AARP's Double Game
The senior lobby wants a Social Security tax increase.
Monday, April 18, 2005 12:01 a.m.
Whatever the outcome of President Bush's push for personal accounts in Social Security, one of its effects deserves to be damage to whatever credibility AARP had left as a pragmatic and non-partisan organization.
The senior lobby still claims--to us and to the White House, among others--to be interested in working constructively on a solution to the retirement program's long-term cash flow problem. But it's put nothing substantive on the table, preferring instead to run demagogic and misleading ads about the President's ideas. One of AARP's recent, edifying contributions to public discourse has been a TV ad that goes like this:
Plumber: "Yep, looks like the drain is clogged. There's only one way to fix it. We're going to have to tear down the entire house."
Woman: "What?"
Announcer: "If you had a problem with the kitchen sink, you wouldn't tear down the entire house. So why dismantle Social Security when it can be fixed with just a few moderate changes? Reform is necessary, but diverting money into private accounts is just too drastic, could add up to $2 trillion in more debt and lead to huge benefit cuts."
Social Security is, well, a slightly more serious issue than a clogged drain. The small personal accounts--the President has suggested a maximum of $1,000 in annual payroll tax diversions--would in no way "dismantle" the program. And by "$2 trillion in more debt," we assume AARP simply means honestly acknowledging in the form of bonds some of the unfunded promises the government has already made to seniors.
AARP's not-so-hidden big-government agenda is to ensure those promises are kept largely by raising taxes, though the organization has in the past been willing to go along with benefit cuts such as raising the retirement age.
The "dismantle" allegation is particularly dishonest given that AARP knows the White House is now keenly interested in a proposal called "progressive indexing," under which the government would continue to commit to paying out the gradually increasing benefits that have been promised to lower-wage workers. But AARP refuses to consider the proposal because it flatly refuses to consider corollary personal accounts that would be funded with a portion of the payroll tax.
Not only would personal accounts likely mean no effective benefit cuts, they are the only proposal on the table that would force the government to stop squandering all of the current payroll tax surplus and turn some of it into real assets. If AARP has a counter proposal for protecting the surplus--say, requiring the government to invest and manage it in a Calpers-like investment fund--we'd like to hear it and debate it.
Which brings us to the best evidence that AARP isn't even in the ballpark of serious debate about Social Security: its continuing deception about the nature of the Trust Fund. To hear AARP tell it, the Trust Fund is a big pot of money sitting somewhere that will help the government pay benefits painlessly through roughly 2042. When pushed, AARP acknowledges that's not exactly true but protests that the Trust Fund's self-referential IOUs should be just as secure as other U.S. government debt.
But that's exactly the point: the Trust Fund is a debt, not an asset. The most accurate way to think about the Trust Fund is simply as the amount of money that Congress will have to raise in future general tax revenues to pay itself back for the surplus payroll taxes (above current year elderly benefits) it's squandering on other things now.
We met with AARP CEO Bill Novelli and Policy Director John Rother not long ago, and we know they understand all this. So it's hard not to view AARP's current ad campaign as cynical, and as a payback to the Democrats who pounded AARP after it agreed to give tepid support to the Republican 2003 Medicare drug bill.
It's also worth mentioning the hypocrisy of AARP's deriding diversified bond and stock investment as too "risky" in other ads, while at the same time profiting by putting its brandname on various investment funds of its own. AARP sells 38 mutual funds, and makes north of $300 million annually by such co-branding of financial products.
This kind of financial muscle--along with the group's semi-plausible claim to represent 35 million seniors who join for the discounts--allows AARP to sit across the table from its interlocutors at the White House and pretend to be sincere about its desire for compromise. And it's almost enough to make us long for an intrepid antitrust lawyer to take on the senior lobby. One thing's for sure: We're never going to have a reasonable debate about policies for an aging society as long as AARP has an effective monopoly on that role. |
