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CBO Says Social Security Disability Insurance Insolvent in Eight Years

John on September 14, 2010 at 9:35 am

The Washington Post has the story:

Applications to the program soared by 21 percent, to 2.8 million, from 2008 to 2009, as the economy was seriously faltering. The growth is the sharpest in the 54-year history of the program…

Obviously, 21 percent annual growth is unsustainable. The number of new cases may return to a normal level in a few years, but as the story notes only about 1% of those given benefits ever return to work. In theory this shouldn’t matter since those receiving benefits are disabled and couldn’t work if they wanted to; however the story also notes that disability isn’t what it used to be:

[M]ore than half of awards go to applicants who claim mental disabilities, such as depression, or musculoskeletal disorders, such as back pain, which are harder for federal officials to disprove.

According to the CBO, here’s what the surge of new dependents looks like:

What this means is that SSDI, which is one portion of the overall Social Security program, will become insolvent in about eight years:

CBO projects that under current law, the Disability Insurance Trust Fund will be exhausted in 2018. At that point, legislative action would be necessary to avoid a sudden drop in the amount of benefits paid. Of the alternatives available to address that fiscal imbalance, some would increase revenues dedicated to the DI program or reduce outlays by adjusting the program’s rules (such as the benefit formula or the definition of disability). Others, much broader in scope, would aim to make work a more viable option for people who could qualify for DI benefits under current law.

Options for extending solvency include increased taxes or shifting money from other parts of the program:

Alternatives for increasing revenues for the DI program include increasing payroll or other taxes. In addition, policymakers could choose to redirect a portion of the payroll tax dedicated to Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund to the Disability Insurance Trust Fund, as was done in the 1990s. However, redirecting resources from the OASI trust fund to the DI program would advance the date on which the OASI trust fund itself would be exhausted.

Now, I have elsewhere advocated that the “trust fund” is a bogus way to look at the Social Security issue. I still believe that to be the case. In reality, current benefits like SSDI are coming from current workers. There really is no trust fund but the general fund.

But the mythical trust fund is useful in one way. As the date of its solvency leaps closer, it reminds us that unicorns don’t exist and, sooner rather than later, we’re going to have to get a grip on our entitlement problem.

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