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.
Fix The Debt Hypocrites Want to Exempt Off-Shore Earnings From U.S. Taxation
On June 13, 2013, the Institute for Policy Studies released a new report, Corporate Pirates of the Caribbean: Pro-Austerity CEOs Seek to Widen Tax Haven Loophole, which shows the billions of dollars Fix the Debt member corporations would stand to gain if Congress agrees to a "Grand Bargain" on the deficit that includes a “territorial” tax system exempting offshore earnings of U.S. firms from U.S. taxation. The report documents the hypocrisy of these Fix the Debt firms which back a plan for "entitlement reforms" (read cuts to Medicare and Social Security), while at the same time reaping record profits, stashing earnings overseas and pressing for even more favorable treatment in the U.S. tax code.
The debate over the rapidly declining deficit will take center stage once more when the debt ceiling is reached this fall. Below we excerpt major findings from this important report:
The Fix the Debt campaign is a heavily funded corporate lobby group pushing for cuts to Social Security and Medicare and more corporate tax breaks. One of their main goals is a “territorial” tax system that would permanently exempt U.S. corporations’ foreign earnings from U.S. federal income taxes. Erskine Bowles and Alan Simpson, who serve as Fix the Debt Co-Founders, also made this reform a centerpiece of their recently released deficit reduction proposal. The IPS report provides updated figures based on recently released 2012 tax data.
Fix the Debt continues to be a meeting ground of corporations using offshore tax loopholes to dodge U.S. taxes.
Two-thirds of the 93 publicly held corporations involved with Fix the Debt were holding profits in offshore subsidiaries at the end of 2012. The 59 firms that reported the amount of these offshore profits had a combined total of more than $544 billion, up from $473 billion in 2011. The average offshore stash per company rose 15 percent in 2012 to $9.4 billion. Currently, these profits are not subject to U.S. corporate income taxes unless they are brought back to the United States (also known as repatriation).
If Congress adopts Fix the Debt’s proposed territorial tax system, these 59 companies would stand to win as much as $173 billion in immediate tax windfalls.
The biggest potential winner is General Electric, which could reap a tax windfall of as much as $38 billion on its overseas earnings stash of $108 billion.
The Fix the Debt member with the largest increase in offshore untaxed profits in 2012 among firms with more than $1 billion in offshore profits was Honeywell, with a 43 percent increase to $11.6 billion in 2012. Twenty-two firms reported increases of more than 20 percent in their untaxed offshore profits last year.
All but one of the 59 companies with offshore profits operated offshore subsidiaries in tax haven nations.
Fix the Debt corporations represent an elite minority of firms that stand to benefit from a territorial tax system.
Less than two out of every 1,000 U.S. businesses nationwide have offshore subsidiaries. Perhaps not surprisingly, 85 percent of small business owners oppose a territorial tax system, according to a nationwide poll conducted by the American Sustainable Business Council and Main Street Alliance. A second poll, conducted by the National Small Business Association, found that just 16 percent of small business owners support a territorial tax system and 53 percent are opposed.
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.
Fazio is on the board of Fix the Debt’s parent organization, the Committee for a Responsible Federal Budget (CRFB), and is listed as being on the Steering Committee of the Campaign to Fix the Debt. UNDISCLOSED CONFLICT OF INTEREST: Fazio works for Akin Gump, where he has lobbied against HR 2834, Rep. Sander Levin’s bill to tax private equity and hedge fund income at higher regular rates rather than at the 15 percent capital gains rate. The finance industry has fiercely fought this effort, despite its vague commitment to raising "revenue" in campaigns such as Fix the Debt. In this "carried interest" tax rate battle, Fazio has represented the Private Equity Growth Capital Council and private equity firms KKR and Apollo Advisers (now Apollo Global Management). Akin Gump also lobbied on behalf of many corporations on tax and appropriations issues including KKR and Private Equity Growth Capital Council on tax reform and issues affecting private equity.
Fazio is also on the board of directors of Northrop Grumman (annual compensation of $304,347 in 2011), a major defense contractor and funder of ALEC that would benefit from the corporate tax rate cut proposed by Fix the Debt; of insurance company W. R. Berkley Corporation’s Peyton Street Independent Financial Services; and of Fix the Debt’s parent organization, the Peterson-funded Committee for a Responsible Federal Budget. Northrop Grumman companies received $9.5 billion in Department of Defense contracts in 2012, making it one of the top 10 corporate recipients of defense contracts in 2012. It lobbied on defense spending and tax credit issues in the third quarter of 2012.
Phil Bredesen was a superdelegate in the 2008 Democratic nomination.
Phil Bredesen is the former Democratic Governor of Tennessee and was a superdelegate in the 2008 Democratic presidential nomination. He is a former healthcare industry executive (he founded HealthAmerica Corporation, an insurance company, which he sold in 1986 for about $385 million), and is currently on the board of directors of Vanguard Health Systems, a $5 billion hospital chain, receiving an annual compensation of $240,005 in 2011. Bredesen is on the steering committee of the Campaign to Fix the Debt. In January 2013, Bredesen admitted that Fix the Debt's strategy was to create an "artificial crisis" to achieve a "grand bargain" on Medicare and Social Security.
UNDISCLOSED CONFLICT OF INTEREST:Bredesen is currently on the board of directors of Vanguard Health Systems, a $5 billion hospital chain, receiving an annual compensation of $240,005 in 2011. Vanguard lobbied on federal appropriations issues in the third quarter of 2012. Vanguard's biggest owner is the private equity firm Blackstone Group (Blackstone and its affiliates acquired Vanguard in 2004). Blackstone was co-founded by Fix the Debt funder Pete Peterson. Bredesen has been an investor in a number of healthcare companies in addition to HealthAmerica Corp., including Coventry Health Care (which was recently sold to Aetna for $5.6 billion), First Commonwealth, and Qualifacts Systems Inc. For a time Bredesen was being considered for Health and Human Services secretary in the first Obama administration, but lost out to Kathleen Sebelius. Responding to opposition to his potential appointment from national and Tennessee healthcare advocates, Bredesen told the Wall Street Journal "advocacy groups don't matter nearly as much as the pharmaceutical groups, the hospitals, the doctors' groups. There's a lot of very powerful interest groups that will play in this thing." Bredesen is on the Governor's Council of the Bipartisan Policy Center, which received $400,000 from the Peter G. Peterson Foundation in 2011 to fund its Debt Reduction Task Force.
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 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.