I have been 50 years old for about ten weeks now, and already I have received five identical invitations to join AARP, the group formerly known as the American Association of Retired Persons. This wasteful barrage would be enough to make me hate AARP, except for the fact that I started hating AARP 30 years ago and never stopped. Let me tell you why.
AARP is a tremendously powerful organization dedicated to taking money from people who don’t have much, and giving it to people who do. Now, before my fellow codgers start spitting their Metamucil, let’s remain calm long enough to study the facts. Take a look at Table 720 of the U.S. Census Bureau’s Statistical Abstract of the United States.
What this non-partisan, dry-as-dust document shows is the distribution of wealth by age group. As you might expect if you gave it much thought—or if you happened to study the silver-haired clientele of most luxury resorts, beachfront communities, cruise ships and five-star restaurants—the average net worth of Americans starts low and rises steadily through life. It reaches a peak among the cohort 65 to 74 years old before dropping again as the very old and very wealthy begin giving their money away. (You can tell that the post-75 drop mostly effects the very rich because it doesn’t produce a correspondingly sharp drop in the median level of wealth.)
Anyway, according to Table 720, the average net worth among the 65-to-74 crowd was about $1 million per household in 2007, just before the crash. Given the drop in home values, it may be a bit less now, but it’s still a heck of a lot richer than the younger demos.
Indeed, the median net worth of Americans over 55 is roughly two-and-a-half times as high as the median net worth of adults younger than 55.
And yet, when everyone else can see that the federal budget is out of whack, AARP is all about spending more tax dollars on old folks, whether they need it or not. And what AARP wants, it usually gets, because AARP is among the most aggressive lobbies in the United States. Over the past half-dozen years, it has spent at least $20 million per year—and often much more—to shape government policy. They’ve been at it for decades, spending from a nearly bottomless wallet filled with licensing fees they charge to insurance companies eager for the AARP endorsement. This influence helps explain why the federal budget has become a powerful engine for taking money from younger people and giving it to older, richer people.
As this week’s warning from Standard & Poor’s made clear, this isn’t just a matter of current taxes paid by working Americans to support retired Americans. The cost of providing a safety net to people who don’t need one is saddling younger Americans with crushing debt and threatens to make their hard-earned dollars less valuable. They pay directly and pay again indirectly.
AARP doesn’t seem to care. It has been a driving force behind two of the most expensive wealth transfers in recent history. In 2003, the organization backed the GOP’s unfunded Medicare prescription drug plan, which was sold with a price tag of $400 billion over 10 years. According to government financial statements, this program will cost more than $7 trillion above anticipated revenue over the next 75 years.
Then in 2009, AARP threw its weight behind the Democrats’ health care plan—thanks in part to another giveaway tucked into the mega-bill. Under the 2003 drug plan, seniors who aren’t indigent were asked to shoulder the cost of their drugs above $2,830 and below $6,440. Along with deductibles and co-pays, this meant that seniors might be on the hook for roughly $4,500 a year. Beyond that, they were largely protected. Medicare rightly shields retirees from catastrophic drug costs—that’s what insurance is for, after all.
Well, AARP couldn’t live with that, so its lobbyists began demanding an end to the “doughnut hole.” The Democrats’ bill gave it to them—putting another $135 billion on the tab.
AARP was willing to see one cut to Medicare–$500 billion from the Medicare Advantage program, which compete with AARP-sponsored Medigap insurance. Score another round to the Gray Goliath.
Are there elderly poor people who need all the help they can get? Absolutely! Should we make sure they receive good medical care in spite of their poverty? Darn right! But would AARP ever consider changing the Medicare system so that it steers less money to wealthy seniors, in order to remain solvent for those in need?
In the past, younger people could perhaps rationalize the shafting they receive from their elders by thinking of the day when they would enjoy the bounty won for them by AARP—not just government benefits, but discounted travel packages, cheap movie tickets and a glossy magazine full of advice on how to enjoy a well-funded retirement. Actuarial tables don’t lie, however. Today’s young people won’t ever ride the gravy train. The sheer weight of retired baby boomers is going to break Medicare. Whatever remains will look very different.
AARP could try to be part of the solution, but I’m not holding my breath. I’m starting to need it to climb stairs.