Billionaire investment banker Peter Peterson is back on the warpath. He just established a new foundation with a $1 billion endowment, the main purpose of which is to cut back spending on Social Security, Medicare and Medicaid.

    These programs, which provide an essential safety net to virtually the entire country, are hugely popular and will be politically difficult to cut. Nonetheless, $1 billion is a lot of money. Therefore, Peterson's campaign deserves to be taken seriously.

    Peterson has long been an ardent foe of these programs. He first rose to national prominence as commerce secretary in the Nixon administration. He then returned to the private sector and became a partner in the Blackstone Group, a very successful private equity fund.

    Mr. Peterson is fond of telling his audiences that he doesn't need his Social Security. Of course, as a manager in a private equity fund, Mr. Peterson was allowed to take advantage of the fund manager tax subsidy - a provision of the tax code that allows some of the richest people in the country to pay much lower tax rates than ordinary workers.

    With his enormous wealth, Mr. Peterson was probably given more than 1,000 times as much money through this tax subsidy as the typical worker can expect to see on her Social Security. Needless to say, if the rest of us had been beneficiaries of the government's largesse to the same extent as Mr. Peterson, we would not need our Social Security either.

    Mr. Peterson's public crusading against Social Security, Medicare and Medicaid began in 1992 when he formed the Concord Coalition. This organization crusades for cuts in these programs under the pretext of fiscal responsibility.

    Mr. Peterson has also written several books calling for cuts in these programs with ominous titles like "Gray Dawn: How the Coming Age Wave Will Transform America," which warns that the country will be bankrupted by the retirement of the baby boomers. He uses his power and wealth to publicize these diatribes and get them reviewed in top outlets, such as the New York Times Book Review.

    While Peterson's efforts appeal largely to Republicans, he generally pulls enough Democrats on board that he can pass off his attacks on the country's key social programs as bipartisan. In fact, the media often treat Peterson's assault on the social safety net as being above the political fray, allowing him to spout his views unanswered on major national talk shows.

    Peterson has not been shy about using slippery logic to advance his agenda. For example, back in the 90's he argued for cutting the annual cost-of-living adjustment for Social Security, which is tied to the consumer price index (CPI), based on the claim that the CPI substantially overstates the true rate of inflation. If Peterson's claim about a CPI overstatement were true, then it would imply that incomes are rising far more rapidly than our projections show. Peterson's CPI adjustment would mean that our children and grandchildren will be far richer than we could possibly imagine, because incomes are rising so rapidly. Similarly, the retirees for whom he wanted to cut benefits actually spent much of their lives in poverty. If incomes have been rising more rapidly than the official data show, then we must have been far poorer in the past than the data show.

    In the same vein, Peterson supported the partial privatization of Social Security, based on assumptions on stock returns that were inconsistent with the profit growth projections of the Social Security trustees, and the price-to-earnings ratios that existed in the stock market at the time. In the push to cut Social Security and Medicare, Peterson does not feel the need to be bound by the truths of logic and arithmetic.

    There is a fundamental point on which Peterson is correct. The long-term budget projections do show a horror story of enormous deficits. But these projections are not driven by aging and overly generous retirement programs. They are driven by projections that our private health care system, which already costs twice as much per person as the average for other rich countries, will get ever more inefficient through time. If we never fix our health care system, then we will face an economic disaster, which will include serious budget problems, since half of our health care is paid for through government programs such as Medicare and Medicaid.

    This reality would suggest the importance of reforming the health care system. Health care reform would mean confronting the insurance and pharmaceutical industries, as well as the doctors' lobbies. These groups have serious power. That's why Mr. Peterson prefers to stick with granny bashing.