Forty-eight stories above Manhattan, looking down on a verdant Central Park, Pete Peterson is sucking on a mint and sipping iced tea in the headquarters of the aptly named Peter G. Peterson Foundation, his new cause.

Soft-spoken and immaculately dressed as always, resplendent with pocket square, he's the picture of calm on this clear autumn morning. But all around us, invisible to the eye, is the devastation of financial collapse. Wall Street's investment banks have disappeared. The markets are tanking. The federal government is scrambling to head off catastrophe. "You notice they never say they're working to make the economy healthy," says Peterson. "It's just about preventing a bottom."

The market debacle and Washington's efforts to control the damage threaten to derail a cause that has absorbed Peterson, a former Lehman Brothers C.E.O. and a former chairman of the New York Federal Reserve, for more than two decades: cutting government spending. He wants all Americans to save more. He's worried about the federal budget deficit, the difference between what the government spends and what it takes in, which is now approaching a record $500 billion. He's even more worried about the national debt-the cumulative total we owe from financing years of overspending-which stands at $10.3 trillion. And he's positively terrified by the money we've promised the baby boomers through Social Security and Medicare. In total, the government has pledged a stunning $53 trillion that it doesn't have.

Earlier this year, Peterson promised to put up $1 billion of his personal fortune to start his foundation, the main purpose of which is to get the American public to realize just how scary and corrosive deficit spending is. And now things have gotten a whole lot worse.

The current economic crisis makes the country's fiscal outlook bleaker in two big ways and could turn Peterson's effort into a billion-dollar folly. First, the slowing economy means less tax revenue. Second, the government is spending wildly to fix the problem. Peterson supports the $700 billion rescue package, the $85 billion to prop up A.I.G., and other measures as sad-but-necessary moves to stop the economy from going over a cliff. But as a result, the deficit could swell to $1 trillion in 2009. Worse, the short-term focus on the health of the economy, Peterson admits, makes deficit reduction a nonstarter in Washington. His goal-always quixotic-is now, he says, a true "long shot." Bob Kerrey, the former Nebraska senator and a close friend of Peterson's, puts it this way: "It's like coming up with a really good welfare-reform plan for New Orleans, and then Katrina hits."

Still, at 82, Peterson says he will make a full-bore attempt with his campaign, and he believes it is more important than ever. If we don't do something to restore long-term fiscal discipline, he warns, we could turn into a "banana republic." We won't be able to afford such things as the Federal Bureau of Investigation or Yellowstone National Park, which we look to the government to support. We'll be at the mercy of the foreigners who buy all those T-bills. We'll be an economic basket case. Peterson will retire at year's end from the Blackstone Group, the private equity giant he co-founded with Stephen Schwarzman. When he steps down, he'll devote himself to the foundation. "This is about starting a movement," he says.

Peterson believes that the public is only dimly aware of the deficit threat because politicians have been afraid to broach the subject of painful spending cuts after seeing colleagues who tried and got whacked. "It's like a turkey shoot," he says, recalling his native Nebraska. "The first one that pops up gets his head shot off."

But in these hard times, a billionaire may find it difficult to sell sacrifice to the middle class. Most of the money fueling Peterson's cause comes from a windfall he received when Blackstone went public in 2007 and he became what he calls "an instant billionaire, which I never expected to be." Already wealthy, he netted about $1 billion from the initial public offering, and he liquidated before the stock fell. (As of mid-October, Blackstone stock was down 70 percent since its I.P.O.) It might help Peterson's cause if he were in the mold of Warren Buffett, living in a modest Omaha home and going to Dairy Queen. But last year, Peterson bought David Geffen's nine-room Fifth Avenue duplex for $37.5 million because he had always wanted a view of Central Park and because it was close to the foundation's office. "The hypocrisy and chutzpah is astonishing," says Jeff Faux, founder of the Economic Policy Institute, a think tank that focuses on political and economic issues affecting the working class.

To be fair, Peterson has no problem with raising income-tax rates for the rich and has joined Buffett in supporting the inheritance tax. But he is a defender of something near and dear to Blackstone, the so-called carried-interest rate. Revenues from private equity partnerships like Blackstone, as well as other partnerships in fields ranging from real estate to energy, are taxed at a 15 percent rate, while ordinary income-tax rates are nearly double that. Peterson asks, Why single out private equity partnerships of all the many different kinds? When I ask him if he has a problem with raising the rates on all partnerships, be they private equity or not, he demurs: "You wouldn't get that much money from it." (Congressional estimates find you'd get about $2 billion annually from private equity and hedge funds alone.) But if you're selling sacrifice, isn't that one place to start?

Instead he's starting a political campaign. For years, Peterson promulgated his gloomy deficit argument in highbrow forums, starting with a 1982 cover story in the New York Review of Books that his friend and former Random House boss Jason Epstein asked him to pen. But to get the attention of the masses, he's now going the pop-culture route. There are Facebook pages and YouTube clips and a possible alliance with mtvU, the cable music channel that's broadcast to 9 million college students. The foundation is working to create an online videogame, along the lines of one that helped educate youth about the crisis in Darfur, that it hopes will become viral. Before year's end, Peterson plans to launch a major multimedia campaign that will probably cost at least $10 million. He's also brought in top Democratic and Republican pollsters Peter Hart and Bill McInturff to survey attitudes about public and private debt.

To get a sense of what's coming, look at the feature film that the foundation funded earlier this year, I.O.U.S.A. (get it?), which premiered at Sundance and later opened in theatrical release. The idea was to do for deficit reduction what An Inconvenient Truth did for global warming. So far, it hasn't. But the foundation has made sure to send out DVDs of the film, which paints a nightmarish picture of an economically ravaged country at the mercy of foreign governments because of its crippling debt.

For Peterson, selling the public is in some ways a return to his adman roots. He worked at McCann Erickson in the 1950s before going on to run Bell & Howell in the '60s, serve as secretary of commerce under Nixon and run Lehman Brothers in the '70s, and found Blackstone in the '80s. He's been poring over ad copy himself, such as a recent New York Times spread that showed how the $53 trillion promised by the government would swamp the country. It's Mad Men meets the apocalypse.

But can he pull it off? Can Peterson create a public climate in which politicians are able to cut Medicare and Social Security benefits and raise taxes? He's assembled an impressive team to help him, foremost among whom is David Walker, the former comptroller general of the U.S. who took the normally sleepy post and used it to launch his Fiscal Wake-Up Tour. Walker was the subject of a 60 Minutes piece and got plenty of other attention. Last year, when the Concord Coalition honored Walker at a dinner at New York's Pierre hotel, he and Peterson discussed the foundation.

Peterson's wife, Joan Ganz Cooney, a co-founder of the Children's Television Workshop, one of the leaders of New York philanthropy, and consigliere to her husband, was also impressed with Walker at the dinner. "I told Pete he was an oxymoron, a charismatic accountant," she recalls. A few months later, Walker left his 15-year appointment as comptroller to join Peterson's foundation. Now he's a TV staple, appearing on everything from NewsHour to Real Time With Bill Maher. He too knows that the meltdown will make the foundation's job tougher. "It's a matter of major concern," says Walker, but adds that dealing with the $53 trillion in unfunded financial commitments should be the greater concern because it promises to bring us to our knees.

Walker and Peterson are right. The math doesn't lie. Our entitlement programs and spending habits need reform. And that makes Peterson's efforts worth applauding whether he succeeds or not-and regardless of whether he always presents his arguments in the best way. (I wish he talked more about ending the war in Iraq and less about cutting Social Security.) A few years ago, Peterson wrote an article that, lamenting the loss of civic-minded business leaders, asked where all the corporate statesmen have gone. Modestly, he failed to include himself among that esteemed group. Whether the Crash of '08 kills Pete Peterson's dream of fiscal sanity remains to be seen. But there is no doubt that Peterson belongs on that list.

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