Alan Reynolds

The House and Senate passed a bill called "a $400 billion prescription drug bill for seniors." Much is made of the fact that this bill was supported by AARP, an organization said to "represent 35 million seniors." In reality, the bill will cost four or five times that much in the next decade alone. And AARP represents itself, not seniors.

The prescription drug plan is estimated to cost "only" $410 billion over just the first eight years, not 10, because the plan pays nothing until 2006. The estimated yearly expense quickly triples from $25.7 billion in the first year to $73.1 billion by 2013. The CBO also assumes the monthly premium will rise from $35 to $58 by 2013 and that the deductible will be increased from $250 to $445. Were it not for those increased premiums and deductibles, even the initial cost would far exceed $410 billion.

The most alarming numbers are not in the first eight years but the following 10. That's when the ratio of retirees to working taxpayers tilts dramatically against the latter. The director of the Congressional Budget Office estimates costs of the new drug subsidies during the 10 years starting with 2013 will range from $1.3 trillion to $2 trillion. Congress and the president evidently care more about the next election than the next decade.

AARP does not represent the highly diverse opinions of its members, who include anyone over the age of 50 willing to pay $12.50 a year for discounts and publications. AARP's famed lobbying clout comes from its large tax-free income, and most of that income comes from selling insurance. AARP cannot plausibly claim to "represent" anyone, let alone seniors, because the organization's policy preferences are those of its hierarchy, not its members.

Congress has special interests of its own, particularly in the high voter turnout among older folks. Legislators made no effort to balance new drug benefits against the costs, but instead decided to describe the benefits as free -- something for nothing. Some seniors, they boast, will pay less "out of pocket." But that just means the cost comes out of someone else's pocket.

Who will be willing and able to finance these rapidly escalating drug subsidies? Nobody has the foggiest idea. Medicare is already in the hole by more than $13 trillion over the long haul, and drug subsidies could easily add another $10 trillion to those unfunded promises.

Alan Reynolds

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