Group Begins War on Social Security Privatization

A large and powerful senior citizens organization, the American Association of Retired Persons (AARP), yesterday unveiled plans, beginning with a $5 million ad campaign, to oppose the Bush Administration's proposal to overhaul the Social Security pension program. Still feeling the sting from its endorsement, although tepid, of last year's controversial Medicare prescription program pushed through Congress by the Republican leadership and opposed by many rank-and-file AARP members, the lobbying group now wants to demonstrate a far less accommodating stance on policy matters the White House has on the agenda for its second term.

In contrast to this open opposition to the radical restructuring of Social Security is the subdued, behind-the-scenes support being provided by lobbyists for the banking and securities industries, which will stand to benefit enormously from what could be described as a $2 trillion jobs program for their member firms. Fearing public backlash if they appear too eager for the overhaul to get underway, bankers and stockbrokers must craft an outward appearance of disinterest while at the same time making it clear to key lawmakers that they are highly interested in passage of the necessary legislation.

It is unlikely that the AARP and other advocacy groups opposed to the partial privatization of the New Deal-era Social Security Trust would be able to spend anywhere near the money that financial institutions can bring to bear on waivering Congressmen. However, the AARP's publicity may put pressure on Congress to ask hard questions of the Administration:

• What impact will the government's borrowing of up to $2 trillion to overhaul the program do to interest rates already beginning to rise because of historically large budget deficits the Bush Administration and its Congressional allies chalked up during Bush's first term? With foreign lenders to the U.S. government showing worrisome signs of disinterest in continuing to finance the deficit spending of the federal government, the U.S. Treasury might find itself being forced to pay interest rates that could increase the total cost of the program even more, while simultaneously driving the economy into deep recession because of the high cost of borrowing that businesses and consumers would face.
  
  
• What will the government do under a partial privatization for those whose investments don't perform well? Either through unwise portfolio construction or by a serious downturn in the stock market, large numbers of people now in their prime working years could find themselves in very difficult economic circumstances should the funds they invest for retirement not provide adequate yields.
  
  
• To what extent will other alterations—like increasing the retirement age—still have to be instituted? Many critics of the proposed partial privatization note that projected shortfalls in the past have been well managed by incremental and modest increases in Social Security taxes and the age at which prospective retirees may begin collecting Social Security payments. Already, some insiders are saying that the age at which workers can become beneficiaries will be raised, despite the partial privatization.

With advocacy groups bringing these and other problems of the Republican plan to the attention of average Americans, the White House may find that the Social Security issue dominates its attention for the foreseeable future and swiftly burns up what political capital the ruling party in Washington has to spare.