President Bush’s bold attempt to reform the financially strapped Social Security program through a system of private retirement accounts has sadly ended with a whimper and not a bang.
Senate Finance Committee Chairman Charles Grassley (R-IA) recently told the U.S. Chamber of Commerce that he’s “very pessimistic” that Congress will address Social Security reform during the President’s second term.
The organization that played the biggest role in fomenting opposition to a measure Bush hoped would be his crowning domestic achievement was AARP.
AARP is the nation’s largest organization ostensibly lobbying for the interests of the elderly. With a membership base of 22 million and revenue of $878 million in 2004, AARP had the most resources of any interest group, conservative or liberal, involved in the debate.
And it didn’t spare a dime to stop the private account initiative. Starting in January 2005, AARP sent mass mailings to its members, spent $5 million on newspaper advertisements, and another $5 million on print advertising denouncing the Bush plan.
AARP charged that diverting payroll taxes to private accounts would lead to massive new federal debt. Incredibly, AARP chief executive Bill Novelli insisted the program was financially solvent even though it will start paying out more in benefits than it collects in taxes in just 12 years.
Thanks to its multi-million dollar lobbying campaign, AARP won the battle.
The defeat of private accounts is just the latest example of AARP’s longtime commitment to liberal activism. Of course, as a private nonprofit organization it has the right to take any stand it chooses on a public policy issue. However, the fact that AARP pursues its agenda using federal dollars stirs considerable anger among many taxpayers, and not just those who oppose its politics.
The AARP 2004 annual report shows that the organization received $83 million from the federal government through a variety of grants. Thus, when AARP spent at least $10 million torpedoing Social Security reform, more than 10 percent of its $800 million budget came from the U.S. taxpayer.
Charlie Jarvis, Chairman and CEO of USA Next, estimates that since 1989, “AARP appears to have taken over a billion dollars in taxpayer money.”
The large majority of AARP’s federal largesse comes from a Department of Labor grant that funds the Senior Community Service Employment Program (SCSEP), a senior job-training program with a checkered history of wasteful spending and unaccountability. Labor’s SCSEP grant for the 2004-2005 fiscal year is $75 million, which accounts for nearly 90 percent of AARP’s federal support.
SCSEP purports to place low-income individuals age 55 and older in temporary, minimum-wage jobs at private nonprofits and public agencies. Under a longstanding funding formula, 78 percent of the $440 million SCSEP budget, $342 million, is allocated to 13 national nonprofit groups and 22 percent to the states. AARP is the second largest recipient.
Other recipients include Experience Works ($86 million), National Council on Aging ($22 million), and Easter Seals ($16 million).
Under the supervision of the nonprofits, seniors typically work in schools, hospitals, libraries, and various local agencies. The goal is that after a few months, the seniors will acquire the skills to work in full-time jobs.
However, there are serious concerns about the effectiveness of the SCSEP program. The Congressional Budget Office (CBO) has repeatedly recommended that the program could be targeted for elimination since the nonprofit organizations, among the best-funded in the nation, are quite capable of bearing the cost of running senior training programs. In its official “Budget Options” report to Congress in 2003, the CBO noted that AARP and other nonprofits must bear only 10 percent of the job training costs. CBO concludes, “Shifting those costs would ensure that only the services that were most highly valued would be provided.” In other words, AARP would do a better job with its own money.
Another problem is that SCSEP doesn’t seem to train seniors so much as place them in make-work government jobs that are in effect welfare. “SCSEP offers few benefits aside from income support,” concludes CBO.
Indeed, it is questionable how seniors can expect gainful employment by performing part-time, unskilled labor that pays only minimum wage. Amazingly, the Labor Department does not perform independent audits to measure how effectively grantees place seniors in meaningful jobs. Grantees grade themselves. Not surprisingly, AARP consistently boasts a high placement rate.
The time is long overdue to cut off federal subsidies to AARP, worth, at last count, $1.6 billion. It’s grating enough that AARP gets away with blocking Social Security reform through misinformation. But don’t let it do so while it’s feeding at the public trough.
John Carlisle is the Director of Policy at the National Legal and Policy Center, a nonprofit foundation dedicated to promoting ethics in public life.