 billion in fiscal 2015 and decline further to $414 billion in fiscal 2016. That would be its lowest level since 2007. The deficit peaked at $1.4 trillion in 2009.

Nevertheless, Michael A. Peterson, president of a $1-billion foundation set up in 2008 by his father Peter G. Peterson and devoted to fiscal reform, warns that the long-term federal fiscal picture is still dire and vows to fight on.

"The budget is not front and center right now, and there's not a lot of political will in Washington to solve it right now, but I don't think that means that there's a view that this challenge isn't still a major issue," he told Reuters.

"We still have a very significant long-term debt problem."

Increased tax revenues on a strengthening economy, modest budget restraint imposed since 2011, and sharply reduced spending on foreign wars have all helped bring the deficit down.

Still, the CBO projected that the public's holdings of U.S. federal debt - the accumulation of years of deficits - is projected to hit $13.2 trillion this year, up from $12.8 trillion last year, and to rise above $20 trillion by 2025.

(Related graphics: http://link.reuters.com/qup45w and http://link.reuters.com/her45w)

PETERSONS UNDETERRED

"Pete" Peterson, 89, co-founded The Blackstone Group, a major financial firm, in 1985 after serving in the 1970s as U.S. secretary of commerce. He set up the Peter G. Peterson Foundation to address "key fiscal challenges threatening America's future and to accelerate action on them."

Since 2009, the foundation has given $7.6 million to an anti-deficit group called the Concord Coalition, and $6 million to another group, the Committee for a Responsible Federal Budget. These groups were founded in the 1980s and 1990s to advocate for "responsible" fiscal policy.

By issuing studies, holding conferences and offering up experts for public appearances, they campaign against deficits and the debt. They help shape a fiscal debate that still flares sometimes.

Budget conflict is expected to return to Congress in the coming months when the federal debt ceiling is reached again, with conservative Republicans expected to make demands and perhaps issue shut-down threats around it.

The foundation will continue to fund the deficit hawk groups, said Michael, Peter's 45-year-old son.

"There's still an enormous challenge," he said.

Reuters asked to speak with Peter Peterson, but the foundation responded by offering his son for an interview.

The Petersons, who advocate for a balanced budget through increased revenue and spending cuts, say the rising debt burden is a threat to the U.S. standing in the world and to future generations of Americans.

DEFICIT CONCERN SLIPS

A Pew Research Center poll this year found that 64 percent of respondents called the deficit a top public policy priority, down eight percentage points since 2013.

Resolve over the deficit and the debt has slipped in Congress, too. Earlier this year, lawmakers set aside cuts in Medicare reimbursements for doctors, though the CBO said this would add $141 billion to the U.S. debt in the next decade. With big budget decisions ahead in September and October, advocates of more defense and domestic spending are clamoring to exceed budget caps imposed by a law passed in 2011, when anti-deficit worry was high, under a rule known as the sequester.

Steve Bell, senior director of economic policy at the Bipartisan Policy Center, a think tank that also has received money from the Peterson Foundation, complained of "complacency" among policymakers on the debt and deficits.

"It is unfortunate that of the nearly two dozen candidates running for president today, virtually none of them have placed a focus on this important issue,” he said in a statement.

Liberal critics say the "deficit hawks" lost some credibility a few years ago with apocalyptic warnings that didn't pan out.

A decade from now, CBO said, if present laws hold steady, U.S. debt held by the public will equal roughly 77 percent of gross domestic product, a broad measure of the economy's size.

That would rank the United States roughly 32nd in debt-to-GDP among the nations, with many far more indebted, such as Japan at more than 220 percent. Greece, Italy, Spain, France, Canada and Britain are also more indebted in this way.

Robert Bixby, executive director of the Concord Coalition, said his group and the Committee for a Responsible Federal Budget are refocusing on the national debt and trying to draw attention to it as part of the 2016 presidential campaign.

"The real issue has always been our unsustainable fiscal policy ... it was a problem before the recession and it's still a problem," Bixby said.

(Reporting by Susan Cornwell; additional reporting by Jason Lange; Editing by Kevin Drawbaugh and Stuart Grudgings)