Wednesday, January 7, 2015

Holding The Disabled Hostage

Social Security consists of trust funds. The Old Age, Survivors, and Disability Insurance has of two parts. Retired workers, their families, and survivors of deceased workers receive monthly benefits under the Old-Age and Survivors Insurance (OASI) program. (Rep Paul Ryan is an example of someone who received survivor benefits after his father passed away.) Disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. The Medicare Hospital Insurance Trust Fund handles Medicare.

The Disability Insurance trust fund is slated to run out of money in 2016. Failure to act upon that means all disabled recipients will take a 20% cut. This is the same thing that is scheduled to happen in 2035 when the OASI trust fund will be depleted and beneficiaries will only receive 75% because that's what the tax revenue can handle. However, as a combined fund, the OASI and DI can last until 2033 before the reserves are depleted. In the past Congress has reallocated revenue to address imbalances in the trust funds.

Yesterday, the House of Representatives adopted a rule that would prevent the reallocation of tax revenue to the Disability Insurance Trust Fund. Why?

Because Social Security trust funds have a lot of money in them and there are people who want to get their hands on that money. Your money.

What do the Social Security Trustees recommend? From their annual report (PDF): (bolding mine)

The projected theoretical combined OASI and DI Trust Fund asset reserves increase through 2019, begin to decline in 2020, and become depleted and unable to pay scheduled benefits in full on a timely basis in 2033. At the time of reserve depletion, continuing income to the combined trust funds would be sufficient to pay 77 percent of scheduled benefits. However, the DI Trust Fund reserves become depleted in 2016, at which time continuing income to the DI Trust Fund would be sufficient to pay 81 percent of DI benefits. Therefore, legislative action is needed as soon as possible to address the DI program’s financial imbalance. Lawmakers may consider responding to the impending DI Trust Fund reserve depletion as they did in 1994, solely by reallocating the payroll tax rate between OASI and DI. Such a response might serve to delay DI reforms and much needed corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short-run. 

For the combined OASI and DI Trust Funds to remain solvent throughout the 75-year projection period: (1) revenues would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 2.83 percentage points1 (from its current level of 12.40 percent to 15.23 percent; a relative increase of 22.8 percent); (2) scheduled benefits during the period would have to be reduced by an amount equivalent to an immediate and permanent reduction of 17.4 percent applied to all current and future beneficiaries, or 20.8 percent if the reductions were applied only to those who become initially eligible for benefits in 2014 or later; or (3) some combination of these approaches would have to be adopted. 

The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes soon would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 59 million beneficiaries and 165 million covered workers and their families in 2014. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.

For the Republican-led House, informed discussion, creative thinking, and timely legislative action means holding the disabled hostage. I'd say that one ranks pretty high up on the heartless scale.

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