Last week, the Washington Examiner did a nice job covering the growing Social Security Disability Insurance (SSDI) crisis, and Congress’s recent response to it. The issue at stake is the 2016 benefit adjustment, which would cut 20% of benefits for more than 10 million SSDI recipients:
“Many Democrats want to sweep the problem under the rug with an accounting gimmick that would merge the disability trust fund with the general Social Security trust fund, which, on paper, isn’t expected to be depleted until 2034. But House Republicans passed a rule [Tuesday] to protect the broader Social Security program from being raided.
In 1994, the payroll tax rate was reallocated between Social Security’s two trust funds to avoid depletion of the disability insurance fund, but another reallocation would ignore Social Security’s long-term funding issues.”
The idea for reallocation came from the bleak 2014 Social Security Trustees report, which described, “Lawmakers may consider responding to the impending [Disability Insurance] Trust Fund reserve depletion, as they did in 1994, solely by reallocating the payroll tax rate between [Old-Age and Survivors Insurance] and DI. Such a response might serve to delay DI reforms and much needed financial corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short run.”
The reallocation response would be merely a bandaid, ignoring the overall Social Security funding crisis, which is why the House passed a rule prohibiting reallocation unless it is combined with “benefit cuts or tax increases that improve the solvency of the combined trust funds”. That is to say, there must be some act of long-term reform.
Apparently, the Left was having none of that; responses were swift and sharp. The LA Times headline screamed, “On Day One, the new Congress launches an attack on Social Security”. The paper further described how,
“The rule hampers an otherwise routine reallocation of Social Security payroll tax income from the old-age program to the disability program. Such a reallocation, in either direction, has taken place 11 times since 1968, according to Kathy Ruffing of the Center on Budget and Policy Priorities.
But it’s especially urgent now, because the disability program’s trust fund is expected to run dry as early as next year. At that point, disability benefits for 11 million beneficiaries would have to be cut 20%. Reallocating the income, however, would keep both the old-age and disability programs solvent until at least 2033, giving Congress plenty of time to assess the programs’ needs and work out a long-term fix.”
Clearly, Democrats doesn’t see the irony of having to reallocate 11 times already as an major fiscal problem. I’m betting that every time there was a reallocation, it was to give Congress “plenty of time to assess the programs’ needs and work out a long-term fix.” In other words, kick the can again because the issue is politically unpalatable.
The Washington Examiner spoke to Charles Blahous, a Trustee of the Social Security and Medicare Trust Funds, about the Social Security situation. Blahous described how “the problem is not that disability needs a bigger share of the overall payroll tax than it now has, but that Social Security as a whole faces a financing imbalance that needs to be corrected. The single most irresponsible response to the pending [disability insurance] trust fund depletion would be to do nothing other than paper it over with a reallocation of funds, delaying meaningful corrective action as long as possible.”
You can be sure the Dems will use this issue as a way to stir up the base between now and 2016. Kudos to the new Congress for being willing to discuss and tackle the insolvency problem instead of moving funds around automatically.