Economic Outlook: Knotty pine

By ANTHONY HALL, United Press International
Anthony Hall
Anthony Hall

Is there any parallel between what is happening in the streets of Athens and the AARP's recent about face concerning Social Security?

Put that under the category of checking to see who was awake. Unions and senior citizens have not banded together to march on Washington quite yet and now look unlikely to do so at all as the AARP is not joining a large coalition of unions -- 300 of them, The Wall Street Journal reported -- in opposition to cuts to Social Security, one of the mainstays of its elderly membership.


One thing to count on with the elderly vote: They are as stubborn as knotty pine. They do not change their opinions quickly, which leaves AARP with a potential backlash from its membership as it spells out its new position, which would allow for some cuts in Social Security benefits.


AARP policy chief John Rother said he had simply done the math. The proposal on the table that raises taxes the highest still leaves half of the program's impending deficit unfilled. That, to Rother, meant cuts were inevitable and AARP did not want to be cut out of the discussion.

"The ship was sailing. I wanted to be at the wheel when that happens," Rother said.

That policy gambit does not mean AARP wants to give away the store. The group still intends to get Social Security off the table when it comes to deficit reduction talks, claiming that Social Security did not create the deficit and, therefore, should not be used to fix it, the Journal said.

What pension plan, however, can survive a drop in the population?

Like a Ponzi scheme, the next generation of investors is expected to keep the program solvent with contributions of their own. But the population bubble commonly called the baby boom has skewed the formula. Too many retirees and too few workers means the government will have to borrow to keep Social Security afloat through 2036.

On one hand, some say this means AARP will likely feel the heat from angry members.


"They are completely at odds with their membership," said Nancy Altman, co-chair of the coalition of unions standing opposed to cuts in the program.

While that is true, the organization has numbers to spare. It is unlikely 37 million AARP members will quit the program despite 84 percent of seniors in polls indicating they are against cuts in the program.

Jonathan Cowan, president of Third Way, a think tank in Washington, said: "For decades, AARP has stood against any substantial changes to Social Security. Now that they have opened the door to reform, it is time for lawmakers to walk through it."

On the other hand, forcing the program to borrow for the next 25 years? In Washington these days that would be like asking a senior citizen to give up gravy.

In international markets Friday, the Nikkei 225 index lost 0.64 percent while the Shanghai composite index in China lost 0.81 percent. The Hang Seng index in Hong Kong shed 1.17 percent while the Sensex in India lost 0.64 percent.

In Australia, the S&P/ASX 200 index rose 0.13 percent.

In midday trading in Europe, the FTSE 100 index in Britain rose 0.28 percent while the DAX 30 in Germany added 1.46 percent. The CAC 40 in France rose 1.25 percent while the Stoxx Europe 600 gained 0.56 percent.


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