AARP Fears Competition, Not Confusion

Just a few hours after the inaugural press conference of the Alliance for Retirement Prosperity – an organization I co-chair along with former Congressman Dick Armey and former Social Security Commissioner Dorcas R. Hardy – we received word that the AARP is considering legal action against the alliance because the acronym “ARP” sounds like “AARP.” However, the distinctions between the two organizations could not be more clear.

Our Alliance for Retirement Prosperity ( is an organization whose sole purpose is to help lead and coordinate the legislative and grass-roots efforts for real Social Security reform enabling working Americans to invest in the private economy for their retirement by redirecting at least half of the current 12.4 percent payroll tax into their own personal retirement accounts. The alliance is in its infant stages, just beginning to raise money for a budget of less than $1 million. In stark contrast, the AARP boasts a membership of some 35 million members, has been around since 1958 and has an annual budget of $620 million.

The alliance has a visionary mission: to transform Social Security for the 21st century premised upon retirement prosperity and individual ownership, which would complete the transformation of America into an investor nation. The alliance opposes all payroll tax increases and benefit cuts, and supports reasonable restraint on federal spending growth and prudent federal borrowing to finance the transition to the new system. I believe the enactment of large personal retirement accounts would bring to fruition Abraham Lincoln’s true American dream of making every worker an owner.

Conversely, even mentioning personal retirement accounts seems anathema to AARP. After President Bush uttered the words “personal retirement accounts” in his 2004 State of the Union Address, AARP representatives rushed to criticize any such proposal. David Certner, AARP’s director of federal affairs, said, “We continue to oppose reform proposals that would take money out of Social Security and put it into private accounts. … Taking money from Social Security would only weaken the program.”

Instead of being a partner and voice for meaningful change, AARP leaders seem to prefer putting their heads in the sand and pretending that the problem doesn’t exist. For example, in a speech at the National Press Club, Bill Novelli, CEO of AARP, argued that: “Social Security can pay full benefits until 2042.” But his words simply do not comport with the facts. You don’t have to take my word for it; simply read the summary of the 2003 trustees’ report:

“Projected OASDI tax income will begin to fall short of outlays in 2018 and will be sufficient to finance only 73 percent of scheduled annual benefits by 2042.” To argue that a system that will begin running perpetual deficits in 2018 does not present a serious public policy problem until 2042 is misleading at a minimum and reckless in the extreme.

In 1999, Fed Chairman Alan Greenspan explained why so many baby boomers planning for retirement feel nothing but social insecurity, “Those (citizens) born in 1960, for example, are currently calculated to receive a real rate of return, on average, of less than 2 percent on their cumulative contributions.” The situation only gets worse for workers born after 1960.

As a result, the Alliance for Retirement Prosperity supports progressive personal retirement accounts. Workers could contribute 10 percent of their first $10,000 of earnings and 5 percent thereafter up to the income limits of payroll taxation. The chief actuary of Social Security scored a plan published by the Institute for Policy Innovation that meets all of the alliance’s principles and concluded that workers owning large personal accounts would receive nearly 60 percent more in retirement benefits than Social Security currently promises.

Interestingly, AARP authorizes 15 private investment funds designed to meet the diverse investment needs of AARP’s membership while providing competitive returns. AARP also touts the success of its Scudder GNMA AARP Fund, which has an asset value of approximately $4.4 billion and for the 10-year period through Jan. 31, 2003, the fund averaged annual total return of 6.1 percent. Not bad, but that begs the question: Why is diversified private market investment OK if it is controlled by the AARP and for AARP members, but a “risky scheme” when used to transform Social Security into a pre-funded, investment-based system for all Americans?

In the letter we received threatening to sue the alliance, AARP’s lawyers claimed that our group is intentionally producing a “likelihood of confusion in the marketplace,” and as a result we are engaging in “unfair competition.” Contrary to AARP’s assertions, we seek not to create confusion but to clarify, and not to litigate but to compete in the marketplace of ideas. I am so confident that our ideas for reforming Social Security are superior to AARP’s reactionary opposition to personal accounts, that I, along with my two co-chairs have formally challenged AARP to a series of town hall debates around the country to dispel any confusion between the two organizations and where we stand on the issue of personal retirement accounts and retirement prosperity. We have not heard a word from anyone from AARP other than their lawyers. We’re waiting.