Wednesday, April 13, 2005

In the ongoing debate over Social Security, AARP may claim that its mission is to defend the elderly, but its use of manipulative polls and inaccurate ads to needlessly frighten the public about the merits of reform raises serious questions about its tactics.

Moreover, while AARP says private stocks are too risky for individuals to invest their retirement savings, the multibillion organization has no problem making millions off those same “risky” investments.

As evidence for the alleged unpopularity of private accounts backed by President Bush, AARP cites a poll it conducted in March that showed that 59 percent of the organization’s 35 million members oppose the proposal. However, the poll is suspect because it was framed in such a way as to maximize a negative response. For example, 29 percent of AARP members initially said they liked the idea of diverting up to $1,300 into private accounts. These respondents were then asked a series of loaded questions, such as “What if you heard that creating private accounts out of Social Security funds will put more of your retirement savings at risk?” This was followed up with language such as private accounts “will create winners and losers” and “could mean cuts in everyone’s Social Security benefits.” Not surprisingly, most of the respondents who supported private accounts changed their minds.

AARP plays other games with polls to get the answers it wants. One poll reported that the general public is opposed to private accounts by a margin of 48 percent to 43 percent. However, the poll was skewed to maximize the representation of demographic groups that tend to oppose the plan. To begin with, the survey did not even sample people under 30 who comprise the most pro-reform group. On the other hand, people over 60, the most skeptical of private accounts, constituted 34 percent of the survey, even though they made up just 24 percent of voters in the 2004 election. Likewise, the poll sampled 37 percent Democrats and 31 percent Republicans. In 2004, Republicans and Democrats each constituted 37 percent of the electorate.

AARP’s determination to stop private accounts is also perplexing since the nonprofit makes millions of dollars each year from stocks and other investments. According to its 2003 financial statement, AARP took in $770 million. While $211 million came from member dues, more than $300 million was derived from royalties and management fees. This includes about $50 million reported as “investment income.” As part of its extensive package of income-generating services, AARP promotes stock and bond investing by selling 38 mutual funds to its membership and taking a cut from each sale. And some of the AARP funds are much riskier than the relatively conservative investments people would be allowed to make under Mr. Bush’s reform plan. For instance, AARP funds include investments in junk bonds, Latin American stocks and volatile markets such as Russia.

Yet in a brazen display of hypocrisy, AARP ran a full-page ad in several newspapers that showed a frenzied commodities pit with the heading, “Winners and losers are stock market terms. Do you really want them to become retirement terms?” Instead of mutual fund managers, harried traders are portrayed dealing in such commodities as sugar and cocoa., a nonpartisan media watchdog group at the University of Pennsylvania, denounced the ad as “misleading.” FactCheck correctly points out that the president’s plan would not allow individuals to speculate in volatile commodities. “The kinds of ideas under discussion all call for accounts to be invested in broadly diversified stock and bond funds. There’s a big difference,” says FactCheck.

Obviously, AARP believes it is OK to make millions for itself from private investments ? but it’s not OK for anybody else.

Not content to raise money from member dues and stocks, AARP also receives nearly $70 million a year in federal grants. In the last 16 years, AARP may have taken as much as $1 billion in taxpayer money. An organization that can raise $800 million a year and has total assets of more than $2 billion does not need federal aid to do things like help seniors fill out their tax forms.

AARP is clearly out for itself and not the elderly.

It has gotten rich defending the Social Security status quo and is prepared to wage shameless scare campaigns to stop reform. That may be good for AARP’s balance sheet, but it means catastrophe for retirees in the not-so-distant future.

John Carlisle is director of policy at the nonpartisan National Legal and Policy Center.

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