Disability funds for 11 million people would run out in final days of 2016 election

Source: Washington Examiner

Democrats and Republicans will have to find agreement on shoring up funds for Social Security disability, or 10.9 million beneficiaries will face steep benefit cuts just as the 2016 elections are in their last days.

That was the message sent by the program’s board of trustees this week, in its annual snapshot of the program’s finances.

Without action, the report said, the trust fund for the disability program will be exhausted at some point in next year’s fourth quarter. At that point, disabled workers, their spouses and their children would see a 19 percent cut to their benefits, dropping the average monthly check from roughly $1,017 to $824.

That will serve as an incentive for Congress to act on an issue on which Democrats and Republicans disagree, one that involves some of the most vulnerable people in the population.

“This needs to be dealt with this year,” said Pam Villarreal, a retirement expert at the National Center for Policy Analysis. “They don’t want to have beneficiaries heading to the ballot box in November, and thinking, ‘Well, we won’t get our benefits until January.'”

Like many analysts on the Right, Villarreal favors a major overhaul of the disability program, specifically a rating system to give more benefits to those with worse disabilities and fewer to more able-bodied people.

In recent years, the disability program has come under scrutiny for a rapid increase in the number of beneficiaries, especially those with hard-to-judge disabilities such as mental disorders, as the population has been getting healthier. Meanwhile, the program discourages people with disabilities from working, because they lose a lifetime’s worth of benefits if they hold down a decent-paying job.

Democrats have mostly countered that the program’s growing size is a reflection of changing demographics: The Baby Boom generation aged into its 50s and early 60s, when disabling illnesses or injuries are more common.

Democrats have consistently said that the late-2016 benefit cuts should be avoided by simply re-routing incoming payroll tax revenue from the larger retirement trust fund, which is projected to be solvent through 2035. Together, the combined trust funds would not be expected to run out until 2034.

“The administration looks forward to working with Congress to rebalance the Social Security program — as has been done on a bipartisan basis many times in the past — to ensure that workers with disabilities and their families receive the full benefits they have earned and need,” Obama economic advisers Jeff Zients and Jason Furman wrote in response to the trustees’ report.

But House Republicans attempted to stave off that possibility at the start of the 114th Congress in January with a parliamentary rule relating to the disability program. The rule prohibits diverting funds away from the retirement trust fund to the disability trust fund unless steps are taken to shore up the combined fiscal health of the program.

The trustees report provided some intellectual support for the GOP stance. The trustees noted that Congress reallocated payroll funds to the disability program in 1994, on the basis that it would provide lawmakers 20 years to come up with a longer-term solution to the program’s fiscal problems.

“Twenty years after the tax reallocation that was intended to create the time and opportunity for such reforms, the trustees reiterate the call for legislation to achieve long-range financial stability, though there are fewer reform options available now than there were in the 1990s, when the projected date of reserve depletion was more distant,” the report says. The trustees include the secretaries of Treasury, Health and Human Services, and Labor, as well as the commissioner of the Social Security Administration and two public trustees.

Now, the trustees wrote, “reallocation of resources in the absence of substantive reforms might, on the other hand, serve to delay [disability insurance] reforms and much needed corrections for [Social Security’s retirement and disability programs] as a whole.”

There probably is not enough time before the 2016 deadline to come up with a bipartisan reform of that scale. But Republicans on the House Ways and Means Committee, which has oversight over Social Security, have begun working toward that goal, holding hearings on reforms to the disability program.

Meanwhile, committee Chairman Paul Ryan, Social Security subcommittee Chairman Sam Johnson and Senate Finance Committee Chairman Orrin Hatch have introduced one measure that an aide said would satisfy the House rule, namely a bill to prevent workers from receiving disability payments and unemployment insurance benefits at the same time. The bill would save $2 billion over 10 years.