September 2004
Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It, Peter G. Peterson, Farrar Strauss and Giroux (2004).
In “Running on Empty,” Mr. Peterson analyzes the same issue that economist Laurence J. Kotlikoff and finance columnist Scott Burns did in “The Coming Generational Storm.” Can we provide the promised level of Social Security and Medicare/ Medicaid benefits to a rapidly growing population of seniors without unfairly (perhaps unrealistically) increasing the tax burden on working Americans?
Like Kotlikoff and Burns, Peterson’s conclusion is NO. If corrective action is not taken soon, he says, our country is headed for a financial crisis.
The two books suggest different approaches for reforming Social Security and Medicare. Other experts have their own ideas, as do we at SAFE, and that’s fine. The most important thing at this stage is not the precise shape of the solution – it is convincing people that a restructuring of Social Security, Medicare and Medicaid is needed so that these benefits for seniors can be kept affordable over the long term.
Some people will resist this conclusion. In its 8/30/04 issue, for instance, “Business Week” asserts that “both books express extreme distrust of technology and warn the reader not to count on it to solve our problems.” Really? History shows that the U.S. economic growth rate is unlikely to soar into the stratosphere. Even if it did, as the authors explain, Social Security benefits accruing to active workers are linked to wage levels (which should rise faster than prices due to productivity gain) and technological progress is a key driver for soaring healthcare benefits (everyone wants the most advanced care available).
Mr. Peterson is chairman of The Blackstone Group, chairman of the Council on Foreign Relations, and a former chairman of the Federal Reserve Bank of New York. He was the Secretary of Commerce in the Nixon Administration and is a founding president of The Concord Coalition.
Which of these books should you choose? It depends on what you are looking for. “The Coming Generational Storm” offers an economist’s view of the situation and some useful financial advice for readers. “Running on Empty” does a better job of explaining how and why our political leaders (since FDR) have gotten us into this mess.