AIP Column: AARP’s Willful Blindness

Does the AARP not recognize the danger in the wage-stunting impact of ObamaCare, or do they just have another agenda than seniors in mind?  My latest column at American issues Project looks at the problems facing another troubled entitlement program, Social Security, and the dangers of more rapid insolvency from a decline in wages caused by Barack Obama’s health-care reform plans.  The AARP seems either unable or unwilling to connect the dots:

Earlier this month, Steven Nyce and Syl Schieber produced a study for Watson Wyatt on the impact that Obama’s overhaul of health care would have on wage growth and productivity. Nyce and Schieber found that expanding coverage would necessarily increase costs of benefits to employers, which would depress wage growth. In each scenario of cost growth and productivity, the impact of the overhaul cut real wage growth, and in some scenarios actually result in wage declines. …

But what has this got to do with the AARP? Someone needs to tell them that falling wages will accelerate insolvency for Social Security. The Social Security Adminstration already knows this. In its solvency projections for this year, SSA projects that Social Security will hit insolvency in 2033 as long as real wage growth remains at 3.3% (and inflation at 2.8%) annually; in the previous seven years, we’ve been at 3.2%. For wage growth of 4.5%, insolvency gets put off to 2044.

However, with the implementation of health-care reform, the benefits costs either slow wage growth considerably, or in fact push wages downward. Since Social Security tax rates are linked to income, slower or nonexistent wage growth means less revenue for the SSA. Less revenue means that insolvency will come more quickly than current projections. The Nyce-Schieber study’s scenario that uses the Medicare experience shows that the reform will increase SSA deficits by as much as 25% in the aggregate over the next 75 years, hastening insolvency or massive taxation and benefit cuts.

In other words, ObamaCare will depress Social Security revenues, which will either push the program into insolvency or create the needs for tax increases and/or benefits cuts.  The pursuit of this kind of government-run system will actively and significantly reduce the living standards of the very group the AARP purports to represent.  Yet instead of connecting these dots themselves and demanding a stop to ObamaCare, the AARP has chosen to remain on the sidelines — even though they screeched from the rafters over a Social Security reform hypothesis in early 2005 that never made it into a bill.

Seniors have to ask themselves: does the AARP represent them, or another political agenda altogether?

By the way, those solvency projections may still be too optimistic, according to Rep. Spencer Bachus (R-AL), who says Social Security will enter deficit spending in the next two years, not in the next decade, as projected earlier (via Steveegg):

Social Security could face a deficit within two years, according to U.S. Rep. Spencer Bachus who met with The Tuscaloosa News editorial board Tuesday.

“The situation is much worse than people realize, especially because of the problems brought on by the recession, near depression,” said Bachus, R-Vestavia Hills, in an interview with the Tuscaloosa News editorial board. …

The solvency of Social Security, which provides pensions for people older than 65, has not played a major role in the current debate about health care in Congress. Bachus said it will not likely be addressed in any health-care bill the House eventually passes, although if a Social Security bailout is needed, it will invariably have an impact on government health-care programs.

I warned about this in March and in May.  The entitlement disaster already looms, and this administration wants to offer the hair of the dog.

Don’t forget to check out the other great writers and bloggers at AIP when you read the rest of my column.  Lorie Byrd looks at the polls and discovers that there never was a liberal mandate.  Melissa Clouthier sees Americans holding their breath, worried about what Democrats will do next.  Despina Karras can’t decide if the public option is an ex-parrot, feeling happy, or only mostly dead.  Jimmy Bise says it’s more like Night of the Living Dead.

Update: Bachus is from Alabama, not Tennessee.  I’ve fixed the reference above.

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