WASHINGTON -- Alan Simpson’s cold relationship with AARP is no secret, but the former Republican Senator from Wyoming took it to a new level Friday. At an event hosted by the Investment Company Institute, Simpson delighted the finance industry audience members by aiming a rude gesture at the leading lobby for senior citizens.
Financial and investment interests have long been supportive of Simpson’s broad critique of Social Security, since privatizing the old-age and disability support program would be a tremendous boon for Wall Street’s financial managers. ICI represents mutual funds and other money managers who control more than $13 trillion in assets.
Simpson’s forceful gesture came after an extended diatribe against Social Security, which he said is a "Ponzi" scheme, "not a retirement program.”
Simpson argued that Social Security was originally intended more as a welfare program.
"It was never intended as a retirement program. It was set up in ‘37 and ‘38 to take care of people who were in distress -- ditch diggers, wage earners -- it was to give them 43 percent of the replacement rate of their wages. The [life expectancy] was 63. That’s why they set retirement age at 65” for Social Security, he said.
In 2010, President Obama appointed Simpson to a deficit commission that recommended cutting taxes and reducing entitlement spending. The commission's outline is being used as a framework for reform in Congress.
Yet Simpson's comments to ICI reflect an apparent unfamiliarity with the history and foundation of Social Security.
HuffPost suggested to Simpson during a telephone interview that his claim about life expectancy was misleading because his data include people who died in childhood of diseases that are now largely preventable. Incorporating such early deaths skews the average life expectancy number downward, making it appear as if people live dramatically longer today than they did half a century ago. According to the Social Security Administration's actuaries, women who lived to 65 in 1940 had a life expectancy of 79.7 years and men were expected to live 77.7 years.
"If that is the case -- and I don’t think it is -- then that means they put in peanuts," said Simpson.
Simpson speculated that the data presented to him by HuffPost had been furnished by "the Catfood Commission people" -- a reference to progressive critics of the deficit commission who gave the president's panel that label.
Told that the data came directly from the Social Security Administration, Simpson continued to insist it was inaccurate, while misstating the nature of a statistical average: "If you’re telling me that a guy who got to be 65 in 1940 -- that all of them lived to be 77 -- that is just not correct. Just because a guy gets to be 65, he’s gonna live to be 77? Hell, that’s my genre. That’s not true," said Simpson, who will turn 80 in September.
Understanding life expectancy rates at age 65 in 1940 is central to understanding Social Security itself. If the very nature of the population has changed dramatically since the program's creation, it stands to reason that the program itself requires dramatic changes: Means testing, creating private accounts and further upping the retirement age for the program have all been proposed by its opponents.
But if the population is largely similar today, then only modest changes would be needed to maintain Social Security. Critics of the program therefore have an incentive to dramatize life-expectancy stats.
But those dramatic claims aren't buttressed by the data: A man who turned 65 in 2010 has a life expectancy of 83.1 -- barely five years more than he had in 1940. Women have increased their life expectancy at roughly the same rate. Since 1940, the retirement age for drawing Social Security benefits has been lifted from 65 to 67, meaning that people are receiving a net of only three extra years of benefits than they were 70 years ago.
The second prong of the Social Security critique relies on the coming wave of Baby Boomer retirements. This flood of retirees will tip the ratio of workers to pensioners out of whack, the argument goes.
"The statistics right now show a totally unsustainable program that cannot possibly function when 10,000 a day are coming into the Social Security system at 65," Simpson explained to HuffPost. "Was that ever planned [for]? That 10,000 a day would suddenly coming into the system?"
In fact, it was planned for: The Social Security Administration tracks births every year and knew by 1947 that 1946 had been a boom year. When the system was reformed in 1983 by the Greenspan Commission, the Baby Boom was specifically taken into account.
"The fundamental ratio of beneficiaries to workers was fully taken into account in the 1983 financing provisions and, as a matter of fact, was known and taken into account well before that," Social Security's actuaries noted in 1994.
The explanation for the shortfall -- the program will only be able to pay roughly four-fifths of scheduled benefits after 2037 -- is much simpler: Social Security's actuaries didn't see the wild swing in income inequality that came about since 1983. Income has been largely flat for the middle class while rising for the wealthy. Social Security taxes apply only to the first $106,000, so increases for the rich don't contribute to the trust fund. And compensation increases that come in the form of more expensive health care benefits are also not subject to Social Security taxes.
Simpson said that questioning his data wasn't helping to solve the underlying problem.
"This is the first time, the first time -- and Erskine [Bowles, the deficit commission co-chair,] and I have been talking for a year and many months -- that anyone’s going to sit around and play with statistics like this," he told HuffPost. "Anything I tell you, you repudiate. You’re the first guy in a year and a half who’s stood out here with a sharp pencil playing a game that doesn’t have a damn thing to do with: 'What the hell are you going to do with the system?'"
The former senator enjoys a pension for his service in Congress, which lasted fewer than 20 years.
At the ICI event on Friday, Simpson called the members of AARP “38 million people bound together by love of airline discounts” and derided the group as concerned only about its own profit. He called AARP Magazine a "marketing instrument."
"Are these people patriots or marketers? That’s a harsh statement, and I intend it to be,” he added.
“They’re 1.5 percent of every mailing in the United States. One-and-a-half percent!” he griped, thrusting his fist into the air and gesturing toward AARP. “Gah! Jeez!”
"We respectfully disagree with Senator Simpson’s comments about the purpose and mission of our organization," Mary Liz Burns, an AARP spokeswoman, told HuffPost. "For over 50 years, AARP has been fighting to protect the hard-earned benefits that Social Security and Medicare provide for millions of Americans today, and we will continue our work to strengthen these critical programs for our children and grandchildren," she said.