MYTH: USA Next is just an innocent "seniors group"

The move is on to vilify those who support President Bush's Social Security reform package. The New York Times recently demonized the group USA Next as Republican operatives -- with, gasp, ties to some of the same lobbyists as the Swift Boat Vets. (Michael P. Tremoglie, "Radio hypocrisy," Front Page Magazine, 3/1/05)

So outraged were Winsted and Maddow that they asked listeners to sign a petition organized by the left-wing group Democracy for America , which will be sent to all the TV stations that dared to broadcast the Swiftboat ads, demanding that these stations deny first amendment rights to USA Next. (Tremoglie)

A new conservative seniors group called USA Next is ripping into the AARP, riding a wave of publicity from its (rather ham-fisted) attack on the AARP on the issue of gay marriage (an AARP affiliate in Ohio opposed an anti-gay marriage constitutional amendment in the state). USA Next is making its case not just on political grounds, but with a dagger aimed at the heart of the AARP's appeal — cheaper discounts on travel! (Rich Lowry, "Quit the AARP," National Review Online, 3/1/05)

REALITY

As we've outined, USA Next is not a "new conservative seniors group," but rather an old corporate lobbying front group engaging in a crude mudslinging war against AARP. Contrary to the sensitive Mr. Tremoglie, the group seemed quite pleased with the New York Times' characterization of it, featuring the Times article on its website. (The same news was reported by UPI, the news service owned by the conservative Moonies of the Washington Times.) And as for the Swiftie-style attack advertising, they are largely succeeding in spreading their smear thanks to the controversy. Their shameless, bizarre ad ("The Real AARP Agenda": troops no, gay marriage yes) ran only for one night on one website, but it vaulted the front group to prominence on TV for its sheer audacity and tastelessness, just like the Swift Vets ad.

This issue, supposedly, is Social Security privatization, which AARP opposes and USA Next supports. But the ad does not mention Social Security; instead, it uses simplistic symbols designed to manipulate the viewer's emotions. The symbol of a soldier with an "X" over him, implying AARP is against the troops, and the symbol of two well-dressed men kissing with a check over them, implying AARP is all about gay rights. Both claims are baseless smears.

The Democracy for America petition was to anticipate further homophobic non-sequitor ads. In a letter from viewers to TV stations, it simply states: "I demand that you keep political hate speech and false claims off the air." This is not a denial of "first amendment rights"; there is no doubt that USA Next will find stations such as Sinclair or FOX to air whatever advertisement they produce. The petition seeks to inform those stations unaware of the sick controversy that such ads are offensive and dishonest, and to encourage them to use their discretion as they would an ad from any other hate group.

MYTH: AARP is hypocritical

Another sign that the AARP is driven by politics is that it has stumbled into that common pitfall of partisan advocates — hypocrisy. In one of its ads it has a couple saying of investing in the stock market: "If we feel like gambling, we'll play the slots." This from an organization that offers its members the opportunity to invest in 38 separate mutual funds. To date, the AARP doesn't encourage its members to play Internet poker or slots on its website, a sign that it doesn't truly consider investing equivalent to gambling. (Rich Lowry, "Quit the AARP," National Review Online, 3/1/05)

The Bush proposal wouldn't touch anyone 55 years or older, and thus leaves the vast majority of AARP members undisturbed. What the AARP is advocating for is not the financial well being of its members so much as an ideological vision of an entitlement state that limits individual choice and emphasizes governmental dependence. (Lowry)

REALITY

What would you think of a veterans' group that lobbied for benefits that only applied to veterans of World War II, excluding those of later wars or wars that haven't happened yet? That would be hypocrisy -- advocating one standard for yourself and another for others.

AARP is not so complicated -- it simply works out what it believes to be the best interests of retired people. We think it was shortsighted to back Bush's Medicaid drug perscription plan, which turned out to be an expensive giveaway to the pharmaceutical industry. But in terms of Social Security, the group advocates maintaining the guaranteed benefit: "Private retirement accounts in addition to Social Security... are one of the four pillars of a strong retirement that include Social Security, pensions and savings, continued earnings, and affordable health insurance."

So, AARP is in favor of private investment in addition to, rather than instead of, Social Security guarantees. It advocates this for everyone. AARP is not that difficult to understand!

MYTH: Can't touch the payroll cap!

Lifting the wage cap would impose a cruel marginal tax increase on anyone earning between $90,000 and the level of the new cap. Stunting job creation and labor-force participation among that population of workers would slow overall economic growth — and slower growth always ends up hitting the little guys hardest of all. (Donald Luskin, "Hare-brained cap-raising idea," National Review Online Financial, 3/1/05)

REALITY

Following other groups, the AARP, which proposes raising the maximum level of wages that can be taxed for Social Security to $140,000 instead of $90,000, explains it this way: "Twenty years ago, Social Security received revenue from 90% of the total wage base paid in the U.S. However, the growing gap between high and average salaries, and a slightly flawed calculation formula have dropped that figure to 85% today." Raising the cap would only affect the 6% of wage-earners who currently have their income above $90,000 untaxed. The president has recently said he is open to this idea, since his privatization plan does nothing to shore up Social Security's finances.

Mr. Luskin calls this "cruel" -- but given that the Social Security payroll tax currently does not touch income over $90,000, what he must mean is that it is not regressive enough. This is a tax that already gives a pass to the wealthy, and falls largely on the middle class. It makes the Forbes flat tax look progressive. But raising the cap to keep it in line with the national wage base, without changing the rate or the basic regressive structure, would be cruel?

As if to prove that he is simply a knee-jerk anti-tax ideologue, he trots out the cliche that this tax adjustment would "stunt job creation" and "end up hitting the little guys hardest of all." Such an argument has yet to be proven when applied to taxes on the real upper-end, and it just sounds ridiculous when applied to this narrow margin between $90,000 and $140,000. What will hurt "the little guys" is phasing out Social Security guarantees and the progressive benefits they offer to lower-income retirees.

MYTH: No transition costs

Some persistently ask, Don’t personal accounts have to be financed somehow? Well, no — or at least they don’t need any additional financing that the Social Security system doesn’t already need. Under the White House proposal, a worker who elects for a personal account agrees to give up a proportionate fraction of his future benefits in exchange for that account. The cost of diverting payroll-tax dollars into personal accounts today is perfectly offset by reduced benefit payments that will have to be made in the future . Yes, that will entail some public borrowing in the near term, but it will all be paid back to the penny out of lower benefit payments down the road. (Luskin)

REALITY

This week was the first we didn't catch any of the usual suspects claiming that there is no Trust Fund, but the second most popular myth dies harder. (See here, here, here, etc.)

The "transition costs" are the gap created as payroll taxes are diverted to private accounts while, at the same time, we have to finance the benefits of current retirees. According to the Luskin plan, the trillions we will need to borrow ($4.9 trillion in the Bush plan's first twenty years) are paid for by the phasing out of Social Security. The social insurance, where risk is shared by all, is sold off to individuals, who will take on the risk individually. In effect, we would be mortgaging Social Security to the stock market in order to pay for eliminating Social Security itself.

Even if this were possible, it doesn't recognize the real cost -- that we would lose the guaranteed benefits, the risk-free bedrock of middle-class retirement in America, and the vital support to poorer and less fortunate workers in the years they can no longer work. Government's responsibility to keep seniors out of destitution does not end simply because we wish it to, and the accounting tricks of today do not mean our future government will be so heartless that it will not help seniors in need.

But the claim that the borrowing "will all be paid back to the penny" is false. From the CBPP: "The White House is indicating that no offset would apply to private accounts in the case of divorce or death prior to retirement.  But this also means that all of the private account contributions for such workers would represent a net loss for Social Security and a net cost for the budget. By itself, this proposal thus would worsen the solvency of Social Security."

And Luskin's excitement at the astrological timing -- the political stars are in alignment, with a supply-side president and a GOP congress -- makes him overlook the poor financial timing. We are already so saddled with debt today that, even without privatization, we're on such a track that we will be paying our entire revenue towards interest on debt by 2040. To top that off, Privateers are pushing to roll back Social Security revenue at the very time outlays are highest, due to the retirement of the Baby Boom generation. Such poorly-timed strain could break the back of the system.

Here's an honest version of the Privateers' argument: Social Security is bad because we don't like government, so we want to put retirement risk on the backs of individuals, even if it puts the government even further in debt. It won't help most people but it will help our portfolios. Doesn't sound too appealing, does it? So instead, their strategy is to talk about crisis, reform, action, solvency, etc., and to paint a rosy portrait of their imaginary 19th-century economic utopia with made-up numbers and deceptive ruses.