Arnold Kling  

Anti-AARP?

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Unintended Consequences, Chapt... The Reality of Meritocracy...

How snowed in are we? So snowed in that we had the television on when this Charlie Rose interview with David Brooks came on. It was quite good. I agreed with Brooks on many things, and even when I did not I thought he was saying things that were reasonable.

One theme is that Brooks is impressed by the Tea Party and by the potential for mass movements in general. At one point, he suggests that old people will come forward and put entitlement reform on the table, and that will make it politically possible.

I find that notion intriguing, if perhaps implausible. But sometimes the leaders of groups are out of touch with their members--union leaders lean one way, and their members lean another, for example.

The AARP policy folks are super-aggressive about protecting every dime of benefits, for everyone from current recipients to today's young people to the unborn (the AARP folks go ballistic if you talk about cutting benefits in 2080)

So, would seniors rally to the anti-AARP, a group that wants to give back some of their entitlements? And is there someone willing to lead the anti-AARP?

Right now, the dynamics are that if someone from one party proposes a cut in future entitlements for people aged 50 and under, someone from the other party will scare today's seniors into thinking that they are about to lose their benefits. In the eyes of both Democrats and Republicans, seniors are ignorant, frightened misers, who will vote out of office anyone who mentions the words "reform" and "Social Security" or "Medicare" in the same sentence. Until that perception changes, our fiscal policy is in deep yogurt.


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CATEGORIES: Social Security



COMMENTS (10 to date)
Lance writes:

This does not entirely meet your definition, but a group known as the American Seniors Association has positioned itself as the "conservative alternative to the AARP".

But, they may be more along the lines of the protesters who implore for the government to keep their hands off their Medicare.

mulp writes:

Unless you are going to argue that Reagan cynically supported the Social Security reform to implement a regressive flat tax to fund his military spending or something, Social Security should have been well funded until 2060, I believe.

The excess SS revenue would have first paid off all war related debt (WWII and before) and then provided more than enough cash for lots of infrastructure investment without any borrowing, replacing the pre-70s era bridges, water and sewer systems, taken over rail lines as if they were highways and airports, and upgraded them for high speed freight, added intermodal facilities, upgraded transmission lines as well, so that at this point in time, no infrastructure investment would be required in the coming decades.

As these infrastructure facilities are highly productive and critical to an economy, even a stagnant economy, they are the type of long term investments needed for retirement funds. Many rail lines go back to the civil war, funded by the government, and the highways largely date from the 30s-60s, they clearly have long productive lives. Others include the dams and water systems built in the 30s and 40s. NYC depends on investments of decades ago that are highly critical to the economy of the city, yet are aging and so heavily used they can't even be inspected much less maintained. The investment for backup capacity goes back three decades, but hasn't been completed.

Even if privatized, the private institutions will need investments and Social Security could by bonds secured by the physical assets.

Of course, the record for privatizing such things is mixed - Chicago privatized parking and the rates have jumped substantially, something merchants oppose - remember merchants moved to suburban shopping centers to provide free parking, but that required the tax payers to build the highways to the shopping centers. If we are serious about privatizing things, let's privatize all the streets and highways in the US and build RFID into license plates so transponders everywhere can charge tolls based on distance and time of day use. I find it odd that every libertarian who calls for eliminating SS opposes privatizing the roads.

Social Security is not anything close to generous for 80% of where people live. I'm sure some areas have low costs of living for the healthy - rural Iowa where towns are being abandoned - but in general, SS provides barely enough to scrape by on. And I have seen no one explain how a "private account" can provide the "whole life" benefit of Social Security - check out a whole life policy for the price of the median income FICA SS deduction that provides the same benefit as SS - I think the "free market" is hardly competitive with Social Security. And the insurance companies would need to have assets of how many trillions of dollars to pay for SS benefits if all private, as if suddenly they would get zero new customers....

While tallying up liabilities, no one bother to tally up assets held by the people. The roads, to start. The investment in land is massive, not counting the improvements - easily tens of trillions in productive land and infrastructure owned by the people. The people charge themselves low rents because that makes the economy more efficient. If you don't think the value of such things is worth much, look at the $10-$100 a gallon for fuel in Afghanistan because it has no pipelines, no rail lines, and the roads are totally inadequate.

Medicare is a different story, but the US health care is twice as expensive as it should be because it isn't universal. The evidence is absolutely clear if you believe in competition. Match the health care systems of nations all over the world in terms of efficiency - output of quality per dollar paid - and the US is far from leadership.

Only economists who deny reality, and simply design societies that are theoretical can argue for anything but a universal health care system. After that, multiple models exist, the Swiss model for Romneycare which is the model for health reform, Canada's Medicare which is like US Medicare, but for everyone, Britain's NHS, Germany's system, Japan's, Israel's, France's, Taiwan's, ... All have on thing in common: universality which means no one is screwing over another group - everyone is in the same system.

And it is the near universality of Social Security that allowed it to be reformed in 1983 at Reagan's initiative and the fees hiked in order to give nearly everyone the same benefit with very sound financials. Its running out of money for full benefits in 2050 or whatever is a consequence of the poor economic performance this 21st century which is the result of under investing in productive capital - big energy wasting houses are negative productive.

The big experiment of the 21st century is the "government getting out of the way so the free market can create more wealth" but the free market seldom makes investments which won't repay the investment in less than 50 years. The free market wouldn't have built the transcontinental railroad in a decade without huge government subsidies. Massive subsidies.

Likewise, free market disability, dependent, and retirement that handles everyone for most eventualities is a huge investment that is beyond the means of any consortium of private firms, especially when the profits are to be made from the greater productivity of the customers in the aggregate. Ditto health care.

Health care is an example of private profit, socialized losses. Unless you demand the welfare cases be euthanized and body parts sold for salvage value, any person without insurance in need of medical care is an insurer free rider - insurers have refused to cover them because they are transferring the risk to the public.

Eliminate Medcare and hand out a voucher as Ryan proposes, 20-50% of the people over 65 won't be able to buy insurance, unless the insurers are mandated to cover everyone, and everyone is mandate to buy, and if the plan the buy is insufficient, they are euthanized. Try to sell that Medicare reform just for those over 65 without setting the same terms for those under 65.

lukas writes:
The big experiment of the 21st century is the "government getting out of the way so the free market can create more wealth" but the free market seldom makes investments which won't repay the investment in less than 50 years. The free market wouldn't have built the transcontinental railroad in a decade without huge government subsidies. Massive subsidies.

mulp, meet the Great Northern Railway.

david writes:

Lukas, the Great Northern Railway received Presidential backing for building through American Indian territory. Seizing territory is a great subsidy, I'd say. And it built towards areas which had sustained an immigration boom through previous, more obviously subsidized, railways.

On the whole I would not go as far as mulp, but it is true that much of government infrastructural investment eventually turns out to be net welfare improving - people tend to find creative uses. Whether more welfare improving than an imagined private alternative is an open question.

Mercer writes:

"The AARP policy folks are super-aggressive about protecting every dime of benefits, for everyone from current recipients to today's young people to the unborn (the AARP folks go ballistic if you talk about cutting benefits in 2080)"

Obama's health plan has some elements to try to reduce Medicare spending growth. The AARP is supporting Obama's plan. It is the Tea Party and Republicans who are currently protesting any change in Medicare.

Yancey Ward writes:

Arnold asked:

So, would seniors rally to the anti-AARP, a group that wants to give back some of their entitlements? And is there someone willing to lead the anti-AARP?

The cynical side of me says that the answer depends on how much you pay them to get and stayed bought off.

Chris Koresko writes:

@david,

My hypothesis is that there are certain points in history when there's an obvious big opportunity which demands a massive investment, and when that happens a large government investment may be made without becoming a boondoggle.

But in times when the government has access to large amounts of money and is looking for something to invest it in, the result is likely to be much less productive than whatever the private sector would have done in its place.

Paul writes:

"The AARP policy folks are super-aggressive about protecting every dime of benefits, for everyone from current recipients to today's young people to the unborn (the AARP folks go ballistic if you talk about cutting benefits in 2080)"

If you actually take a look at the health care reform proposals, seniors stand to lose more than they gain. The Medicare Advantage and provider payment cuts clearly outweigh the additional prescription drug benefits provided to seniors in the bill.

The AARP's endorsement of the bill is based on two factors:

1) Their leadership and staff are filled with individuals who used to work for Democrat members of Congress or for left-of-center/leftist think tanks and health policy groups. Support of the bill reinforces long-standing relationships between the organization's leadership and those who wield political power.

2) The HC reform proposals are a financial boon to the AARP. Since there is over $100 billion in cuts to Medicare Advantage (which provides additional benefits above traditional Medicare), there will be a higher demand for Medicare supplemental policies, otherwise known as Medi-gap policies. The AARP licenses its name to United Health Care and makes a tremendous profit off of these plans. The AARP gets roughly 60% of its revenue from licensing fees and that share is growing exponentially. Despite the fact that many seniors are angry with the bill and have cancelled their membership, AARP stands to make more money if the bill ends up becoming law. They don't care if a few thousand seniors cancel their membership.

This Bloomberg News article confirms most of these facts:
http://www.bloomberg.com/apps/news?pid=20670001&refer=&sid=a4OkPQIPF6Kg

ColoComment writes:

AARP does NOT speak for all seniors.

I withdrew my personal AARP membership when it adamantly refused to enter into any discussion whatsoever about SS reform during the Bush administration, and indeed, took fearmongering of (for?) seniors to new heights. I believed then as I do now, that while AARP may claim that it represents the interests of retirees, it's only in the very short-term if at all.

Seniors are not necessarily economic illiterates; nor are they completely self-centered. They haven't survived this long by being stupid. If I recall correctly, a record number of seniors dropped AARP membership last summer to protest AARP's support of ObamaCare (whichever version it may have been at that time). I believe that plenty of seniors knew then and know now that SS and MediCare are failing programs, and would support intelligent, economics-informed reforms.

Norman Pratt writes:

How do I join the Anti-AARP organization?

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