Will America Grow Up Before It Grows Old?

• Author: Hewitt, Paul

By Peter G. Peterson Random House, $21

There are moments in the History of great nations when a single choice can mean the difference between alternative futures--one bright, the other dark." So writes Peter G. Peterson in his wake-up call to politicians on the dangers of merely representing, rather than leading, an electorate woefully unprepared for the agewave soon to overtake American society.

In his latest book, Will America Grow Up Before It Grows Old?, Peterson gives voice to a growing anxiety that we are fast approaching the day when, if we do not act, we will pay a terrible price. As we have come to expect from his writings, he carefully documents how well-meaning and popular old-age benefit promises have launched the American economy on a perilous journey into darkness. Yet in the past, Peterson's recommendations have centered mainly on balancing the budget. This time he makes a comprehensive, urgent case for a savings policy--an expansion of government's regulatory powers in the interests of protecting posterity.

"Graying means paying," Peterson observes. Indeed, much of this fact-laden book is devoted to disproving claims that America can wriggle out of its demographic future. As the baby boomers retire over the next three decades, America will experience a sustained rise in consumption by persons who no longer produce as much as they consume. Finance this consumption with deficits, he warns, and the economy will collapse amid soaring interest rates and debt service costs. Finance it with taxes, and you will drastically lower the living standards of middle-class families. In the process, taxes will crowd out savings and investment, and with it our ability to compete in world markets.

Instead, Peterson calls on Congress to replace the "vicious cycle" of debt and dependency with a new "virtuous cycle" of saving and self-denial. In the broad sweep of things this concept is hardly radical. He reminds us that it is essentially the same model being followed by our new competitors, the fast-growing economies of Southeast Asia--not to mention our own forbears.

But by Washington standards, his proposals are bold. Among his prescriptions: a mandatory savings plan that initially supplements and then gradually replaces the unfunded Social Security program; a consumedincome levy that taxes what people spend, not what they earn; and pareddown, means-tested health benefits that stop lavishing the...