Congress wrangling over Social Security

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The latest skirmish over Social Security has begun.

Social Security’s actuaries project that the Disability Insurance Trust Fund will be exhausted in 2016 — next year. After that, the program will only be able to pay out what it takes in from payroll taxes. If that happened, disabled recipients would suffer a 20 percent cut in their payments, according to the Center for Retirement Research at Boston College — a real burden on people who are unable to work.

Last week, during the first week of the new congressional session, the U.S. House of Representatives took a shot at forcing action on Social Security reform. It passed a technical amendment that could prevent Congress from moving money from the trust fund for Old-Age and Survivors Insurance, or OASI, to make up for the looming shortfall on the disability side.

Monday morning, eight senior senators signed a letter criticizing the House for its action. In part, the letter said: “Holding hostage the Social Security benefits of any American, particularly those of the 9 million Americans with disabilities who are at risk in the coming years, is an untenable proposition. It only increases the chances of yet another unnecessary manufactured crisis, akin to shutting down the government or threatening the full faith and credit of the United States.”

Shortfall was anticipated

No matter how you look at it, this issue is messy:

  • Most of the people applying for and getting Social Security Disability are only a few years from qualifying for Social Security retirement. According to Social Security, 70 percent of disability recipients are age 50 or older. Thirty percent are 60 or older, and 20 percent are 62 or older and could actually just move to the retirement side of the house if their disability were cut before they reached full retirement age.
  • The practice of moving money from the disability side of the program to the retirement side — and vice versa — isn’t without precedent. Social Security Disability was added to the program in 1956 and a portion of payroll taxes was allocated to pay these benefits, but the percentage hasn’t always been the same. “Congress has reallocated taxes between the Social Security retirement and disability trust funds 11 times before, in both directions, when it was needed to put either program on stronger footing,” the senators wrote in Monday’s letter.
  • The shortfall isn’t news or caused by the fraud that has plagued the disability program. The Center for Retirement Research said in a policy brief on the issue last year, “(Social Security’s) actuaries have always anticipated higher rates of disability with the aging of the baby boom, but they did not foresee a significant increase in disability rates at young ages, and the impact of the economic recession.”
  • Reallocating enough money to keep the disability program solvent through 2033 would have almost no impact on the solvency of the retirement fund — reducing it by about a year — because the retirement fund is so much bigger.

There are a lot of good reasons to fix the entire Social Security program now while there is time available to gradually raise taxes, increase eligibility ages or revise how benefits are distributed. Too bad it takes holding Congress hostage for there to be any discussion or action on this critical issue.