by Meg Handley

June 26, 2011

Progress in the Social Security funding debate could reshape discussion about our entitlement programs

Following intense critique from fellow activists, AARP backtracked on comments made by its policy chief, who hinted that the organization might consider cuts to Social Security benefits as part of the program's funding reform. Historically, the organization has been one of the fiercest opponents of any cuts to the program, which is projected to exhaust its funds by 2036.

"AARP is as committed as we've ever been to fighting to protect Social Security for today's seniors and strengthening it for future generations," AARP's CEO A. Barry Rand said in a statement. "Contrary to the misleading characterization in a recent media story, AARP has not changed its position on Social Security."

Rand's statement came in response to comments by AARP's policy chief John Rother that were reported in the Wall Street Journal on Friday, indicating the organization was dropping its longstanding opposition to cutting Social Security benefits. "The ship was sailing," Rother told the Wall Street Journal , and added that changes were inevitable for the program. He also said AARP wants to be at the helm of the dialogue to minimize any negative impact that proposed changes to Social Security could have on its members.

Alicia Munnell, who heads Boston College's Center for Retirement Research, wasn't surprised by the organization's seemingly sudden change of heart. "I think it's an organization that's trying to be relevant, and just saying it cares about its constituents and saying 'we're never giving in on anything' [is] just not a way to be relevant," she says. "I think they think this program should be fixed sooner rather than later, and keeping a position that says no cuts under any circumstances means you can't really start a dialogue."

Experts say hidden between the lines of AARP's "new" stance is evidence that the most powerful lobby for older Americans could be coming around to the idea of compromise, which has the potential to reshape Washington's approach to revamping entitlement programs as a whole. U.S. News recently spoke with Bill Novelli, professor at Georgetown University's McDonough School of Business and CEO of AARP from 2001 to 2009, about the organization's latest comments and the future of Social Security. Excerpts:

Do Rother's comments represent a fundamental change in AARP's stance?

In my opinion, this is not a sea change for AARP. This is AARP trying to take the positions that it's held and move the ball forward, and that's what we need. Nobody has the silver bullet here. We have to sit down and negotiate and figure it out. They have been saying right along that they are open to the idea of figuring out ways to get to Social Security solvency, and that includes both sides of the equation: the revenue side and the benefits side.

The information that came out of AARP didn't surprise me. What surprised me was the way some of the policymakers and some of the special interest groups reacted to all this, acting as though it was AARP reversing itself, which I don't think it is at all.

What prompted these comments on Social Security now?

AARP is basically doing what they always do.

They're trying to lead, they're trying to be constructive, they're trying to make positive contributions to this huge debt and deficit debate. Social Security is one of the ways in which you really could solve a problem, and that could be a catalyst for taking on the tougher [problems].

We've got to have Social Security solvency and we've got to do it with adequacy and fairness. You've got to take longevity into account. People are living longer. You need to make Social Security progressive -- it's a safety net, and I think that they've recognized this all along.

Raising the [payroll tax] cap has been something talked about all along. Even in 2005 when President Bush tried to carve private accounts out of Social Security, even then he implied he would be willing to talk about a raise in the cap.

That's been out there and that solves a big part of the problem, [but] there are other ways to raise revenues that don't have anything to do with tax increases. Investing the money better -- Canada does that -- signing up everybody and making this a universal system. It's surprising that in many states, teachers, cops, and fireman are not in Social Security. There are a variety of ways to think about the revenue side of the equation.

How does this impact the broader dialogue about entitlement programs?

I think what they're trying to do here is they're trying to lead, which is what they should be doing and I do think it has implications for the wider debate. They can engage their members, they can be constructive on Medicare, and especially on healthcare even more broadly. If we're going to get debt and deficit under control, we have to get healthcare under control and AARP can contribute to that.

If you look at the whole healthcare picture, who would've thought we would have had healthcare reform a few years ago. Now we have it and what we have to do now is build on it. AARP is in a good position to help us do that.

What does this mean for retirement income security?

We have to think about retirement income as broader than just Social Security, and AARP has been talking about this all along. We need some way to improve retirement security.

There is one good trend, which is that older people are working longer and that's because there's more longevity and better health and there's also a need -- some people want to work longer, but some people have to work longer.

But we have to think about retirement security beyond Social Security. We need add-on accounts on top of Social Security, we need to help people be more financially literate, we need people to start [saving for retirement] earlier.

These are the areas that we can make progress, and if we can break out of all this partisan bickering and really face up to these issues with AARP helping out, we have a lot of opportunities.


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