I’m going to come right out and say it: AARP is about money and power. That’s all it’s interested in.
Formerly known as the American Association of Retired Persons, the nation’s largest seniors group hasn’t cared about its elderly members’ well-being for eons. It’s been too busy building a financial empire.
With $1.6 billion in assets and $1.2 billion in revenue in 2010, AARP is a moneymaking powerhouse. The bulk of its money comes not from membership dues but from product endorsements and business agreements with insurance companies.
These mountains of money and the generous salaries that AARP lavishes on its corporate executives recently drew the attention of members of Congress who have asked the Internal Revenue Service to review AARP’s tax-exempt status. Their findings appeared in an eye-opening investigative report, “Behind the Veil: The AARP America Doesn’t Know,” that was issued by Republican members of the House Ways and Means Committee.
Much of the self-described “nonprofit” group’s revenue comes from the sale of supplemental Medicare insurance provided by UnitedHealthcare, which pays a royalty fee to AARP to use its name for marketing purposes. This licensing earned AARP $284 million in 2007, a figure that ballooned to $427 million in 2009 and $670 million in 2010.
As it amasses huge profits, AARP also has become the 800-pound gorilla of special-interest advocacy groups.
As journalist Fred Lucas writes in the current issue of Capital Research Center’s monthly newsletter, Foundation Watch, AARP has a much deserved reputation for throwing its weight around on Capitol Hill.
AARP burned through $198 million in lobbying fees from 1998 to 2010, according to a recent congressional report. That places it behind the U.S. Chamber of Commerce, the American Medical Association and General Electric but ahead of PhRMA, the trade association that represents pharmaceutical manufacturers.
AARP has run afoul of the tax man before. In 1994, it forked over a one-time settlement of $135 million to the IRS to settle an audit over its tax returns from 1985 through 1993. The IRS found that AARP had engaged in commercial activities and had to remit “unrelated business income tax” or UBIT. That same year, AARP also paid $2.8 million to the U.S. Postal Service to resolve claims that in 1991-92 it improperly mailed health-insurance solicitations at nonprofit rates.
Why should AARP be tax-exempt while it rakes in hundreds of millions of dollars in royalties by sponsoring health insurance and offering hotel and travel discounts and deals on auto rentals? That’s the question former Sen. Alan Simpson, Wyoming Republican, asked at a 1995 hearing on AARP’s operations.
What “if U.S. Steel decided to rename itself the American Association of Steel Enthusiasts, offered some discounts and rebates to millions of Americans in exchange for a strictly nominal contribution and then used that incidental association to gain tax-exempt status, and devoted millions to lobbying for direct support of the steel industry.”
That’s an excellent question.
Meanwhile, AARP remains a steadfast enemy of even the mildest entitlement reforms. The group would prefer to send the bill for previous generations’ spendthrift ways to young people and those who have yet to be born. The group represents only the very short-term financial interests of those now retired and leaves their children and grandchildren to fend for themselves in an America with an increasingly uncertain future.
AARP attacked Rep. Paul Ryan, Wisconsin Republican, when he advanced an extremely modest proposal last year aimed at getting a handle on exploding Social Security and Medicare costs. Even though it knew the plan would not affect today’s seniors or anyone over the age of 55, a disingenuous AARP-produced TV ad said, “Some in Congress want to make harmful cuts to Medicare and Social Security, cutting your benefits so Washington can pay its bills.” It was complete nonsense, but AARP didn’t care.
AARP CEO Barry Rand doubled down, misrepresenting the Ryan plan in an effort to scare seniors. Although the Ryan plan would not reduce Medicare spending, Mr. Rand told lawmakers in a letter that Mr. Ryan’s “proposed budget caps” would “very likely trigger cuts to Medicare benefits for today’s seniors.”
At the same time, AARP gave its enthusiastic support for Obamacare, which would slash $500 billion from Medicare’s budget. AARP’s cheerleading for President Obama’s socialist health care plan was decisive.
Without that support, the Medicare-cutting package probably wouldn’t have been approved by Congress and the millions of seniors that AARP claims to represent would have been better off.
Terrence Scanlon is president of the Capital Research Center.