AARP's Social Security "Shift": Much Ado About Nothing?
Recent statements from key policy personnel of AARP, the powerful lobby for the elderly, expressed a willingness to consider reductions in future Social Security benefit growth to help correct the program’s financial shortfall. These remarks received a fair amount of coverage, the central thesis of which was that AARP’s newly expressed receptivity to benefit changes may make it substantially easier to enact bipartisan reform legislation.
My take on this interpretation of AARP’s statements is one of skepticism. I do not see their recent comments as significant or new. In support of this skepticism I offer the following observational points:
First point: The substance of AARP’s recent statements is not new or different. AARP has always expressed a willingness to consider “a balanced package of revenue and benefit measures”, if – and that’s a big if – the entire package is to their liking. By contrast, there has always been another caucus of advocates urging that benefit growth restraints never be enacted. This other is an unabashedly far-left caucus and AARP has never been within it, instead portraying itself as less ideological and less partisan. AARP has in the past expressed an appreciation of the need to reform Social Security’s benefit structure even as they have withheld their support from various specific proposals to do so. AARP’s follow-up statements have confirmed that this longstanding posture has not changed.
Second point: AARP is not yet embracing a specific, balanced package of benefit changes. Several Social Security plans have been put forward over the last year containing various provisions that would adjust benefits to improve Social Security’s financial outlook. Some plans use such provisions to get roughly halfway to sustainable solvency (the other half coming from revenue changes), whereas others would do the entire job by constraining benefit growth. AARP has yet to voice support for any of these.
Third point: It is routine for effective advocates to emphasize their policy flexibility to secure a seat at the negotiating table. This principle generally holds for all participants in the larger policy discussion, from associations to legislators. There is little point in consulting an individual or organization during a negotiation if there is no hope of winning their support. AARP’s statements are consistent with preserving its potential influence upon the outcome of any such discussions.
Fourth point: To the extent that AARP has voiced specific policy views, it has consistently opposed specific benefit changes that would make a substantial contribution to sustainable solvency. In recent years, for example, AARP has expressed strong opposition both to progressive indexing and price indexing of Social Security’s benefit formula. When more recently the Simpson-Bowles fiscal commission produced a plan that relied on cost containment to close roughly half of the shortfall (including eligibility age changes, CPI reform, and progressive changes to the benefit formula), AARP offered only criticism. AARP has yet to retract any of its statements of opposition even to those proposals that would change benefits just enough to strike a rough balance between tax increases and cost restraint.
Fifth point: All significant bipartisan reform efforts for decades have faced AARP’s opposition. There is a tendency to forget that AARP fought aggressively against the 1983 Social Security reforms, which were enacted only when legislators from both parties agreed to surmount their opposition. AARP also opposed the reform proposals developed by President Bush’s 2001 bipartisan commission and President Obama’s 2010 bipartisan commission. This means that AARP has opposed plans representing bipartisan pairings such as Ronald Reagan/Tip O’Neill, Daniel P. Moynihan/Bob Dole, Daniel P. Moynihan (again)/Dick Parsons, Erskine Bowles/Alan Simpson and Tom Coburn/Dick Durbin. Based on the past thirty years of history at least, bipartisan Social Security reform will more likely happen over AARP’s objections, not via a package negotiated to secure its approval.
How one believes AARP is motivated greatly influences how one believes they will behave when faced with a policy or political question. If they care only about getting the maximum possible benefits for their members, then they will favor an unsustainably generous benefit formula over a solvency solution. If instead they are institutional protectors of Social Security and Medicare, they might accept slower benefit growth in exchange for strengthened program finances. In 1983, it happened that AARP made the value choice of favoring pre-existing benefit promises over programmatic financial repair.
The Social Security policy debate involves many players, each of whom bring different value priorities to the discussion. Such value priorities might include: maximizing total benefits, optimizing protections for the poor, minimizing taxpayer burdens, rewarding work, advancing intergenerational equity, balancing program finances and maintaining Social Security’s foundational principles, among others. Organizations may support all of these objectives in a conceptual sense yet must still confront difficult trade-offs between them. How they make these trade-offs tells us what is most important to them.
To take but one example: One of Social Security’s foundational principles is its contribution-benefit link, for which AARP routinely expresses support. (Example: “AARP believes that any changes to the program should maintain the link between benefits and contributions.”) AARP has nevertheless repeatedly accepted proposals to disrupt or even abandon this link in deference to competing considerations. When in the 1990s President Clinton proposed to abandon Social Security’s self-financing and to bail out the program with general revenues, AARP then dropped its opposition to this severance of the contribution-benefit connection. Last year, when Congress cut the payroll tax and determined (via issuances of debt from general revenues) that over $100 billion ($PV) in future Social Security benefit payments would be authorized with no worker contributions behind them, AARP actually defended this overt severance of the contribution-benefit link. A key to predicting any organization’s behavior is understanding when it allows one objective to give way to another in this manner.
Despite its reputation among some observers, AARP has not always chosen to defend its members’ interest in higher benefits over competing policy objectives. AARP for example supported last year’s health care law, which implemented a transfer of resources away from Medicare participants to those benefiting from the new health insurance exchanges. Although the health care law extended Medicare solvency from a narrow accounting standpoint, it did not significantly improve the government’s net ability to finance the program because the Medicare savings were expended on a new health entitlement. Under an analysis of the CMS Office of the Actuary, these Medicare payment reductions would have the effect of reducing beneficiary access to care over the long term. If AARP were solely about their members’ interests, it would have opposed the health care law.
My skepticism that AARP’s statements have significantly altered the Social Security landscape is based on the patterns of organizational behavior described above. Nevertheless, I hope that my take on AARP’s recent statements turns out to be incorrect and that AARP is now prepared to support a bipartisan solution to Social Security’s financial shortfalls. How will we know if this is happening?
The clearest signals of real change in AARP’s positioning would be if it begins to give more than conceptual support to benefit changes but instead signals support for specific policies that would eliminate at least half of the Social Security shortfall (the amount required for a roughly “balanced” solution). Examples could include slower benefit indexing, bend point factor changes a la Simpson-Bowles, or accelerated eligibility age increases. One especially important signal would be for AARP to pull away from its recent attacks on the bipartisan compromise hashed out by the President’s fiscal commission. Though by no means the only possible signal, this would be fairly compelling evidence that AARP intends to play a constructive role in the ongoing Social Security reform debate.
Until such signals are offered, however, it is more likely that AARP’s recent statements do not suggest genuine change. Legislators should therefore remain mindful that any negotiated solution to Social Security’s shortfalls may need to be enacted over AARP’s opposition.
Charles Blahous is a research fellow with the Hoover Institution and the author of Social Security: The Unfinished Work.
