Will the President Default on His Entitlement Promise?

by Bill Jaeck

Opinion Piece

The Social Security Disability Insurance Trust Fund is projected to go bankrupt in 2016

Today actuarials and statisticians are calculating the math on the Social Security Disability Insurance Trust Fund (SSDI) and the projections are not pretty. Simply put, the scant revenues entering the system through payroll deductions are being overwhelmed by the explosive growth of enrollments. The trust fund’s depletion is more than 20% per year as enrollees collect approximately $1,100 a month for life. Unless actions are taken, this fund will be insolvent in 2016, President Obama’s last year in office.

Yet President Obama stated, “We do not have a spending problem.” In January, Speaker John Boehner kept insisting during the fiscal cliff debate that spending was the problem. President Obama finally said, “John, I’m getting tired of hearing you say that”. The President then proclaimed in his inauguration address, “The commitments we make to each other through Medicare, Medicaid and Social Security —- these things do not sap our initiative, they strengthen us. They do not make us a nation of takers…”

OK, that’s a nice fuzzy, warm statement, but what about the math ?

The Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund published, “As a result, after having reached a maximum in 2008, DI Trust Fund assets continue to decrease in 2012 under each alternative. Under an intermediate assumption, assets will continue to decline until their projected exhaustion in 2016.” Signatories to this report included Kathleen Sebelius (Secretary of HHS) and Tim Geithner (Secretary of the Treasury).

Still this pending catastrophe has been largely ignored by the mainstream media. However, The Washington Post did write that the Social Security disability program is on the verge of insolvency as it is currently being swept by being overrun by the flood of benefit claims filed by laid-off workers.

How Did We Get Into This Mess

It’s a simple inflow versus outflow equation. In 1968, there were 51 workers supporting the Disability program to 1 disabled person. In 2001, the ratio was 23 to 1. Now, it is 13 to 1. Can you image a grocery store surviving on only 13 customers or a church with only 13 in the congregation? Of course not. Even Bill Maher, liberal talk show host, knows the program is in trouble.

“When there’s less people pulling the wagon and more people in the wagon, at some point the wagon is going to break.”

Today, about 13.6 million people receive disability benefits through Social Security or Supplemental Security Income.

Jaeck changes to labor force.tif

The chart above shows that there have been 8.5 million fewer jobs available in the labor force since 2009 but SSDI continues to grow with 6 million new enrollees. Even last month’s labor report showed 157,000 new jobs created but 169,000 left the work force. Where are all these vanishing people going? Evidence suggest a significant portion are going into the SSDI entitlements. Applications are up nearly 50 percent over a decade ago. “It’s primarily economic desperation,” Social Security Commissioner Michael Astrue said in an interview. “People on the margins who get bad news in terms of a layoff and have no other place to go and they take a shot at disability.”

Once on Social Security Disability, people stay there. Only 6% returned to work and 3.6% exited the program due to medical improvement. That is not a misprint, only 3.6% became healthy again. It’s like checking in a hotel and never leaving. According to Congressional Research Service, this program cost taxpayers $128.9 billion in 2011 and recorded a deficit of $25 billion. SSDI is funded by the 1.8% payroll tax and comprises nearly 18% of all social security spending. At this current pace, the trust fund may be exhausted by as early as 2016. And to add insult to injury, SSDI beneficiaries receive Medicare after just 2 years into the program.

Finally, how are all these people getting injured? A quick check of OSHA claims reveal no significant increase in manufacturing accidents, no where near the 6.0 million new claims since 2009. The heavy manufacturing jobs from the 1950-60s have been outsourced overseas, yet the questionable injuries continue to mount overwhelming the trust fund.

How Do We Fix the Problem?

The SSDI program is a microcosm of what ills the job market in America. First, like any problem, there needs to be a recognition that the problem exists. The President needs to look in a mirror and stop proclaiming we do not have a spending problem. He should form his opinions around math and a simple data analysis. There is clearly a epidemic of people entering the system well above any statistical norm.

To protect the SSDI fund, I would suggest the following reforms:

– First, Congress should reduce the benefits 20% from the current $1,100 monthly payout.

– Secondly, payroll deductions need to increase.

– Third, tighter restrictions should be placed on entering the system with 2nd and 3rd medical opinions required.

– Finally, physician re-evaluations/certifications should be required every two years. The current system provides benefits for life, yet as a society we re-apply for unemployment insurance, driver’s licenses, credit cards and passports. Shouldn’t the same requirement be made for SSDI ?

The time to act is now !