June 17, 2011
AARP, the nation’s largest lobbying group for senior citizens, said Friday it is willing to discuss reducing Social Security benefits as part of a plan to ensure the system’s long-term solvency. But the group insisted this represents no change from the organization’s long-standing position.
A front-page story in The Wall Street Journal today asserted that the 40-million-member group had “pivot(ed)” on Social Security and now supports “benefit cuts.” Liberal groups opposed to any changes in Social Security benefits immediately blasted AARP for giving tacit support to budget hawks who want to see Social Security become part of the negotiations now underway in the nation’s capital to raise the debt ceiling in exchange for budget cuts.
But AARP, already under assault by congressional Republicans for putting its own interests ahead of retirees, issued a statement claiming its position had been “misleading(ly) characterized” by the financial paper. The group specifically came out against including Social Security in the debt reduction talks.
“Any changes to this lifeline program should happen in a separate, broader discussion and make retirement more secure for future generations, not less,” said A. Barry Rand, the chief executive of AARP in a statement. But in a clear allusion to future benefit cuts, the AARP chief said, “It has also been a long-held position that any changes would be phased in slowly, over time, and would not affect any current or near-term beneficiaries.”
In a telephone interview with The New York Times, AARP chief lobbyist John Rother said, “Our goal is to limit any changes in benefits, but we also want to see the system made solvent.”
While the group is usually considered an opponent of cuts in Social Security benefits, analysts say its position is more nuanced and less partisan than many other advocacy groups on the right and the left. Like many liberal groups, the AARP is against measures to cut Social Security as a way of reducing the budget deficit, which the group says it didn’t cause. But the group has signaled an openness to adjusting the program’s tax revenues and spending in order to shore up its long-term fiscal stability.
“Everybody understands there’s going to have to be some kind of change, and we’re willing to have a broader discussion about that,’’ David Certner, AARP’s legislative policy director, told The Fiscal Times last August. “What we don’t like is when we are talking about a Social Security solvency package, and the discussion is all about reducing the deficit, which Social Security didn’t create.”
One-Sixth of Overall Federal Debt
Social Security is a payroll-tax-funded program that generated large surpluses over the last quarter century to prepare for the baby boom retirement. After President Ronald Reagan signed a law in 1983 that raised payroll taxes and lifted the full retirement age to 67, the Social Security trust fund amassed $2.4 trillion in government bonds, equal to about one-sixth of the overall federal debt.
But with current payroll tax revenue falling short of benefits paid to the nation’s 44 million retirees, the federal government must now make good on those trust fund IOUs, which were expended over the last decade on the Bush-era tax cuts, an unfunded Medicare drug benefit, and two wars financed through deficit spending. At current rates of spending, the trust fund will be exhausted in 2036, at which point Social Security benefits would have to be cut by 23 percent to bring payroll tax revenue and benefit payouts in line since Social Security by law cannot run a deficit.
Social Security’s long-term imbalance is considered the easiest federal budget problem to solve. The most frequently cited changes needed to return to 75-year solvency are lifting the cap on salaries subject to the payroll tax, which is supported by liberals; cutting benefits, which is supported by conservatives; and increasing the retirement age, which can win support from both sides depending on how it is structured. Raising the retirement age penalizes the poor, who on average have shorter life spans, and manual laborers, who are less able to work deep into their 60s.
No one involved in the debt ceiling talks led by Joe Biden has publicly declared that Social Security has come up in the talks. However, one proposal gaining traction among budget hawks is to lower the cost-of-living adjustment factor for seniors, which would have a dramatic impact on the federal deficit.
The liberal coalition Social Security Works claims that moving to a lower inflation factor would cut benefits by over 7 percent over the next two decades. Budget analysts say it could save the federal government nearly $300 billion in payouts over the next decade. “Any formula that tells seniors that they’re going to get a different COLA that isn’t a benefit cut is going to be laughed at,” said Eric Kingston, a co-chairman of Social Security Works. “Seniors are smarter than that.”
The AARP statement did not address specifics of how it might approve benefit adjustments to assure long-term stability. “Any changes would be phased in slowly, over time, and would not affect any current or near-term beneficiaries,” the group said.
The group has played a key role in every major political battle over old-age entitlement programs during the past quarter century. In 1983, when the Social Security trust fund was just a few months away from bankruptcy, the AARP supported increases in payroll taxes and gradual increases in the retirement age. In 2003, the AARP broke ranks with many liberal groups and provided crucial support for a Republican bill to provide prescription-drug benefits under Medicare.
But in 2005, senior citizens groups, including AARP, waged a massive and successful campaign to sink President George W. Bush’s proposal to convert part of Social Security to a system of private investment accounts.
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