Feb 12, 2015

Future Funding Debate

     John Fritze at the Baltimore Sun has written a good summary of yesterday's Senate Budget Committee hearing. The hearing was supposed to focus on Social Security's Disability Insurance Trust Fund but often seemed to be a debate over future funding of the nation's entire Social Security system. A short version of the Republican position would be that the Social Security trust funds are going to run out of money in 18 years which would result in significant cuts in Social Security benefits so it's vital that Congress enact significant cuts in Social Security benefits today. A short version of the position of the Democrats would be that there's no need for any cuts in Social Security benefits if we just eliminate the cap on wages covered by FICA, a loophole that only benefits wealthy people.

22 comments:

Anonymous said...

The Politico article I read this morning summarizing yesterday's hearing mentioned that the Republicans are expected to sign onto a bill this week to narrow the window in which people who review disability payments can also collect unemployment benefits. This was supposed to "force the president's hand" on the issue of the disability fund funding. Anyone heard any details of this bill?

Anonymous said...

Update the DOT! Didn't hear much of anything about that. Lifting the cap AND raising the minimum wage would help as well. As would more access to higher education. Access to more healthcare under ACA may lower rates of disability claims. People who are able to get treatment for minor conditions that can potentially get worse without care could continue to carry on working. Also, nobody talks about the population dip with Gen-X vs. Millenials. As the boomers pass on the balance of fewer workers to recipients of benefits starts to shift doesn't it? Everyone speaks about 2033 like the demographics will be the same as they are today. The boomers will be phasing out as the X-ers phase in and Millenials and Gen-Z (?) and whatever is next, are at their peak working years. That population drop for Gen-X is almost never referenced.

Anonymous said...

Good points, 10:18. More reasons to show why this is a manufactured crisis being used for a political gain. The funding issues might take of themselves over time.

Anonymous said...

ACA is a farce, I have seen 4 claimant's with ACA in the last year..

Anonymous said...

Well, there's 4 claimants for you that are a potential $24,000.00 in fees for you. If they didn't have access to health care how much potential do you think would be there to possibly win those claims? After all SSA defines disability as unable to engage in any substantial gainful activity by reason of MEDICALLY DETERMINABLE physical or mental impairment...

How many medically determinable records would those 4 claimants have had to support their claims without ACA?

Food for thought...

Anonymous said...

Or you might be seeing only a few claims with claimants enrolled in ACA because many people got treatment for their issues, are now feeling better so they can keep working and didn't have to file for disability.

Anonymous said...

It's hard to say how the ACA will affect the disability roles. We have noticed an appreciable number of our existing clients who now have insurance. That, of course, only helps their cases because there is now more medical evidence. And cases that we used to turn away for not having medical treatment now call and say they have a doctor so we take their cases. On the other hand, we used to have clients tell us that the main reason for their filing for disability was to obtain insurance. Those cases, in theory, will no longer be there. Plus, as 1:12 mentions, potential future clients who now have medical treatment under the ACA may not be forced to leave work and file in the future because their illness are better controlled.

Anonymous said...

With regards to SS cuts immediate or in the future, is anyone talking about the fact that the government has borrowed trillions of dollars from the SS trust funds? If this some odd 2.7 trillion were paid back, would there be a problem?

Anonymous said...

Some of the postings are laughable. Of course the demographics (boomers starting to pass from the scene and millenials hitting peak earning years)and are taken into account by the actuary et al. in calculating when the outgo from the OASDI Trust Fund exceeds the income from FICA taxes. The 2033 date is real. Yes, it may move a little depending on economic swings, but it is real.

Had this issue been addressed sooner, and it was recognized over 20 years ago, then the changes needed to bring things into balance would have been more minimal. But everyone kept kicking the can down the road.

Anonymous said...

1:31

your post is well-taken, but looking back at past predictions vs. actual outcomes shows that margins of error are often pretty large, with the margins becoming ever larger the further out in time the prediction covers. With so many moving parts being involved when it comes to SSA benefits/trust funds, I don't see predictions involving more than about 5-10 years in the future as worth all that much.

Anonymous said...

1:53 I disagree. In 1994, the last time there was interfund borrowing, the actuaries said that the SSDI fund would experience stress in 2016 and they were dead on. Of course the reason for this stress is that the RSI trust borrowed from the DI trust fund but for some reason the GOP does not want to grasp this.

Anonymous said...

you're right about that. But I'd argue that the boomer problem was huge, can't miss, and not too hard to see the immediate effects. We are in a time where very significant changes to SSA's rules could very well be made, life expectancies are no longer going up across the board as predictably as they did in decades past, and the working/earning of young people today is something that is going to be presumably very different than in the past because of the recession (with long-term effects really hard to nail down). In short, there were far fewer and much less volatile variables when mid-90s predictions were being made (though I'll concede the impact from contemporaneous welfare reform on disability, specifically SSI, was huge and probably not easily predicted)

Anonymous said...

2:41 siad, "Of course the reason for this stress is that the RSI trust borrowed from the DI trust fund but for some reason the GOP does not want to grasp this." The GOP totally understands this and does not want it to continue. It is time to make some changes in the system not just borrow from Peter to pay Paul. We need to raise the cap on amount taxed for FICA. We also need to change the welfare system in this country. When a person on welfare has the same things they would earning $20.00 an hour, why work?? As they said in Economics 101, there is only so much coin to burn..

Anonymous said...

4:50

I love when people make the assertion you made last.

So which is it--should people receiving "welfare" get less benefits or should the minimum wage be raised?

Anonymous said...

Raising the FICA cap will merely provide more cash for other government spending and IOUs for the Social Security trust fund.
Usually assets = liabilities.
But that normal situation has 2 distinct parties, and the debt is either repaid or collateral is seized by the creditor.
In the case of $18 trillion of public debt, the federal government owes itself money. The 2 entities are part of the federal government, not distinct from each other. And while the asset of the equation is used to fund government expenses, the liability side remains in limbo. Neither principal nor interest is repaid, and collateral is not seized by the unpaid creditor.

Anonymous said...


The current Republican delusion is that they could get away with sneaking or strong-arming a Social Security benefit cut without taking the severe public backlash that would surely follow. All the crazy stuff we are hearing from them has that end in mind. You'd think they would give up and move on once their plan was exposed, but apparently some additional pandering to tea partiers and extremists is required.

Anonymous said...

Well, if you raise minimum wage, you're still not addressing the people getting something for nothing, so...

Anonymous said...

SSDI is an insurance program (Hence the "I"). To qualify you pay into the system. Like any insurance you pay your premium to be able to get benefits (Yeah, yeah. We'll put an asterisk by dependents). But it's not people getting something for nothing. Let's not forget, regardless of what the media says, actual fraud in the system is miniscule (FACTS!). To even get benefits is very difficult. There's no free lunch here. It is NOT welfare. Its insurance. Raising the minimum wage means more money going in the system. Under $118,500 in wages every dollar earned is taxed. Raise the cap so those earning higher amounts pay the same rate on their earnings and raise the minimum wage. Solvency extended for many years.

Anonymous said...

@ 10:37

As you note, you pay to get benefits. I hope you realize that any raise in FICA cap must come with a proportionate raise in benefits. It won't result in the quick fix you think.

Anonymous said...

"any raise in FICA cap must come with a proportionate raise in benefits"

Of course it does. It doesn't mean it won't help. Even with those who earn more getting higher benefits this one simple move reduces 74% of the funding shortfall. Why, why, why should higher incomes pay less in taxes for this program with regards to their income to lower earners? Should we do nothing? Or should we do something that eliminates 3/4 of the dang problem? It is the most logical choice and creates a fair system.

Anonymous said...

THAN lower earners. Not to.

Anonymous said...

"any raise in FICA cap must come with a proportionate raise in benefits"

says who? the haters already call/believe it welfare, why bend over backwards while diminishing the impact of increasing the cap trying to make it seem less so to folks who will never change their minds?