By Mark Miller
CHICAGO, Sept 5 The year 2035 is far off in the
future - and that's one reason Congress has kicked the can down
the road so many times when it comes to Social Security reform.
The program's retirement trust fund is projected to be
depleted that year, requiring sharp cuts in benefits if nothing
is done. Closing the shortfall calls for tough choices that
invite political procrastination - revenue increases, benefit
cuts or some combination of the two.
Then there's 2016, which is just around the corner. Congress
will need to take action by then if it wants to avert painful
benefit cuts in the retirement program's first cousin - Social
Security Disability Insurance, or SSDI.
SSDI and the Old-Age & Survivors (OAS) retirement programs
really are joined at the hip. Both are social insurance programs
designed to protect against the risk of lost income - one in the
event of retirement, the other, disability. They also share a
funding source: the payroll tax. The retirement program is much
larger; currently, workers and employers pay a combined 12.4
percent employees' payroll, with 10.6 percent going to the
retirement fund and 1.8 percent toward disability.
SSDI's trust fund will be depleted in 2016, which would
translate into a 20 percent cut in benefits to nine million
disabled people and an additional 2 million dependents who rely
on benefits from it.
The problem, and its solution, are right in front of us, but
easily avoided. All Congress needs to do is reallocate a small
portion of payroll tax revenues from the retirement to the
disability program. Reallocations have been done at least six
times in the past- most recently in 1994 - with funds moving in
both directions. These reallocations have not been
controversial, and this time around, a shift of just 1/10th of 1
percent would equalize the long-range outlook of the two trust
funds, according to Stephen Goss, the Social Security
Administration's chief actuary.
But this time could be different. Congress is headed toward
another dangerous game of chicken over the debt ceiling, and
Republicans likely will try to insist on entitlement program
cuts as part of a deal.
The disability program already has been the target for a
barrage of criticism from the right and some media outlets,
which have argued that SSDI is running amok. The basic narrative
is that SSDI is rife with fraud and that out-of-work baby
boomers too young for retirement benefits are freeloading by
getting disability benefits.
All of which suggests that SSDI could fall victim to
polarized fiscal politics in Washington, with very real and
difficult consequences for disabled Americans.
There's no doubt that a program the size of SSDI is subject
to some abuse. There also may be some sensible ways to reform
the program to give people incentive to get back to work
following a disability.
It's also true that the disability rolls have been growing.
This year, the program is paying benefits to 9 million disabled
workers, up from 5.9 million in 2003.
DISABLED BY DEMOGRAPHICS
Most of the growth is due to simple demographics. The boomer
cohort has moved into the years when they are more likely to be
disabled. The rates double from age 40 to 50, and again from 50
to 60, and the sharp jump in female labor force participation
rates means more women are covered by SSDI, as well.
SSDI's costs also have been boosted by the retirement
program's rising eligibility age. SSDI beneficiaries
automatically move to the retirement program when they reach
full retirement age. That age is rising gradually, from 65 to
67. The current retirement age of 66 kept an additional 400,000
people age 65 to 66 on the SSDI rolls for an additional year in
2011, according to the Center on Budget and Policy Priorities.
Contrary to the freeloader narrative some Social Security
opponents want to promote, many SSDI recipients are just
struggling to make ends meet.
A recent Urban Institute paper found that the SSDI
population has lower lifetime income and accumulates less
wealth. SSDI provides a majority of family income for nearly
half of all recipients and more than two-thirds of unmarried
beneficiaries. The average monthly check in 2011 was $1,399 for
men and $1,078 for women. SSDI replaces, on average, half of
what beneficiaries earned before they entered the program.
Poverty rates are highest for younger disability recipients
- 31 percent of beneficiaries age 31-49 had family income below
the federal poverty line. Older recipients (age 60-64), were 1.6
times more likely to live below the poverty line.
Reallocation is the right thing to do - it won't worsen the
combined OAS/SSDI long-range short-fall and it would give
Congress more time to take a considered approach to the
program's overall financial needs. Lawmakers have to act no
later than 2015 to avert sharp disability benefit cuts.