A first day of reckoning for Social Security to arrive next year

“That’s as good as money, sir. Those are IOUs.” (via YouTube)

"That's as good as money, sir. Those are IOUs." (via YouTube)

“That’s as good as money, sir. Those are IOUs.” (via YouTube)

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?

Reader Comments 0

50 comments
JackClemens
JackClemens

Option 1 + Option 2 = Option 3 Why not?

Visual_Cortex
Visual_Cortex

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?

Easy. We have a wealth inequality problem here. 

So, tax wealth to make up any future shortfalls.


Starik
Starik

Separate the old age pension program from the rest, especially disability.  That's the real problem.

LogicalDude
LogicalDude

Congress will not act, because they don't know how to act on important matters.  They'll keep talking, infighting, blaming Obama and so on and so on. 

Candidates will call on congress to act, for the sake of those who need it most - the disabled, and congress will sit with thumbs pointed upwards on the chairs they sit on.  They won't act. 

This will come down to Republicans blaming Obama (they do it so much, hardly anyone pays attention anymore) and Democrats blaming Republicans who should have done something well before this point. 


More Republicans get the blame, and Democrats keep the White House. 

hamiltonAZ
hamiltonAZ

Some say the "crisis" is directly linked to the unintended consequences of reforming the taxable earnings cap in the 1970s. Thus, if one accepts that suggestion, the solution would lie in revisiting that reform.

notagain
notagain

If you have the DR,the attorneys,the Judges,then if that fails get your Representative,or senator to help you.

Some walk around with a cane for years,get the check and back pay,few days later cane disappears.Have to agree with Caius on this one,

As for the old age,pretty hard to fake that.

TheRealJDW
TheRealJDW

Probably a short term patch because as you note that is the MO, due of course to the current disfunction in Washington...Tea anyone?

Interesting choice of topics considering todays body count....do we need a bigger splash or have you just run out of ways to defend the indefensable?

Plumb Krazy
Plumb Krazy

Any changes to retirement age should be done for people born or entering the work force AFTER the day any bill is passed. Everybody else should be grandfathered in who is working under the present criteria. Any insurance company that changed a deal half way through a policy would be sued and rightly so. Thats how I look at it anyway.

ByteMe
ByteMe

I think all the candidates make a lot of comforting noise, but leave it to the lame-duck Congress and President to fix it for the next decade or two.  And I think they'll all go along with that as long as the incoming President isn't one who won BECAUSE of a promise made to do something radical with the program (what would be the odds of that??).

Eustis
Eustis

Eliminate or increase the income cap.


SS  Disability is being abused, but every program that has money involved is being abused by Democrats and Republicans.

DawgDadII
DawgDadII

Simple solution. For everyone receiving Social Security benefits confiscate all their existing wealth (by title transfer) and tax all their income and capital gains at 100%. Calculate the total amount of funds to be collected annually, divide by the number of benefit recipients, then divide by 12 and start sending out the monthly checks. Repeat cycle annually. The poor and immigrants would love it, and what TRUE Democrat would not?

Caius
Caius

Social Security disability has developed into a racket. There are hundreds of lawyers that devote 100% of their practice just to disability.  Federal judges that hear nothing but disability cases. SS administration employees that do nothing but handle disability cases.


This is a program that needs to be examined with a microscope and an ax.

kitty72
kitty72

@Caius 


Especially in very red states. Funny that. West Virginia's economy survives on these payments in rural areas. It is too easy to get them when you don't really need them and too hard when you do.

Nick_Danger
Nick_Danger

@Caius 

What changes would you propose, so that we could reduce the number of judges and employees?  Maybe streamline the process?  HOW?

Plumb Krazy
Plumb Krazy

@Caius Could be but its no more a racket than campaign donations being converted into favoritism, picking and choosing which companies fail or survive, etc etc etc. Common people have learned to hustle from the experts......the business/chamber nut mafia.

hamiltonAZ
hamiltonAZ

There are significant numbers of disability scofflaws, but without a budget for compliance investigation, these numbers won't fall.

lvg
lvg

@Caius I worked for SS disability on the federal court appeals of denials. You are  right.  Attorneys and clients fabricate medical evidence and leave out conflicting doctor evaluations. Should be left up to doctors to determine based on  examination

m h smith
m h smith

@Caius 

 Judges that hear and SS employees that work on  nothing but disability cases is not as questionable as lawyers who devote 100% of their practice to disability. 

There is one more professional player involved in this racket you failed mention - doctors. You find a doctor who devotes 100% his practice to nothing but disability cases coupled with lawyers who devote 100% of their practice to disability cases, the ax may be all that will be needed. 


JackClemens
JackClemens

@m h smith @Caius True, there is even a psychologist in my hometown who runs ads for his assistance with disability cases.

n8diggidy
n8diggidy

"I’d bet on a short-term patch, the preferred M.O. in Washington these days"


Unless it empowers government, then it has to be "comprehensive".

Claver
Claver

During the primaries, Option 1: you'll have various candidates raise it hoping that it will somehow give them a boost with their base.  Kind of like Rand Paul talking about his Flat Tax.


But, once the primaries are over, Option 2 all the way.

JFMcNamara
JFMcNamara

It will get fixed. Democrats want it and recipients represent a large segment of the Republican base. If Republicans allow this to happen, it will be the end of the Republican party. That's not hyperbole. The party will lose half its base.

Claver
Claver

@Kyle_Wingfield @JFMcNamara A good number of the disabled portion are getting close to old age.  When they start showing disabled 60 year olds who look 70 talking on TV about how they are losing their benefits, the old age SS group will start getting very nervous regardless of the distinctions.

Caius
Caius

@Kyle_Wingfield @JFMcNamara Kyle -  please update your column put this in capital letters as a first sentence.  Most of the people replying have not picked up on the distinction.

Kyle_Wingfield
Kyle_Wingfield moderator

@JFMcNamara Remember to distinguish between the disability portion of the program, which runs into problems next year, vs. the old-age SS that has another decade or two.

JFMcNamara
JFMcNamara

I see it now. Its still too big of a hit. 10.9 million directly plus the family members and caretakers would have to pay the difference. The community of interest could easily reach 10% of the U.S. population. That's not the sword to fall on.

m h smith
m h smith

I hope the GOP is not thinking of running against Social Security, as you cited this is an election year. Jeb should remember his brother's attempts at Social Security reforms, how disastrous that effort was before falling his sword. 

2015 Trustees Report Confirms That Expanding Social Security Is Fully Affordable



The Social Security Board of Trustees has just released its annual report to Congress. The most important takeaways are that Social Security has a large and growing surplus, and its future cost is fully affordable.

It is sometimes reported that Social Security's current costs exceed its revenue, but if that happened, we wouldn't need a report to tell us. The whole country would know, because 59 million beneficiaries would not get their earned benefits as they now do every month. By law, Social Security can only pay benefits if it has sufficient revenue to cover every penny of costs - administrative as well as benefit costs. The claim that Social Security is running a deficit counts only Social Security's income from its premiums, often called payroll contributions or taxes, and disregards one or both of its other two dedicated sources of income: investment income and dedicated income tax revenue. As Figure 1 shows, when income from all of Social Security's revenue sources is counted, Social Security ran a surplus in 2014.

Social Security is projected to run a surplus again this year. And next year. And the year after that. And the year after that. As Figure 2 shows, Social Security's annual surpluses simply add to its large and growing accumulated surplus.


http://www.huffingtonpost.com/nancy-altman/2015-trustees-report-conf_b_7850206.html

332-206
332-206

What do I think? Election pandering. Both sides.

And that the fiscal pain from the Iraq war will continue for decades.

m h smith
m h smith

@332-206 

Yep! Social Security needs reforms and we know for OUR money and it is OUR MONEY we should be enjoying a large benefits and better return than a 2% on OUR MONEY. 

SOCIAL SECURITY should by law be changed from just a "tax" to a genuine guaranteed retirement fund which Congress cannot claim: Oh well, you know, Social Security was always just a tax and nothing else under the law so lets forget about any benefits, shall we?

BTW you will find as much push-back coming from tea party members on Medicare than liberals.

 

332-206
332-206

You know, Michael, I think it's the boomer generation that will reveal the defined contribution retirement plans as the investment firm scams they are. Joe the plumber takes on Cray computers; and WINS! Fairy tale, with a cold water ending.

DMayr
DMayr

This is a serious problem in need of a serious discussion and well thought out solution that addresses the inputs (payments into the system) and outputs (management of recipients). Unfortunately, our current political climate is not conducive to serious discussion. Demagoguery and partisan carpetbombing are the dominant forces, and anyone with serious, non rhetoric-based views gets immediately beaten down. Substance is shunned in our wedge issue-oriented climate.


It's non unlike healthcare costs and access to insurance a few years ago. The ACA, which was admittedly handled poorly by Democratic leadership, is a good example of how to address a fundamentally flawed model. And look at the rancor that's still creating, despite its relative success in addressing a third rail-caliber issue.

e-babe
e-babe

Social Security is money that was deducted from our checks while employed, not money the government pays to seniors like welfare. This is money that senior citizens depend on to make ends meet.  The government took away from Social Security and used it unwisely.  Therefore, they need to find another way to make up the deficit rather than lowering the amount people on fixed incomes receive.  Not to mention the millions given to illegals.

LilBarryBailout
LilBarryBailout

Social Security retirement benefits are a third rail of American politics, but SSDI should not be.  Especially since it is overrun with able-bodied moochers and Democrats who have used up all their unemployment benefits.

End the fraud and SSDI would be fine.

Nick_Danger
Nick_Danger

@LilBarryBailout 

Good idea!

I'd be open to additional funding so the IRS could hire agents to ferret out the fraud.  How about you?

m h smith
m h smith

@Hedley_Lammar 


With one tax you could REPEAL AND REPLACE a very good number of taxes plural. 


And it would include paying for all healthcare costs in this country.

 

straker
straker

There are at least 50 million Americans on Social Security, most 62 and older.


Most of them have grown children.


Drastically cut SS and you will have at least 100 million very angry people, who can and WILL vote.


No political party can afford to lose this many voters.

Wena Mow Masipa How
Wena Mow Masipa How

The President was ready for a grand bargain. On more than one occasion. He would've gotten the D's on board. Alas, the R's didn't want to play ball. I won't say why I thin that is. 

TaxiSmith
TaxiSmith

Why is there always plenty of money for foreign aid, welfare, and food stamps, but not for social security? Makes you wonder. We treat anyone who worked for a living like they are pariahs.

332-206
332-206

Taxi, would it be terrible to add foreign wars and corporate welfare as items that always seem a priority over working citizens?

FIGMO2
FIGMO2

At least the GOP has been talking about entitlement reform. It's an issue where GOP could make inroads with millennials. 

GMAB
GMAB

Why was double dipping ever allowed in the first place?

Hedley_Lammar
Hedley_Lammar

 The fact that the account is due to run out of money


How is reducing payments running out of money. Wouldn't running out of money mean zero payments ?


We have heard this chicken little routine before. Its usually followed in the next breath with the word privatize. 

Dusty2
Dusty2

This is my third try at posting here. .  Never mind.