Jul 13, 2015

The Great Recession Caused Big Problems For Social Security Disability But Not What You Think

     Kathy Ruffing, Senior Fellow at the Center on Budget and Policy Priorities, has an interesting observation. The Great Recession hurt Social Security's Disability Insurance Trust Fund badly but not in the way people think. The problem wasn't that the Great Recession caused an increase in benefit payments. Any effects on that side were minor. The problem has been that the Great Recession caused a dramatic decrease in the Disability Insurance Trust Fund's income. If the Great Recession hadn't occurred, the Disability Insurance Trust Fund's income and spending would be in rough balance.


5 comments:

Anonymous said...

That makes sense. Higher unemployment and lower wages = less payroll taxes, directly effecting disability trust fund income. Another legacy of the lack of oversight of the financial markets and the resultant effects on the economy. Remember it when politicians cry for deregulation and less oversight.

Anonymous said...

Not to mention the issue of income inequality. Much of the gains in income has been realized by those already earning over the maximum taxable amount so the increase in their earnings does not help the OASDI trust funds. The overall percentage of total wages subject to FICA has fallen.

Anonymous said...

8:38 is right on. In 1984 when Reagan and O'Neill hammered out a deal with SS the SS tax cap captured 90% of all wages. Now it only captures 84%. This simple fix would solve about 40% of the current gap.

Anonymous said...

Are you all forgetting the reduction in FICA in 2011 and 2012 of 2%? A gift from the administration and of course overall taxes collected would be less. I have no stats on how much, I have no doubt it contributed a significant amount to the reduction in FICA collected.

But that fact does not contribute to the conclusion drawn.

Anonymous said...

If this is correct, then it would be smart for our government to have a yearly index for this and adjust the tax accordingly. Pay as we go.