The Social Security trustees’ new report shows why the program’s immediate priority should be to raise the share of payroll taxes allocated to Disability Insurance (DI) and lower the share allocated to Old-Age and Survivors Insurance to keep the DI trust fund from running out in 2016. Nine million disabled workers face a 20 percent across-the-board cut in DI benefits if the trust fund is depleted.
Social Security’s disability and retirement programs are closely linked, so ideally Congress would address DI’s finances as part of a long-term solvency package for Social Security as a whole — one that extends the solvency of both trust funds well beyond 2033, when the combined trust funds face exhaustion. Enacting a balanced solvency package before late 2016, however, is highly unlikely.
Surveys find that Americans are willing to pay higher Social Security taxes to preserve and strengthen Social Security for future generations. Yet some politicians argue for preserving solvency solely through benefit cuts. Bridging such sharp divisions will be difficult, and holding DI beneficiaries hostage by refusing to reallocate payroll taxes wouldn’t make the task any easier — or success more likely.
Reallocation is unavoidable. Even if policymakers miraculously agreed on a balanced solvency package by 2016, any changes in DI benefits or eligibility would phase in gradually and hence do little to replenish the DI trust fund by 2016.
Reallocation is a historically noncontroversial action that policymakers have often taken to shift resources between the two trust funds, in either direction. Both the Bush and Clinton Administrations endorsed it in the early 1990s, and Congress enacted it in 1994 without a single dissenting voice.
Reallocation isn’t a “patch” or “kicking the can down the road,” as some contend — descriptions appropriate for the recent House-approved bill to extend the Highway Trust Fund by ten months, or Congress’ repeated one-year delays in implementing scheduled cuts in Medicare payments to doctors. A payroll tax reallocation will keep Social Security’s disability and retirement programs solvent for another 15 to 20 years.
And reallocation doesn’t preclude additional actions to strengthen Disability Insurance. Reversing the recent decline in Social Security’s administrative funding would allow the Social Security Administration to process claims more quickly and ensure that recipients remain on the rolls only as long as they are eligible. Changes in the process for approving or denying claims might improve the accuracy and consistency of those disability determinations. We could also test new strategies to help people with disabilities remain in the workforce, as the President’s 2015 budget proposed.