WASHINGTON'S SECOND MOST POWERFUL MAN HORACE DEETS HEADS THE MOST FEARSOME FORCE IN POLITICS, THE AMERICAN ASSOCIATION OF RETIRED PERSONS. BUT ITS INFLUENCE IS THREATENED, EVEN AS BABY-BOOMERS JOIN UP.
(FORTUNE Magazine) – Most leaders of lobby groups are as slick and silver-tongued as the politicians they try to influence. Not Horace B. Deets, head of the most feared lobby in Washington, the American Association of Retired Persons. Deets is a Mr. Peepers in a world of Cary Grants. "If you told me he was short and bald, I would have to take your word for it," says Representative Robert Matsui of California, an 18-year veteran of Capitol Hill and a senior member of the House Ways and Means Committee. "I don't know what he looks like."
That obscurity can't last. Horace Who (as Deets is sometimes known) is a central player in Washington's biggest political and economic drama, the effort to balance the federal budget by 2002. The main components of such a plan--cutting projected Medicare spending and shaving the consumer price index--are vital to AARP. If Congress and the President go too far on either one, Deets, 58, will emerge from the shadows to unleash AARP's 33 million members, one in every five registered voters. At that moment, everyone will know there are really two men in Washington with a veto.
Even if lawmakers sidestep the conflict this year, Deets can't remain faceless. His association is ground zero in what is shaping up as the first battle of the new millennium, a war not between countries or companies but between generations. The major engagement will occur a few years hence, when the outsize baby-boom generation begins to retire. A less populous younger generation will be asked to pay the boomers' Medicare and Social Security, and probably will refuse. But the conflict has already begun in a smaller way. Boomers are clearly anxious about footing the bill for their elders, which, for Horace Deets, amounts to civil war. The earliest boomers are turning 50--the age at which they can join AARP--at the blistering rate of one every eight seconds.
Such is Deets's dilemma. On the one hand, AARP is the most potent force in American politics, with the potential to grow faster than any other group of its kind. Its membership is ten times that of the National Rifle Association, its budget nearly 20 times larger than the Christian Coalition's. In sheer numbers, it is surpassed only by the Catholic Church. Deets once told President Clinton that neither Reagan nor Bush had invited AARP's legislative council to the White House. Clinton was aghast. "Couldn't they count?" he asked. During the next 40 years, the number of people 50 and older is expected to almost double, to 129 million. If AARP continues to sign up half its eligible prospects, it will reach roughly the population of Italy and Greece by mid-century.
On the other hand, it is far from certain that AARP can maintain that pace. The exploding expense of Social Security and Medicare (see charts) has put the organization in a state of siege. Deets and his army of lobbyists must defend those programs, which are the group's bread and butter, against increasingly hostile assaults from congressmen intent on balancing the budget. The conflict will only grow worse as AARP struggles to decide which of its members to put first: those who are already retired or the growing number who are still gainfully employed. And then there's the question of whether independent and youth-conscious boomers will want to join an old-persons' lobby at all.
This historic collision of promise and threat has thrown the 39-year-old AARP into a midlife crisis. To deal with it, Deets has instigated a quiet revolution. He has subtly begun to focus more on boomers by shifting the emphasis of AARP's publications and products to its nonretired members. He also is trying to forge a longer view on issues. In contrast with its image as the selfish seeker of ever more benefits for "greedy geezers," AARP now says it looks ahead to the baby-boom generation whenever it takes a stand. It even acknowledges that Medicare and Social Security will have to change in order to survive and that AARP members will have to sacrifice, at least in the short run.
Critics say they will hail this newfound flexibility when they see it. Most Republicans privately revile AARP, and some Democrats aren't so fond of it either. As guardian of the most visibly troubled programs in government, it is widely viewed as a bulwark against fiscal sanity. Outspoken opponents like former Senator Alan Simpson of Wyoming charge that AARP's imperative to please its members inevitably leaves the rest of society in the lurch. "Do any of you care a crap about your grandchildren?" the cantankerous Republican once asked AARP's hierarchy. "Then you can't possibly impose your agenda on the United States of America; it would bring us to our knees."
The secret of AARP's power in Washington is its unusual blending of social welfare and commercialism. Bankrolled by some of the proceeds from the sale of health insurance to people 65 and older, it was formed in 1958 as an advocate for oldsters. Today its finances remain robust, anchored in health insurance as well as royalty-producing businesses that range from annuities to prescription drugs. In fact, most people don't join AARP for its lobbying prowess but rather for the discounts it offers on car rentals, hotels, and package tours, all of which are included in the dirt-cheap membership price of $8 a year. AARP publishes the nation's largest-circulation magazine, Modern Maturity, which is mailed six times a year to 22 million households. Its Washington headquarters also includes a 32-scholar think tank and 19 staff lobbyists. Although AARP has offices in just 21 states, it controls a network of more than 2,000 volunteers who have been trained to ignite a firestorm of protest whenever headquarters sounds the alarm.
That happened earlier this year when the Senate was about to vote on a constitutional amendment to balance the budget. AARP was opposed because it felt the measure didn't adequately protect Social Security. Its lobbyists issued an "alert" that read, "Caution: The Balanced Budget Amendment Could Harm You and Your Family." AARP members were urged to use an 800 number to connect to a computer that would switch their calls into the offices of their senators or congressmen. All they had to do was punch in their zip or area codes. To no one's surprise, the No. 1 reason cited by lawmakers for voting no was the amendment's lack of protection for Social Security. Ultimately the nays prevailed, even though passing the amendment was the Republicans' top priority.
Both parties acknowledge the strength and power of Fortress AARP. In 1995, House Republicans added extra protection for low-income seniors to a plan that otherwise slashed the growth of Medicare. The year before, White House aides made sure their ill-fated health care bill covered prescription drugs, another AARP request. AARP also flexes its muscle by deciding not to fight. In 1993, senior Democrats begged the organization not to actively oppose President Clinton's deficit-reduction bill, despite the fact that it included a provision to raise taxes on high-income individuals who receive Social Security. AARP didn't support the legislation, but it didn't ask members to attack it either. The bill passed by a single vote.
With that kind of clout, Deets, a tough-minded former Catholic priest, decided long ago that he didn't need to establish a personal presence. So he happily became Horace Who. In Washington, however, the principals have to meet when the biggest issues are at stake, and in recent years Deets has increasingly found himself dragged into budget discussions. "When a deal is made, you want to be in the room," he explains. "So you'd better make sure you've talked ahead of time." These days he has been talking quite a bit, and at the highest levels. Deets and his staff are routinely briefed by the White House prior to any announcement on issues AARP cares about. He also has struck up an unlikely dialogue with Newt Gingrich. Why? The headstrong Speaker once admitted to AARP board members, "I want you to know that I know I can't do what I want to do on Medicare without you."
Something does indeed have to be done about Medicare and Social Security. In 1960, 5.1 workers supported each Social Security recipient. Today there are 3.3. According to government figures, there will be only two or fewer workers supporting each retiree by 2040, when the boomers will be long retired. The system is obviously unsustainable as it is constructed today, so the question is, how soon will Congress get around to fixing it? The answer is in the hands, more or less, of AARP.
The association portrays itself as the soul of accommodation. And in fact, it is more open to change than it used to be. It recently implied that it might favor a type of means test for Medicare that would make seniors with higher incomes pay higher premiums. It also would countenance other curtailments, primarily payment cuts to hospitals and physicians, in order to keep Medicare's hospital trust fund afloat beyond its expected insolvency in 2001. But its willingness to compromise pretty much ceases there. AARP is against altering Medicare or Social Security for the express purpose of balancing the budget. And it doesn't want to do anything about the longer-term problems of either program until they are closer at hand--on the grounds that people need more time to be "educated" about them. In other words, its official position is to stall.
Most experts disagree with this strategy, arguing that the longer the shortfalls are ignored, the costlier any solution is likely to be. The menu of alternatives is already clear: raising the retirement age, hiking taxes, curtailing benefits, and in the case of Social Security, allowing more pension-fund investment in the private sector. But because AARP prefers to drag out the debate, none of these will get beyond the talking stage anytime soon. "AARP was more willing than any other group I dealt with to put short-term political gain ahead of long-term public policy," says Steve Bell, former chief of staff of the Senate Budget Committee.
One of the reasons for AARP's intransigence is that in 1989 it embraced a poorly comprehended bill for catastrophic health care--and suffered its own catastrophe as a result. The legislation provided health coverage for seniors with life-threatening illnesses. Although the benefit was welcomed, the steep taxes that financed it sparked an uproar among seniors who would have to pay them. That led to a quick and ugly repeal of the law--and a vow by AARP that it would never take a position without thoroughly surveying its membership. The association has yet to live down the image of Dan Rostenkowski, the burly chairman of Ways and Means, literally fleeing from angry old people in his Chicago district.
This experience convinced other would-be advocates for the elderly that there was room for more than one senior-citizens lobby. So now AARP has competition on the left from the militant, five-million-plus-member National Committee to Preserve Social Security and Medicare and from the labor-backed National Council of Senior Citizens. On the right are newer, free-market groups like 60 Plus, United Seniors, and the Seniors Coalition, all small but growing. Says Max Richtman, vice president of the National Committee: "It is very difficult to represent 33 million people who range in age from 50 to quite old."
Deets understands the challenge. "We want to establish a sense of relevance," he says, and he's not joking. The leading reason AARP members give for not renewing is "no particular reason." That means they couldn't find anything the association did that they absolutely needed, which is a serious drawback for an outfit that has to add two million members each year just to replace the ones it loses through death or other failures to renew. The problem is even more vexing since AARP is bent on attracting the most fractured collection of nonjoiners in history, the aging baby-boomers.
What to do? The association believes it must strive to become, in a phrase, not your father's (or mother's) AARP. The key, says Deets, is to reinvent the enterprise as a community-based and carefully targeted self-help group rather than keep it the national buying behemoth it now is perceived to be. Eventually Deets plans to have an AARP office in every state, an AARP 800 number in many local phone directories, and a kiosk in shopping malls to dispense AARP propaganda and advice.
With this in mind, AARP has been studying its members--and would-be members--to a fare-thee-well. It has established its own polling department and is building up its database. Last year it sent John Rother, its top policy executive, on a nationwide study mission. Rother's conclusion: With the boomers getting grayer by the day, AARP must transform itself into something unusual--an oldsters' lobby that serves people of a wide variety of interests and ages. The magazine it mails to members is in the vanguard of this alteration. This year's January/February issue featured two covers: the first, sent to the 60 and older crowd, pictured a life preserver and the headline "Can We Save Social Security?"; the second, mailed to younger readers, featured a black and white photo of a man and an elephant with the headline "The Camera Eye: A Celebration of American Photography." Some AARP executives even talk about renaming the magazine. After all, what young-at-heart boomer wants to read something called Modern Maturity?
Of course, few people believe superficial changes like new names and cover switches will avert a generational war. The issues AARP faces are too big and intractable to be market-researched away. Given the conflicts ahead, AARP will have to develop considerably more flexibility than it has shown. It can't count on size alone to keep its power. Deets knows this. "Size," he likes to say, "didn't save the dinosaurs." And it won't save AARP.