WSJ: AARP's False Campaign against Reform

January 13, 2005

The AARP launched its campaign against individual accounts this week with a series of newspaper ads comparing allowing younger workers to privately invest a portion of their Social Security taxes to slot machine gambling. The powerful seniors' lobby expects the multimillion dollar campaign to be just the first shot in its efforts to defeat Social Security reform. Responding to AARP's efforts, the Wall Street Journal offered this perspective:

"So here we are back to scaring grandma, never mind the facts. The AARP leadership knows that no Social Security reform would have any effect at all on current members of the 50-plus set they claim to represent; the personal accounts would be voluntary and for younger workers only. They also know that there isn't a serious Social Security reform plan anywhere that wouldn't guarantee some minimum level of benefit, or that would allow people to 'gamble' their retirement savings in anything other than diversified mutual funds.

"...the truth is that AARP might be able to ignore, but it can't repeal, the laws of demographics. And there is simply no way the current pay-as-you-go retirement system, with two workers supporting each retiree in 2030, is not going to require a crushing tax burden compared with a system that had 16 workers per retiree in 1950 and 3.3 today.

"Particularly dishonest is AARP's readiness to peddle the fiction that there is actually a 'trust fund' accumulating assets to pay benefits once Social Security payments exceed payroll tax revenues around 2018. Mr. Novelli knows these 'surpluses' have already been spent on other things and been converted to IOUs that will have to be financed by taxes on future workers, unless of course those liabilities are repudiated by future politicians.

"..taken together the nation's retirement programs are already in deficit right now. As the nearby chart shows, in 2004 the shortfall of the Medicare payroll tax was sufficient to wipe out the Social Security 'surplus,' forcing the federal government to divert 3.6% of its personal and corporate income tax revenues.

"That figure is set to skyrocket once the baby boomers retire, reaching 52.7% of general purpose tax revenue as soon as 2030. You'd think this prospect would especially worry Democrats, who surely have programs besides Medicare and Social Security they'd like to fund. And by 2070, when today's toddlers retire, Medicare and Social Security would eat up not just their dedicated payroll taxes but ALL other government revenue as well.

"That's never going to be allowed to happen, of course. The real agenda of the 'no problem' crowd is to keep spending the Social Security 'surplus' on other things until 2018 and then simply raise taxes much higher. AARP rank-and-file members need to understand that the leaders speaking on their behalf are now essentially endorsing much higher taxes or lower benefits, and probably both.

"Personal retirement accounts are in fact the least 'risky' alternative. Rather than rely on the whims of future politicians, they allow workers to build up assets that they themselves own as a property right. While individual stocks and the market itself rise and fall, over the last 60 years stocks have provided an average annual return reaching near 10%. As workers age, they would also have the option to shift assets out of riskier stocks to less risky bonds, just as millions of Americans now do with their 401(k)s.

"The older Americans we know aren't selfish, and certainly they don't want to burden their grandchildren by insisting that our runaway entitlement programs must never change. Yet AARP is behaving in a way that portrays anyone over 50 as greedily insisting that only their own benefits matter. It's a shame to see AARP leaders putting their own welcome back to the liberal Democratic plantation above serving their constituents and the future of the country."

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