The Debate About Social Security Continues to Rage While the Program Turns 80 Years Old
FDR rightly pointed out that the program “can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life,” but it has helped the elderly and disabled remain solvent and independent of their families for decades.
In the last few years, many politicians and commentators have raised serious concern that the Social Security Disability program will be bankrupt by 2016. They imply that, because more people than ever apply for even just temporary disability, and there are millions of Baby Boomers edging into retirement, the overall Social Security program will quickly become insolvent.
However, the Social Security Disability program – whose finances are not tied to the retirement program at all – will potentially run out of funding in 2016, which means that in that year’s 4th quarter, those receiving disability could face a 19% cut in their monthly income. This is the program’s default unless Congress takes steps to refund the program in some way.
“The reality of the situation is that Social Security disability insurance benefits play a vitally important role in the lives of just under 11 million people in this country today, nearly 9 million disabled workers, along with an additional 2 million family members, including 1.7 million children,” says Kurt Czarnowski, a principal with Czarnowski Consulting in Norfolk, Mass.
That said, Congress has taken steps not only to protect Baby Boomers as they retire, but many other generations as they face disability, even temporarily. For example, in 1994, Congress reallocated 0.6 percentage points from payroll taxes to the Disability Insurance program, which helped bolster the program’s funding.
“With that relatively minor adjustment, across-the-board cuts to 11 million people can be avoided, and 100% of the promised disability benefits can still be paid,” says Czarnowski.
In fact, “reallocating taxes to put the two trust funds on an even footing would prolong the DI trust fund by 18 years, from 2016 to 2034, while advancing the OASI fund’s depletion date by just one year, from 2035 to 2034,” according to the Center for Retirement Research. Although this is an extension of less than 20 years, it gives governing bodies a little more time to figure out how to re-fund both the retirement and disability programs attached to Social Security.
Due to the demand for both programs, applications could become more complicated and time-consuming.