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AARP Shifts Stance on Revamping Social Security Benefit Cuts

Source: WSJ - Laura Meckler


Posted on 17 Jun 2011

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Influential lobbying group, AARP, is shifting its longstanding opposition to cutting Social Security benefits, a decision that can affect the debate over the revamping of the system.

Although yet to be discussed publicly, the decision came after a wrenching debate inside the AARP organization. In 2005, the last time Social Security was debated, AARP led the effort to kill President George W. Bush's plan for partial privatization. AARP now has concluded that change is inevitable, and it wants to be at the table to try to minimize the pain.

"The ship was sailing. I wanted to be at the wheel when that happens," said John Rother, AARP's long-time policy chief and a prime mover behind its change of heart.

The shift, which has been vetted by AARP's board and is now the group's stance, could have a dramatic effect on the debate surrounding the future of the federal safety net, from pensions to health care, given the group's immense clout.

"If they come around and say they're ready to do something, it will be like the Arctic icecap cracking," said former Sen. Alan Simpson, co-chairman of a White House commission on the deficit. He has frequently assailed the group as a barrier to progress.

At the same time, AARP runs the risk of alienating both its liberal allies, who have vowed to fight any benefit cuts, and its 37 million members, many of whom are deeply opposed to such a move.

To win them over, AARP is preparing coast-to-coast town-hall meetings to explain the problem and the possible solutions.

In an early sign of its new approach, AARP declined to join a coalition of about 300 unions, women's groups and liberal advocacy organizations created to fight Social Security benefit cuts. "The coalition's role was to kind of anchor the left, and our role is going to be to actually get something done," said Mr. Rother.

Leaders of the coalition, dubbed Strengthen Social Security, agreed that AARP's views will carry weight in Washington, but predicted the group would see a bigger backlash from its members than it expects.

"They are completely at odds with their membership," said Nancy Altman, co-chair of the coalition. She said there is a "disconnect" between "elites," who insist that benefits must be cut for the sake of a deal, and regular Americans, who are adamantly opposed. "AARP has been burned in the past," she said. "My guess is that could happen to them again."

Mr. Rother responded that "some of our members will no doubt be upset by any such effort, but I believe most would welcome a balanced and fair proposal that could strengthen the program for future generations and possibly even improve it for current vulnerable beneficiaries."

There are limits to how far AARP is willing to go. The group will accept cuts, but won't champion them, and it is particularly leery of certain concepts such as eliminating benefits for wealthier recipients.

It wants tax increases to fill most of the program's financial hole, and it insists that a deal must be crafted apart from broader deficit-reduction negotiations.

AARP recently launched a multimillion-dollar ad campaign to fight against making Medicare and Social Security cuts part of the broader debt talks now under way. That has reinforced the impression among many in Washington that the group is opposed to dealing on Social Security at all.

AARP is one of the most powerful lobby groups in Washington, with a big budget for TV advertising and decades of experience mobilizing its large and diverse membership to lobby their members of Congress. Last year, it had $1.4 billion in revenue, nearly half of which came from royalties on AARP-branded health-care and financial products.

In Washington, the group is best known for its influence on Social Security and Medicare, but it also has weighed in on transportation issues that affect older drivers, housing for low-income seniors and Congress's recent financial-regulatory overhaul.

Social Security, which was created in 1935, is facing a demographic challenge as the baby-boom generation retires with fewer younger workers to support it. The program's actuaries say that by 2036, the program will have exhausted its reserves and will only be able to pay 77% of promised benefits. Between now and 2036, the government, which has spent the money held in reserve, will have to borrow to meet those obligations.

As recently as late last year, President Barack Obama had hoped to reach a bipartisan agreement on Social Security during his first term, according to officials familiar with his thinking.

Republicans have appeared open to a deal as well, with House GOP leaders dropping their push for a partial privatization of the system. In recent months, a string of commissions has suggested fixes.

But fears about the political sensitivity of the program—seniors vote with greater reliability than all other age groups—have kept Social Security out of conversations over the deficit.

Conservative and liberal experts alike believe the program can be put on a solid financial footing for 75 years, which is the standard for solvency, if lawmakers implement fairly modest changes to collect more taxes and pay fewer benefits.

Republican opposition to tax increases and Democratic opposition to benefit cuts have stymied action.

As much as AARP's previous opposition hindered the Bush effort, its involvement now could help determine the shape of a final deal, given lawmakers' need to secure the support of AARP members.

"AARP swings a lot of weight with them," said Oklahoma Republican Sen. Tom Coburn, another member of the president's deficit commission.

AARP's move was engineered by Mr. Rother, 64 years old, who has been at the center of every Social Security debate in the past three decades. He cut his teeth on the issue as the staff director of the Senate Aging Committee, working for a liberal Republican during negotiations in 1983 over the last bipartisan deal to rescue the program. He is registered as an independent.

He took a job with AARP in 1984. In 2005, he helped lead the opposition to Mr. Bush's plan to let younger workers divert some of their taxes into private accounts to be invested in the stock market. He thought the market plan was too risky, but he also objected because it would have resulted in lower benefits for seniors.

In 2007, the group took what Mr. Rother calls a "baby step" toward the current position, telling Congress it wanted a bipartisan, balanced deal on Social Security. Then, in 2009, Mr. Rother concluded that the state of the nation's finances required him to get ahead of the coming ax.

First came word that Social Security would pay out more in benefits than it collected in taxes in 2010, the first time that has happened 1983. Then an internal AARP poll found that young people were more doubtful than ever about the future of the program. If Americans lost confidence in the future of Social Security, Mr. Rother feared, their support for the program would erode.

The tipping point came when Mr. Rother learned that the White House was seriously considering tackling the program during Mr. Obama's first term.

On AARP's Policy Council, a group of volunteers who make policy recommendations to the AARP board, Mr. Rother faced intense opposition from members who see their role as protecting low-income seniors. He also faced resistance from the board.

His argument: Tax increases wouldn't be enough to make the program solvent. The leading proposal for raising taxes—increasing the amount of income subject to payroll taxes, the central financing mechanism for the program—would fill less than half the hole. Moreover, Republicans were not going to accept a plan that didn't include benefit cuts. The idea that both tax increases and benefit cuts were needed dovetailed closely with plans put forward by several separate commissions in Washington seeking to ease the U.S.'s long-term fiscal woes.

"There was good, healthy discussion," said John Penn, chairman of Intek Plastics Inc., a member of AARP's board. "Healthy tension usually results in better answers, but sometimes it's painful in the process."

When Mr. Obama considered making a Social Security proposal early this year, Mr. Rother indicated he would be supportive, said two people familiar with the matter. But the White House opted to hold off.

AARP is steadfast in its opposition to tackling Social Security as part of a grand budget deal—the kind currently being discussed by a group of lawmakers led by Vice President Joe Biden—saying Social Security didn't cause the current deficit and shouldn't be used to fix the problem. An AARP news release last month urged seniors to lobby their members of Congress against "political deals that cut their hard-earned benefits."

It is also determined that any deal should be bipartisan, a stance influenced by backlash to the group's support for Mr. Obama's health-care law. AARP's endorsement made a big difference in Democrats' ability to secure passage, given that the bill included a half-trillion dollars in cuts to Medicare, the federal health-care plan for seniors.

The group lost about 300,000 members as a result and came under attack from some Republicans who accused AARP of supporting the law because the group, which helps sell insurance products, benefited financially.

On the Social Security question, the organization will have to sell its position to members—which likely will be a major challenge. A February Wall Street Journal/NBC News poll found 84% of Americans age 65 and up opposed benefit cuts. Internal AARP polling shows similar resistance.

AARP plans to hold hundreds of events for seniors, in every state. At town halls and listening sessions, AARP plans to explain the political and budgetary realities facing the program by playing a game in which participants try to make Social Security solvent.
Romona Lindauer, 82, a Democrat and AARP member from Jasper, Ind., said she could "talk your ears off" with various spending that could be cut.

"But not Social Security," adding, "If the AARP went along with cuts, I would cancel my insurance through them and quit my membership right away."

Other seniors believe benefits reductions are inevitable. "They have to save money somewhere," said William E. Salyards, 77, a Republican from Concord, Calif. He opposes tax increases but thinks benefit cuts may be needed. "We have to do something."


Comments

 
KEN KUNES Jun 17 2011 11:40AM Report Abuse
IT IS ABOUT TIME AARP GOT SOMETHING RIGHT. THEY SOLD US OUT ON OBAMACARE. IF SOMETHING ISN'T DONE FAIRLY FAST THE WHOLE PROGRAM WILL GO DOWN THE DRAIN.
Jim Bailey Jun 17 2011 10:38AM Report Abuse
This is absurd. AARP Is selling out it's own membership. What a stupid decision. Perhaps baby-boomers should be grandfathered in any changes.
Jim Bailey Jun 17 2011 10:29AM Report Abuse
How many elder Americans is AARP looking to make medically indigent? Their not defending their own membership is absurd. I am very disappointed they would sell us out.
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