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Who rules America? AARP.

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Monday, February 21, 2011

The great question haunting Washington's budget debate is whether our elected politicians will take back government from AARP, the 40 million-member organization that represents retirees and near-retirees. For all the partisan bluster surrounding last week's release of President Obama's proposed 2012 budget, it reflects a long-standing bipartisan consensus not to threaten seniors. Programs for the elderly, mainly Social Security and Medicare, are left untouched. With an aging population, putting so much spending off-limits inevitably means raising taxes, shrinking defense and squeezing other domestic spending - everything from the FBI to college aid.

Power is the ability to get what you want. It suggests that you control events. By these standards, AARP runs government budgetary policy, not presidents or congressional leaders. Obama says we must "win the future," but his budget (and, so far, the Republicans', too) would win the past and lose the future. The massive federal debt would continue to grow because, without restraining retiree spending, there's no path to a balanced budget. The aging infrastructure (roads, airports) wouldn't get needed repairs. The already-stressed social safety net for the poor would be further strained. We would cut defense while China's military expands. All this is insane. It's not the agenda of a country interested in its future.

But it's our agenda. Look at Obama's budget. Under his proposals, annual federal spending rises from $3.7 trillion in 2012 to $5.7 trillion in 2021. Social Security, Medicare and Medicaid (the three major entitlements) account for 60 percent of the projected $2 trillion increase. Higher interest payments on the debt - mainly reflecting our inability to control big entitlements - account for 31 percent. Altogether, that's 91 percent of the increase; the rest of government accounts for 9 percent.

Indeed, when corrected for expected inflation and population growth, the rest of government shrinks. A table in Obama's budget shows this clearly. From 2012 to 2021, annual "security" spending (defense and homeland security) would drop 21 percent after inflation and population adjustments. Non-security discretionary spending (a catchall including air traffic control, space, regulation and much more) would fall 24 percent. Other "entitlements" (food stamps and the like) would decline 4 percent. Meanwhile, Social Security would rise 27 percent and Medicare, 32 percent.

AARP sends its representatives to Capitol Hill and think-tank seminars, where they pretend to be "reasonable" while frustrating needed Social Security and Medicare changes. Higher life expectancy and private savings mean that eligibility ages could have been gradually raised and benefits curbed for wealthier retirees. Congress, heeding a 1983 commission proposal, slowly raised the age for full Social Security benefits from 65 to 66 (and to 67, much later). Little else of significance has been done. The result is that any effort to control spending must focus on a small part of the budget (from a seventh to slightly more than a third, including defense). House Republicans have cut many programs sharply - some sensibly, others not. Obama is doing the same, though less dramatically.

But AARP sets overall priorities. Its power derives from the fear it inspires in senators, representatives, presidents and political candidates. They worry that they'll be assaulted and rejected by hordes of angry seniors infuriated by any possible loss of benefits and mobilized by AARP. The question of whether all these benefits are needed or deserved can't be asked, let alone answered. It's impossible to enact a major overhaul of Medicare that might check its uncontrolled spending.

The trouble is that this self-serving inattention won't work. The budgetary math doesn't compute; too much is left out. Obama's projected budget for 2021 is instructive. Despite higher taxes - about 10 percent above the 1971-2010 average - and the budget's deep cuts in defense and domestic discretionary spending, the deficit would remain at an estimated $774 billion, about 3 percent of the economy. And that assumes "full employment," a 5.3 percent jobless rate. By 2021, continuous annual deficits would boost the publicly held federal debt to almost $19 trillion, up from $9 trillion in 2010. So the possibility of a financial crisis, triggered by unmanageable debt levels, would survive even if Obama's budget were adopted.

No one wants to strip needy seniors of essential benefits. Social Security, Medicare and Medicaid provide crucial protections for millions of poorer and older households. But for many relatively healthy and economically secure Americans, these programs constitute middle-class welfare. As a society, we need to redefine what's in the public interest and what's not. That's the job of our political leaders.

Obama repeatedly says he'll deal with "entitlements" - and does nothing. He made the promise again last week. Congressional Republicans also committed last week to proposing entitlement changes. We'll see if these pledges are honored or if power continues to be outsourced to AARP.


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