Over the years there has been a lot of talk about the shrinking funds available for Social Security benefits, and what would happen when the day finally arrived that payroll tax revenues were insufficient for paying out promised benefits and the government’s plan for making up the difference resembled something like this:
There’s also been a lot of pushback to the effect that such a day wouldn’t arrive, or wouldn’t lead to very drastic results if it did. Well, the day is indeed coming for the disability portion of Social Security, and the results look rather drastic. From the Washington Post:
“If Congress doesn’t act, people receiving Social Security disability benefits could see a nearly 20 percent cut to payments at the end of next year, according to the latest version of the Social Security trustees report released Wednesday.
“The disability trust fund will be depleted by the fourth quarter of 2016, leaving the administration with enough income to pay 81 percent of benefits, according to the report, which is updated annually. …
“The cuts would most immediately affect the 10.9 million people receiving disability benefits as of 2014, but other beneficiaries could see benefit cuts down the line. If Congress doesn’t act to reform the program, the trust fund used for retirement benefits would be depleted by 2035, a year later than previously expected.” (link original)
Tomorrow’s coming after all.
The question, of course, is what if anything will be done about this. Even if payroll taxes were to rise next year (or disability payments to fall) and stave off the depletion, we’re talking about an extension measured by weeks and months, not years. President Obama’s fiscal 2016 budget actually included one piece of a solution that ought to be a lay-up: not paying disability benefits to people who are also receiving unemployment benefits. But that’s a relatively tiny amount of money (a couple of hundred million dollars a year) in light of the disability benefits due (more than a hundred billion dollars a year).
The fact that the account is due to run out of money in a presidential election year presents two main possibilities. One: The candidates from both parties will turn this into a campaign issue, with the election in part acting as a referendum on how to address this and Social Security’s longer-term problems. Two: Social Security remains the third rail of American politics, and the candidates from both parties beg President Obama and congressional Republicans to come up with their own solution.
I’d bet on a short-term patch, the preferred M.O. in Washington these days for just about everything. But what do y’all think? Is there a chance option 1 or option 2 — or some third option — gives us a longer-term fix?