Less Known, But More Urgent Social Security Shortfall

I supposed you’ve read that the Social Security Trust Fund will run out of money long about 2035. This date applies to the Old-Age and Survivors Insurance Trust Fund — that one that helps pay for workers’ retirement benefits and the benefits their dependent family members may ultimately receive.

The Trust Fund for SSDI (Social Security Disability Insurance) is in far worse shape. The latest report from the trustees projects insolvency in 2016. Unless Congress does something PDQ, the so-called DI Trust Fund will be able to pay only about 80% of benefits.

They’re already far from generous — currently, on average, about $1,146 a month for disabled workers themselves or less than $1,000 if eligible spouses and children are included. Yet they’re a major source of income for most recipients and their families.

In 2010, for example, they accounted for more than half of total family income for 78.5% of beneficiaries. For nearly one in three, they were the only income source.

Benefits notwithstanding, nearly one in five lived in poverty. And well over a third (37.4%) were poor or near-poor, i.e., living below 150% of the federal poverty line.

These are hardly families who can afford a 20% cut.

Congress could avert it, at least temporarily, by shifting funds from the OASI Trust Fund to the DI Trust Fund, as it did in 1994. But this Congress isn’t that Congress.

Hence a panel discussion hosted by the Center for American Progress Action Fund, whose parent organization concurrently released a fact-packed brief on SSDI.

The lead speaker, Senator Sherrod Brown, argued that Democrats should push for an expansion of Social Security, along the lines that he, among others, has proposed. The best defense is a good offense, as they say.

Unfortunately, as things stand now, SSDI needs a good defense too. Because it’s been subject to a barrage of negative media coverage.

Brown says that the attacks on SSDI are actually “backdoor attempts” to dismantle the whole social insurance system, which Republicans still want to privatize, i.e., convert into something like a compulsory IRA.

I’m not so sure. But some surely are casting aspersions on SSDI — and its beneficiaries. Though SSDI is basically an insurance policy that they and their employers have paid for, much of what we hear recalls attacks on safety net programs.

It’s rife with fraud. People perfectly able to work are gaming the system — in this case, with help from rapacious lawyers. Look at all those “squishy” diagnoses, e.g. some musculoskeletal disorder that’s allegedly excruciatingly painful.

The fuel for this fire, I think, is essentially the same as the source of the impending — but easily avertable — crisis.

Many more workers are now receiving SSDI than in the program’s earlier days — about 8.9 million, as compared to 1.4 million in 1970.

And we saw an uptick when the recession set in, though not nearly so large as the uptick in claims. (Notwithstanding alleged laxities, fewer than 40% of claims are ultimately approved.)

Social Security’s Chief Actuary, Stephen Goss, told the CAP Fund audience that the increase over time was predicted, even before the recession, because the largest drivers are demographic.

First, we’ve had a 43% increase in the working age population, i.e., adults between the ages of 20 and 64, since 1980.

Baby boomers are partly responsible for that, of course, And they’re now old enough to be at much higher risk for disabling conditions. A 50-year-old is twice as likely to be disabled as a 40-year-old and a 60-year-old twice as likely as a 50-year-old, according to another CAP brief.

At the same time, far more women are working — and for quite a long time, as they must to qualify for SSDI. So the pool of workers who’ve become eligible when disabilities make it impossible for them to continue doing the same kind of work — or any other kind they might qualify for — has increased for this reason as well.

Expansions in the potential pool tell only part of the story. Roughly half of the disabled workers receiving SSDI benefits have, at most, a high school education. They’re likely to have had jobs that required a lot of standing, walking, lifting and the like.

They’re not likely to have in-demand skills that would enable them to shift into more sedentary occupations — something the Social Security authorities would consider before approving their claims.

Policy changes also help explain why the SSDI rolls have grown. These include the phased-up increase in the age workers can qualify for full retirement benefits — at which point SSDI recipients are automatically shifted over to the OASI program.

Basically, we’ve still got baby boomers — and some younger disabled workers as well — who wouldn’t be receiving SSDI if Congress hadn’t raised their full retirement age to 67.

What this means is that the pressure on the SSDI program will eventually diminish because the boomers will all reach full retirement age.

This is why some recommend that a slightly larger percent of payroll taxes be allocated to SSDI. An initial shift from 1.8% to 2.8% of the total 12.4% collected, with smaller shifts thereafter would keep both trust funds wholly solvent until 2033, according to the Social Security actuaries.

Another option Goss has mentioned would be a small increase in the payroll tax. Or, he adds, Congress could just let the benefits cuts happen.

As if we don’t already have enough poor people in this country.

 

One Response to Less Known, But More Urgent Social Security Shortfall

  1. […] I’ve written before, the trust fund that helps pay for SSDI benefits will run out of reserves in 2016. This has […]

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