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AARP Leads With Wallet In Fight Over Social Security

For now, compromise doesn't look likely. Members of Congress and AARP officials said their meetings have involved mostly laying out conflicting views. They also say neither side is likely to budge significantly until Bush completes his 60-day campaign for his proposal at the end of next month.

But then the issue could be reopened. "I'm hopeful that maybe we can construct a plan," McCrery said. "AARP represents for us a very valuable ally if we can get it to sign on to what we want to do."


William D. Novelli leads AARP's multimillion-dollar campaign to stop President Bush's Social Security plan. (David Duprey -- AP)

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While attending a Social Security speech by the president last week, Sen. John McCain (R-Ariz.) encouraged AARP to bend. "I want to say to our friends in the AARP -- and they are my friends -- come to the table with us," he said.

AARP isn't averse to changing Social Security; it merely disapproves of Bush's plan on private accounts. AARP would add such accounts as a supplement to Social Security and rejects the idea of putting the program's basic guaranteed benefit at risk with market investments. It also would be willing to fiddle with other aspects of the program (such as who gets taxed) to make sure it remains solvent in the long term.

AARP is an 1,800-employee association that mobilizes better than any other group the people who vote in the greatest numbers: senior citizens. It reaches them with the nation's largest-circulation publications, AARP the Magazine and the AARP Bulletin, which are delivered to 22 million households. It also has offices in all 50 states, a national radio show, a heavily visited Web site and a 650,000-circulation Spanish-language magazine, Segunda Juventud (Second Youth).

On top of that, AARP has taught 1.5 million members how to contact their elected representatives. Those activists receive their own publication, as well as periodic "alerts" that launch them into action from every congressional district. So far this year, the 535 members of Congress have received more than 460,000 phone calls complaining about Bush's private-account plan, according to AARP.

"When AARP has a consensus among its members, it's difficult to stop," said James A. Thurber, a lobbying expert at American University. "On this issue it has a consensus."

In late 2003, however, AARP shocked official Washington and much of its membership by backing Bush's drive to add a prescription-drug benefit to Medicare. The support helped the legislation to become law, but it also led to the resignation of 70,000 AARP members and angered Democratic members of Congress who had considered AARP a reliable partner.

This time around, AARP won't take its members' loyalty so lightly, Novelli said. Its in-house polling division will take surveys and conduct focus groups before the organization takes any new stand on Social Security changes.

That kind of work is expensive but AARP can afford it. The association took in $350 million last year from a variety of royalty-producing enterprises, including insurance, prescription drugs and mutual funds.

AARP is facing criticism of its mutual fund business because that kind of investment would probably be a feature of the accounts the president is pushing. Scudder Investments Inc., a unit of Deutsche Bank AG, handles 600,000 mutual fund accounts of AARP members, with $10.5 billion in assets. AARP helped develop those accounts and earns a small percentage of the management fee that Scudder charges. Last year, the association earned about $7 million from those fees and is working with Scudder to develop more funds, AARP officials said.

"It is ironic that they would make such a fuss about risky investments in Social Security when they actually promote investments in mutual funds," McCrery said. Sen. Richard J. Durbin (D-Ill.), an AARP sympathizer, agreed: "AARP needs to take care that when it's in the policy realm, it declares any conflicts of interest."

In response, Novelli denied that there was inconsistency between AARP's resistance to Bush's plan and the fact that AARP encourages its members to invest in mutual funds, especially its own. Bush would make accounts part of Social Security and thus expose its benefits to risk, he said. AARP believes that Social Security's government-provided payments should remain inviolate.

AARP was started in 1958 as a nonprofit organization that also had a business purpose. Its founder, retired educator Ethel Percy Andrus, wanted not only to advance the interests of older Americans but also to create a market large enough to sustain the sale of health insurance to them. That dual role led to accusations of self-serving motives during the Medicare drug debate. Critics asked how AARP could be impartial on prescription subsidies when it made money from a mail-order pharmacy.

The harshest complaints about AARP lately have come from a group formed specifically to undercut it on Social Security. USA Next has recruited some of the consultants who advised the Swift Boat Veterans for Truth advertising campaign against Democratic presidential nominee John F. Kerry last year. Its tactics have been notably rough. In an Internet commercial, USA Next accused AARP of supporting gay marriage, a position that AARP says it never took.

But USA Next's claimed membership of 1.5 million is tiny compared with AARP's. AARP dwarfs every other group that represents older people. The more than $15 million that it has spent already on advertising this year is three-quarters of the entire annual budget of Progress for America, the largest pro-Bush Social Security lobby.

"On Social Security, you have no choice but to hug AARP tight," said Barbara B. Kennelly, president of the National Committee to Preserve Social Security and Medicare. "They will be very influential."


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