Baby Boomers and unemployment straining disability funds

21st July 2014   ·   0 Comments

By Jazelle Hunt
NNPA Washington Correspondent

WASHINGTON (NNPA) – Another partisan battle is brewing on Capitol Hill as Social Security in general, and disability insurance in particular, nears a budget squeeze.

“Any of us could suffer an accident or illness we’re not expecting,” said Rebecca Vallas, associate director of Poverty to Pros­perity Program at the Center for American Progress Action Fund. The Center hosted a press conference last week to release a reported she co-authored titled, “Social Security Disability In­surance: A Bedrock of Security for American Workers.”

Vallas explained, “We have this amazing program there for us if that happened. Very few people have enough savings to deal with that, and without [disability insurance] most of us would fall into poverty.”

Two separate funds feed the two types of social insurance: Old Age and Survivors Insurance (OASI), and Disability Insurance (DI). Collectively they’re called OASDI, or Social Security. Income taxes, and interest from bonds bought with these taxes, anchor these trust funds.

Disability Insurance benefits Americans who cannot earn a living because of physical or mental injuries, illnesses or disabilities, as well as their dependents, spouses, and caregivers. For many, it is the difference between getting by and abject poverty.

Close to two million African Americans are receiving DI benefits. The Social Security Admin­istration reports that as of December 2010, 28 percent of African-American recipients were under the poverty line. Without disability insurance, that figure would rise to 57 percent.

Approximately 31 percent of Black disability recipients also receive Supplemental Security Income (SSI) checks, which provides additional assistance for low-income families of Americans with disabilities.

DI also serves nearly two million children, one million veterans, 4.5 million women, and 154,000 spouses of Americans with disabilities.

But the system is poised to be stretched beyond capacity as millions of Baby Boomers enter high-disability and retirement years. In addition to this population bubble of aging workers, there’s the fact that women have entered the workforce and become eligible for benefits, on par with men. Additionally, the recession has resulted in lower taxes from fewer workers who have to support a sizable population of aging beneficiaries.

With the convergence of these factors, Social Security funds are already plateauing and in danger of declining into inadequacy.

A brief from the National Academy of Social Insurance explains, “At some point in 2016, the DI trust fund’s reserves would be depleted and current taxes coming into the trust fund would not be enough to pay all benefits owed to disabled workers and their families. Funds would be sufficient to pay only about 80 percent of scheduled amounts.”

And the Social Security Administration reached a similar conclusion, reporting that “the Trustees estimate that [both] trust fund reserves will be exhausted by 2033” – and that’s if steps are taken to ease the crunch now. “At that point, payroll taxes and other income will flow into the fund but will be sufficient to pay only about 75 percent of program costs.”

Every year since 2010, the DI fund has paid out more than it collected in taxes and has had to rely on its reserve funds (from past surpluses) to pay beneficiaries on time and in full.

Some elected representatives believe spending on these programs takes too big a chunk of the federal budget. Indeed, Social Security and Medicare accounted for 38 percent of federal spending in 2012, according to Social Security data. From 2012 to 2013, OASDI paid out $826 billion to 53.6 million beneficiaries. Even so,, OASDI has always been less than five percent of national GDP.

Disability insurance in particular has become a target for cuts to the program. The “Mack Penny Plan” from Rep. Connie Mack IV (R-Fla.), for example — which proposes cutting one penny of every federal dollar spent for the next six years – would ultimately cut more than $1 trillion from social security through 2022, according to nonpartisan fact-checking group, Politifact.

“Opponents of Social Security would praise ‘good Social Security,’ which is the retirement trust fund their grandmothers get, and attack ‘bad social security’—that’s disability insurance,” said Sen. Sherrod Brown (D-Ohio), keynoting the Center for American Progress event. Senator Brown serves as chairman of the Social Security, Pensions, and Family Policy Subcommittee of the Senate Finance Committee.

“Many claim to sympathize with low-income workers, but then discuss beneficiaries as lazy, looking for a hand-out, or looking to game the system. That simply isn’t true.”

Congress is already making cuts amidst the political sparring.

Since 2010, the Social Security Administration has closed 64 field offices and 533 temporary mobile offices, and has downsized around 11,000 employees and counting in the last three years, according to the U.S. Senate Special Committee on Aging. There’s also a huge backlog in disability applications; as of last year, claimants could expect a yearlong wait.

Additionally, there’s a steady flow of misinformation in the political discourse, which confuses Americans on the facts.

Rep. Todd Young (R-Ind.), for example, told a constituent that “nearly 70 percent of all federal spending will go towards Social Security, Medicare, and Medicaid” this year, according to Politifact. In 2011, House Speaker John Boehner told media that the trust funds were “facing imminent bankruptcy.”

Historically, whenever the system faced tough times, there has been a simple fix.

Since the funds are structured in such a way that they can neither borrow money, nor go into default, OASDI woes have been balanced through tax reallocation. With this solution, Congress tweaks the distribution of the program’s 6.2 percent payroll tax contributions between the two trust funds.

Last year, for example. 5.3 percent went toward OASI and 0.9 percent toward DI—this year the split is 4.8 and 1.4 percent, respectively, according to the Center for American Progress.

The American public is usually on board for this solution. In a National Academy of Social Insurance survey of 2,000 Americans, for example, 82 percent of respondents (a majority that held steady across party affiliation) believe Social Security programs should be preserved even if it means increasing current taxes.

Congress has voted for OASDI reallocation 11 times since the program’s inception; it is considered a routine, bipartisan Congressional procedure. But if the current rhetoric and the partisan stalemate that resulted in a 16-day government shutdown last year is any indication, the stopgap may not come so easily.

All of this has taken its toll on the American public. In the aforementioned NASI survey, 57 percent of respondents say they have little faith in the future of the program.

“There’s such a huge contrast between what the American people say and think and what people say in the media,” says T.J. Sutcliffe, director of Income and Housing Policy at The Arc of the United States, a disabled advocacy organization. “The controversy doesn’t seem to be there when you talk to average Americans.”

This article originally published in the July 21, 2014 print edition of The Louisiana Weekly newspaper.