Learn more about Pete Peterson-funded astroturf projects at the Fix the Debt Portal.
The Campaign to Fix the Debt is the latest incarnation of a decades-long effort by former Nixon man turned Wall Street billionaire Pete Peterson to slash earned benefit programs such as Social Security and Medicare under the guise of fixing the nation's "debt problem." Through this special report -- and in partnership with The Nation magazine -- the Center for Media and Democracy exposes the funding, the leaders, the partner groups, and phony state "chapters" of this astroturf supergroup," whose goal is to achieve a grand bargain on austerity by July 4, 2013.
Who Knew? New Report Shows that Taxpayers Subsidize Fix the Debt CEO Salary
The Institute for Policy Studies has just put out a new report that shows that taxpayers are subsidizing the outlandish salaries of Fix the Debt CEOs – the same CEOs that are pushing for cuts to Medicare and Social Security to achieve a “grand bargain” on austerity.
Below we include excerpts from the IPS report, "Fix the Debt CEO's Enjoy Taxpayer Subsidized Pay," which can be read in full here.
Thanks to a “performance pay” tax loophole, large corporations in the United States today are routinely deducting enormous executive payouts from their income taxes. In effect, these companies are exploiting the U.S. tax code to send taxpayers the bill for the huge rewards they’re doling out to their top executives.
During the three-year period 2009-2011, the 90 publicly held corporate members of the austerity-focused “Fix the Debt” lobby group shoveled out $6.3 billion in pay to their CEOs and next three highest-paid executives.
These 90 Fix the Debt member firms raked in at least $953 million — and as much as $1.6 billion — from the “performance pay” loophole between 2009-2011.
Big Winners in the Performance Pay Racket
Health insurance giant UnitedHealth Group enjoyed the biggest taxpayer subsidy for its CEO pay largesse. The nation’s largest HMO paid CEO Stephen Hemsley $199 million in total compensation between 2009 and 2011. Of this, at least $194 million went for fully deductible “performance pay.” That works out to a $68 million taxpayer subsidy to UnitedHealth Group – just for one individual CEO’s pay.
Discovery Communications stood next in line for a government handout. Between 2009 and 2011, CEO David Zaslav pocketed $114 million, $105 million of this in exercised stock options and other fully deductible “performance pay.” That translates into a $37 million taxpayer subsidy for Discovery and its lavish executive pay policies. In 2012, Zaslav hauled in enough additional “performance pay” to generate a tax break worth $9 million.
Move over, David Koch and George Soros! Pete Peterson is "the most influential billionaire in America," says the LA Times.
Peter G. Peterson has long used his wealth to underwrite numerous organizations and PR campaigns to generate public support for slashing Social Security and Medicare, citing concerns over "unsustainable" federal budget deficits. Full of apocalyptic warnings, Peterson failed to warn of the $8 trillion housing bubble, but conveniently sold his private equity firm Blackstone Group on the eve of the financial crisis. He later pledged to spend $1 billion of the money from the sale to "fix America's key fiscal-sustainability problems," launching the Peter G. Peterson Foundation in 2008. As of 2011, the Huffington Post reported that Peterson had personally given $458 million to the Foundation.
Pete Peterson Linked Economists Caught in Austerity Error
Kenneth Rogoff and Carmen Reinhart
A team of economists at the Political Economy Research Institute (PERI) at UMass Amherst broke a huge story this week that was promptly picked up by the New York Times, the Washington Post, the Financial Times, and newspapers around the globe. The economists proved that the essential underpinning "of the intellectual edifice of austerity economics," as Paul Krugman put it, is based on sloppy methodology and spreadsheet coding errors.
Three years ago, Harvard economists Carmen Reinhart and Kenneth Rogoff released a study that presented empirical evidence from 44 nations over a 200 year time span to demonstrate that countries with a public debt over 90 percent of GDP (the United States is at about 100 percent, Japan at 200 percent) have average growth rates one percent lower than other nations.
Forty-four countries, 200 years, Harvard -- pretty convincing, huh?
Except it was wrong.
It will come as no surprise that Reinhart and Rogoff have ties to Wall Street billionaire Pete Peterson, a big fan of their work. Peterson has been advocating cuts to Social Security and Medicare for decades in order to prevent a debt crisis he warns will spike interest rates and collapse the economy. (Peterson failed to warn of the actual crisis building on Wall Street during his time at the Blackstone Group.)
With 127 CEOs able to schedule meetings with President Obama and Congressional leaders, numerous PR firms lending a hand, 80 staff, multiple Peterson funded "partner" groups, and 23 phony state chapters, this incarnation of the Peterson message machine must be taken seriously. Fix the Debt documents say the group is targeting a budget of $60 million for the "first phase,"  but in February 2013 Fix the Debt's spokesperson told CMD the organization had only raised $40 million so far. Fix the Debt engaged in a multi-million dollar paid ad campaign in the run-up to the so-called "fiscal cliff" and now is taking that campaign outside the beltway, which is "increasingly resembling a presidential race with grassroots style organizing and offices in places like New Hampshire and Ohio," writes Fortune magazine. As of February 2013, group was touting it 345,000 members/petition signatures. That sounds impressive until one learns that a number of CEOs, such as the CEO of Caterpillar Inc., wrote to 130,000 employees encouraging them to sign and one recalls that their goal was 10 million.Learn more about the firms and the stunts behind the PR spin in the article "Pete Peterson's Puppet Populists" and the Fix the Debt Partners page.
Undisclosed Conflicts of Interest
Fix the Debt biographies fail to reveal that their core leadership team is riddled with conflicts of interest. Public Accountability Initiative (PAI) points to at least 13 steering committee members with financial ties to firms that lobby on deficit-related matters that are not disclosed in their glossy Fix the Debt bios. These firms lobby to preserve dozens of costly tax breaks (including the “carried interest” tax loophole that made Pete Peterson a rich man) or to hold off new taxes, such as the “Robin Hood Tax,” a proposed financial speculation tax that could raise as much as a $1 trillion over 10 years.Click here to see a chart of these conflicts of interest and tax lobbying records.
Prominent CEOs Fail to Fully Fund Employee Pension Plans
While Fix the Debt’s 127 CEOs call for cuts to Social Security (a program that does not contribute to the deficit since it is has a surplus and is accounted for outside the federal budget), many of the publicly-traded Fix the Debt firms underfund their employee pension plans by some $103 billion making their employees even more dependent on Social Security. The CEOs, of course, enjoy lavish retirement packages, averaging $9 million each, according to a study by the Institute for Policy Studies.Click here to see a chart of CEO retirement assets vs. underfunded employee pensions (PDF).
The Real Corporate Tax Loophole Agenda
Many Fix the Debt firms pay a negative tax rate, which contributes greatly to the federal deficit. Worse, Fix the Debt firms are pushing for a "globally competitive" territorial tax system that would increase the debt by $1 trillion over ten years and encourage the offshoring of U.S. jobs, according to Citizens for Tax Justice. This tax cut is not listed in their online goals and rarely spoken of explicitly, but it is mentioned on a slideshow buried on the group's website. The switch would not only add to the deficit, it results in a windfall of some $134 billion dollars for at least 63 Fix the Debt firms, including Google and GE, according to a report by the Institute for Policy Studies.Click here to see a table of 10 top winners from a territorial tax system (PDF).
Many of the Firms Are Federal Defense Contractors
While Fix the Debt targets government programs for the middle class, 38 Fix the Debt leaders are tied to companies with defense contracts totaling $43.4 billion in 2012, as PAI has documented. Boeing (with $25.1 billion in defense contracts) and Northrop Grumman (with $8.5 billion) lead the pack. Boeing CEO W. James McNerney, Jr. is on Fix the Debt’s CEO Council, and Northrop Grumman board member Vic Fazio is on Fix the Debt’s steering committee. Click here to see a chart of the top six defense contractors with Fix the Debt ties (PDF).
Fix the Debt biographies consistently fail to expose the financial and lobbying ties of Fix the Debt leaders. You can see a chart of undisclosed financial interests by clicking here or visit our Fix the Debt Leaders page for more detail.
Erskine Bowles, a Fix the Debt co-founder and board member of Fix the Debt's parent organization, the Peterson-funded CRFB, is best known for his co-chairmanship of the Simpson-Bowles Commission and for being Bill Clinton's chief of staff. Yet he has deep ties to the financial industry, which has lobbied heavily on tax issues.UNDISCLOSED CONFLICT OF INTEREST: Bowles has served on the board of Morgan Stanley since 2005 (with annual compensation of $345,000 in 2011). Morgan Stanley played a major role in the 2008 financial crisis and secretly borrowed over $107 billion from the Federal Reserve according to Bloomberg News. His wife, Crandall C. Bowles, is on the executive committee of the board of directors of JP Morgan Chase (with annual compensation of $245,000 in 2011).
Ed Rendell is a co-chairman of Fix the Debt. In media appearances, he is only introduced as the former Democratic governor of Pennsylvania (2003-2011), yet he has extensive corporate and financial ties.UNDISCLOSED CONFLICT OF INTEREST: Rendell lobbied for KCI USA, a wound care technology company, on Medicare and Medicaid reimbursements in 2012. Rendell is special counsel to the law firm Ballard Spahr -- which has been criticized as a union-busting law firm-- -- where he focuses on privatization and housing, with an emphasis on infrastructure. Rendell is also a senior adviser at Greenhill & Co., a multinational investment bank. Ninety percent of Greenhill's revenue comes from advisory assignments, including to public officials. Rendell is a strong proponent of "public private partnerships" (PPPs) in infrastructure, which have been criticized as a dubious form of privatization of public assets. Rendell is also on the advisory board of Verdeva, a firm developing technology to track motorists at the gas pump so they can be taxed for infrastructure revenue, an industry-favored measure for developing the income streams they need to finance infrastructure deals. He has also joined the venture capital firm Element Partners as an operating partner. Element Partners recently invested in oil and gas extraction (fracking) from the Marcellus formation.
Pete Peterson has given at least $5 million to Fix the Debt, according to the Washington Post. Fix the Debt is listed as a project of the Committee for a Responsible Federal Budget (CRFB) on CRFB's website. Peterson has long funded CRFB and served on its board. CRFB is itself a project of the New America Foundation (NAF). In the 1990s, CRFB partnered with tobacco firms, anxious to avoid higher excise taxes on cigarettes, to tank the Clinton health care plan. Today, critics claim CRFB is a "Trojan Horse" for a similar agenda to cut taxes for wealthy corporations who want to create a territorial tax system.
With regard to Fix the Debt and its many partner organizations, the National Journal observed: "Singlehandedly, Peterson has created a loose network of deficit hawk organizations that seem independent but that all spout the Peterson-sanctioned message of a 'grand bargain.'"
Fix the Debt Phony State Chapters & Lobbyist Leaders
"Up to this point, Fix the Debt's ad campaigns have been largely Washington-focused, combined with a heavy dose of CEO-lobbying. The next phase, Romano says, is national outreach," Fortune Magazine reported in January 2013. Fix the Debt has 23 “state chapters” listed on its website as of February 2013. Those state chapters have been created following a similar formula: "Select bipartisan co-chairs along with a passel of business leaders, write a press release, hold a teleconference et voilà!: a 'chapter' is born that looks like an organic, bipartisan effort."
Fix the Debt leader Maya MacGuineas, Honeywell CEO David Cote, financier Steven Rattner (who was banned from the securities industry for his involvement in a pension-fund kickback scheme) and other CEOs ring the bell on the New York Stock Exchange.
The Campaign to Fix the Debt Rings the Opening Bell at the NYSE
The Can Kicks Back -- with its foam "AmeriCAN" character -- is one of many efforts to convince the public that young people care more about the national debt than their own. Fix the Debt leaders talk about the group as if it "popped up" out of nowhere, but it apparently popped up in the Fix the Debt offices, where it shares space with Maya MacGuineas' Committee for a Responsible Federal Budget.
Fix the Debt Firms: Unpaid Taxes and Underfunded Pensions
Fix the Debt CEOs say they are worried about the debt and deficits, yet many Fix the Debt firms pay a negative tax rate or a tax rate well below the standard 35 percent -- adding greatly to our nation’s deficit. Fix the Debt CEOs say that what is needed to balance the books is cuts to earned benefit programs like Social Security (which is a separate federal program not counted in the federal budget at all). At the same time, many of these same CEOs under-fund their employee pension plans, making it likely that their workers will be even more dependent on Social Security. This hypocrisy has led to a campaign called "Flip the Debt," which calls upon major corporations to pay their fair share of taxes.