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Today's political climate seems more war-torn and divided than ever. Battles rage on issues from abortion to affirmative action, from health care to welfare. Yet there does seem to be one issue on which almost all Americans are agreed--the danger of lobbies.
Although the noise has lessened some, the cries against the "special interests" can still be heard all around the country. Yet lobbyists remain in Washington, their offers of money and votes too precious for Congressmen to refuse. And there is one lobby in particular which controls more voters and more money than any other lobby in Washington, and uses both to keep a strangle-hold on fiscal policy. What is this dreaded lobby? It is not the National Rifle Association, nor is it the Christian Coalition. It is the American Association of Retired Persons (AARP).
Hold on, you say. Isn't that the group that gets my grandparents discounts at motels? What's the big deal? The big deal is that, by membership, they are the third largest organization in the United States, next to the Roman Catholic Church and the American Automobile Association, and they have no problem with throwing that weight around Washington. In addition, senior citizens vote in higher percentages than any other demographic group. So, it should not come as surprise that Social Security and Medicare made up 31 percent of the budget in 1994, and received $177.1 billion more than defense, everybody's favorite budget whipping boy.
Fortunately, some changes are being made to Medicare, but the power of the AARP can still be seen by the size of the fight surrounding his issue, especially given some of the facts involved. The Republican plan aims to cut $270 billion over five years, amounting to about a 20 percent cut.
Most of the savings will come from cuts in hospital and doctor fees and a raise in premiums. If unchanged, premiums are projected to be $60.80 per month in 2002, but will be between $90 and $93 under the proposed changes. Part of the Republicans' goal is to encourage many Medicare recipients to enter managed-care plans, rather than stay with more expensive fee-for-service plans.
None of these proposed changes are really that controversial. Currently, only 10 percent of Medicare recipients are in managed-care plans, compared with almost half of privately insured Americans, so there is definitely room for cost-cutting without losing quality of care. A raise in premiums may sound bad, but let us consider that premiums now account for only 31 percent of costs, compared to 50 percent, when Medicare was first institued in 1965. And, of course, the old today are less likely to be poor than the young. In other words, they can afford it, and should start picking up more of the costs.
Yet the battle over Medicare is shaping up to be huge. Congressmen are engaging in shouting matches and the Democrats are threatening to hold unofficial hearings on the issue, which they will have to hold outside the Capital, because Republicans won't give them any space. Clinton is threatening to veto the budget proposal which contains the cuts, and Republicans won't pass anything but their proposal. The result of this game of chicken could be a shut-down of the federal government, if no accord is reached by the beginning of the fiscal year on October 1. That's the power of the AARP.
But allow me to place the Medicare battle in even more context. The 1994 Annual Report of the Board of Trustees of the Social Security and Medicare Trust Funds points out the upcoming failure of Medicare if no action is taken. According to the report, the Hospital Insurance Fund, which covers inpatient hospital expenses, will be exhausted by the turn of the century, and the Supplementary Medical Insurance Fund, which pays for doctor bills and outpatient costs, is also in serious need of reform to prevent insolvency. The Republican reforms are a step in the right direction, but they do not have the time to make the changes that are seriously needed, and they are being held back at every step by the AARP.
It gets worse. Social Security is the largest single program in the federal budget, accounting for $320.5 billion in expenditures in 1994. Defense only got $279.8 billion. Interest on the deficit was only $20.3 billion. And international affairs, science, space, education and community and regional development, favorites for budget cuts, received only $96.4 billion combined. Yet Social Security is the one area that Congress has declared "off-limits." It is beyond irony that everyone agrees that welfare should be cut, welfare recipients being the most disenfranchised and least powerful group in the country, while agreeing that Social Security cannot be touched, senior citizens being the most politically active group in the country. You may say that the analogy between welfare and Social Security is unfair, considering that everyone pays Social Security taxes, while welfare comes for free to its recipients. But the analogy is closer than you may think.
When Social Security was first instituted, in 1937, it amounted to a one percent payroll tax on both employers and employees, for a total of two percent of payroll. The tax gradually increased, but even as late as 1970, the total tax was just 9.6 percent. Social Security is for the most part unfunded and "pay-as-you-go," meaning that all of the receipts go out as expenditures.
Contrary to popular belief, our Social Security taxes are not put away to gain interest until we retire. Rather, they go right out again to the social security recipients. Since today's labor force is paying 15.3 percent of their paychecks, and they are huge in numbers, Social Security recipients are receiving many times the money they gave up during their working lives. They are getting a hand-out from our government just for being old. Beginning to sound a little bit more like welfare, isn't it? Senior citizens are receiving an AARP-sponsored windfall at our expense.
Several years ago, Congress finally realized that Social Security would collapse under the weight of retiring baby-boomers unless changes were made. So the government began hording some of the money that comes in, and there is now a trust fund of about $1.3 trillion. In addition, the payroll tax has been fixed for nearly seven years, and looks as if it will not rise again. With luck, our generation will not lose any money on the deal, but we will certainly not make the profit that our grandparents are making. But in order for that to happen, changes still need to take place.
The Trustees warn that the Old-Age and Survivors Insurance Fund, which holds Social Security payments funds before they are spent and is not to be confused with the fund more recently established to help baby-boomers, will collapse by 2036, unless changes are made. This estimate is eight years earlier than the estimate that they made in their Annual Report in 1993. It doesn't look like it is getting any better.
With the impending budget crisis, things could get much worse. The federal government is dangerously close to the debt limit of $4.9 trillion (no, that's not a typo), and that $1.3 trillion saved for our parents may be quietly tapped into if that limit is reached. In other words, there is a good chance that if Medicare reform is not passed, not only may Medicare be doomed, but Social Security as well.
But of course, none of this will effect the AARP's present members.
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