Peterson Foundation Targets 'Free-Lunch' Mentality

June 25, 2008— -- The nation's free-lunch mentality is the target of a $1 billion nonpartisan foundation launching July 10 in New York City. The organization, which will be led by former U.S. Comptroller General Dave Walker, is bankrolled by Pete Peterson, commerce secretary under former President Nixon and co-founder of the Blackstone Group.

"We've become a free-lunch society where everybody got used to having everything that they wanted, whenever they wanted it, without having to worry about how it was ultimately going to be paid for," said Walker, who serves as the foundation's president and chief executive officer. "We are trying to create various issue campaigns which will ... make sure that tough choices are made sooner rather than later."

The Peter G. Peterson Foundation plans to focus on six issues: financial deficits, entitlements, health care costs, education, energy consumption and nuclear proliferation.

Much of the work of the foundation, which is expected to have a staff of fewer than 30 in New York, will be done through the awarding of grants. Starting after Labor Day, the foundation plans to issue analyses of the presidential candidates' policy proposals.

Appearing Tuesday before the House Budget Committee, Walker unveiled "The State of the Union's Finances," the group's take on the country's fiscal outlook. He also called for ways to make the country's long-term financial obligations more transparent.

When it comes to the country's fiscal health, Walker, who served under both former President Bill Clinton and President Bush, wants the public to know that the problem is not simply today's deficit and debt levels.

"The problem," Walker told ABC News, "is our off-balance obligations for Social Security and Medicare, which are over $40 trillion and growing by at least $2 trillion a year by not doing anything."

To fix Social Security and Medicare, the Peterson Foundation will push for scaling back benefits for middle- and upper-income workers. The group's ideas for reforming Social Security also include raising the retirement age and strengthening the benefit for those near poverty.

Peterson and Walker also favor the creation of a mandatory individual savings account to supplement Social Security, which would be funded by a payroll tax of at least 2 percent.

"This is very different from what the president was calling for," said Walker, referring to Bush's 2005 Social Security reform proposal. "He was talking about carve-out accounts, not add-ons. His proposal would have exacerbated the deficit whereas this one is designed to do the opposite."

Walker says Social Security can be put on sound footing without raising taxes. He believes, however, that expanding the taxable wage base may be a necessary part of a final compromise. Democrats are likely to push for tax increases so that the benefit reductions can be smaller than they otherwise would be. Social Security taxes are currently only assessed against the first $102,000 of income.

"Neither one of the economic platforms that the [presidential] candidates have proposed add up from a mathematical standpoint," Walker said. "And neither one of them have, to date, addressed how they are going to stop the fiscal bleeding."

Walker says that Sens. John McCain, R-Ariz., and Barack Obama, D-Ill., are unlikely to offer specifics on the trail for shoring up the country's finances. But by meeting with their economic advisers and by raising public awareness, the foundation hopes the candidates will avoid taking major reform options off the table.

On health care, the foundation sees universal coverage as the right long-term goal, but it plans to set priorities for controlling costs.

"The worst thing in the world we can do right now is to try to bring 47 million more people into a system that is badly broken, unaffordable and unsustainable," Walker said.

On education, the foundation will focus not only on the high school dropout rate and the nation's lagging performance in science and math but also on preparing students for adult responsibility.

"We're not teaching people about financial literacy and civic responsibility and, as a result, not only does the country have major problems, we have a lot of individuals with a lot of problems with regards to their own personal finances and without the knowledge to make our democracy work," Walker said.

In the area of national security, the foundation plans to emphasize what it sees as the "transcendent threat" posed by nuclear weapons falling into the hands of terrorists. Toward this end, it has already awarded a grant to former Georgia Sen. Sam Nunn's nuclear threat Initiative.

"Right now, the country faces a number of serious sustainability challenges, which grow with the passage of time," Walker said. "It's totally unacceptable."

ABC News' James Gerber contributed to this report.