November 2, 2015

Future Work Still Needed after Budget's Disability Fix

Charles Blahous

J. Fish and Lillian F. Smith Chair
Summary

The bipartisan budget bill just passed by Congress contains several provisions affecting Social Security disability insurance (DI) operations as well as Social Security finances generally. The purpose of this piece is to explain key effects of the disability provisions. I will not speak to the merits of the budget deal as a whole, which is already the subject of many others’ analysis and commentary.

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The bipartisan budget bill just passed by Congress contains several provisions affecting Social Security disability insurance (DI) operations as well as Social Security finances generally. The purpose of this piece is to explain key effects of the disability provisions. I will not speak to the merits of the budget deal as a whole, which is already the subject of many others’ analysis and commentary.

The details of the disability provisions are complex and likely of interest only to those steeped in Social Security disability policy.  So before proceeding to describe them, I will stress three bottom-line conclusions:

1) The provisions represent a slight improvement to disability program operations.

2) The provisions represent a substantial improvement over the likely result if legislative action had been further postponed until nearer to projected DI trust fund depletion in late 2016.

3) Passage puts the program in better condition but it will rapidly grow worse unless legislators enact further Social Security reforms in short order (e.g., after next year). This worsening has nothing to do with the budget bill provisions. It is because time is the enemy of Social Security finances. Until comprehensive corrections are enacted the shortfalls facing Social Security, including disability, will continue to grow worse.    

Some background may clarify these points.

Social Security DI has been running a deficit of tax income relative to benefit spending, forcing the program to draw down the spending authority of its trust fund at a rate that would result in depletion in late 2016. This threatened beneficiaries with sudden benefit reductions of approximately 19%.

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