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What Happens If The Disability Trust Fund Runs Out Of Money?

     Most people think there is only one Social Security trust fund but there are two. The one most people don't know about is the Disability Insurance Trust Fund. It has much more immediate problems than the Retirement and Survivor's Insurance Trust Fund. The Disability Insurance Trust Fund is predicted to run out of money in 2018. Restoring the Disability Trust Fund to health isn't that big a deal.A small reallocation of the FICA tax would do it with little effect upon the Retirement and Survivor's Insurance Trust Fund. You may have noticed, however, that Republicans have been taking hostages lately, refusing to agree to routine measures that prevent catastrophes, in order to achieve leverage. This tactic may have run its course as the public is tiring of crises and Democrats seem willing to practice brinksmanship themselves. Still, there is a very real threat that Republicans will attempt to use the problems of the Disability Insurance Trust Fund to force dramatic changes in Social Security's disability programs.
     It's impossible now to predict whether there will be a crisis in a few years or what the Republican demands or Democratic response might be. It may be worth looking though at the question of exactly what looms if there is no agreement. My first thought was that there won't be a crisis because there is already authority for borrowing between the Trust Funds. Unfortunately, my memory failed me. There was such authority at one time but it expired in 1987. Let's hope this authority can be quietly renewed before 2018. My second thought is to wonder just how benefits might be paid if the Disability Insurance Trust Fund runs out of money because the exhaustion of the Disability Trust Fund does not mean that there will be no money to pay benefits. Actually, there will be enough money to pay about 84% of the benefits since there will still be revenue coming into the Disability Insurance Trust Fund, allowing some benefits to be paid out of the revenue stream. Would Social Security just reduce each month's check by 16%? Probably, but a Congressional Research Service study on the subject tells us that the Disability Trust Fund running out of money would be terra incognita. There is no clear statutory answer. Perhaps, the answer would be to delay each month's checks until sufficient funds are available to cover them, making each check later and later.

Disability And Unemployment

     I said that I would have more on the testimony at the House Social Security Subcommittee hearing on December 2. Let me finally start getting around to it. The testimony of Stephen Goss, Social Security's Chief Actuary,  included a statement that "Periodic economic recessions, as illustrated by the civilian unemployment rate in bright orange in the figure below, have been associated with temporary increases in disability incidence." I have copied his chart below. Click on it to see it full size.
     What strong an association do you see? It seems to me that the correlation is so weak as to be indistinguishable from ordinary fluctuations associated with small policy changes. Does anyone have the statistical background to do an analysis on this? Is this chi square? I don't know my statistics but surely some reader does.
     This is not a minor point. If the Social Security disability programs are little more than a form of unemployment benefit, perhaps they should be dramatically altered. That is the point of much of the  recent criticism of the Social Security disability programs. Is there substance to this claim? I don't see it. Do you? If you do, can you prove it statistically? If it can't be proven statistically, those trumpeting this view ought to shut up.

Challenges For Social Security Administration

Here are a couple of excerpts from Fiscal Year 2011 Inspector General Statement on the Social Security Administration’s Major Management and Performance Challenges, a report by Social Security's Office of Inspector General (OIG):

As the end of FY [fiscal year] 2011, SSA’s [Social Security Administration's] hearings backlog was approximately 787,000 cases—about 82,000 cases higher than the backlog at the end of FY 2010 and 62,000 higher than its goal for FY 2011. However, SSA continued to improve the timeliness of hearing decisions. The cumulative average processing time for hearings dropped to 360 days as of the end of FY 2011, compared to 426 days as of the end of FY 2010. ...


In FY 2011, DDS [Disability Determination Services] staffing decreased from 18,269 employees to 17,271 employees – a loss of 998 employees. With the hiring freeze, DDSs are not allowed to replace the lost staff. At the end of 2011, five States were still furloughing DDS employees. ...

Windfall Elimination Provision Problems

     From a recent audit report by Social Security's Office of Inspector General (OIG):

Our objective was to identify Old-Age, Survivors and Disability Insurance (OASDI) beneficiaries whose payments may have been affected by State or local government pensions. We limited our review to those beneficiaries who may have been receiving State or local government pensions and for whom the Social Security Administration (SSA) had not determined whether the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO) applied. ...

Based on the results of our review, we estimate SSA overpaid about $623.8 million in OASDI benefits to approximately 24,900 beneficiaries because Agency staff did not apply WEP and GPO provisions to the OASDI benefits. If SSA does not take action to identify and correct these payment errors, we estimate it will pay about $869.9 million in future overpayments over the beneficiaries’ lifetimes ...

     This was based upon a small sample. I suppose these auditors know what they are doing but they are basing a projection of almost a billion dollars on 13 or so cases. To a layman, that seems questionable.

Arizona Governor Investigated For Social Security Fraud

     There is a report that Arizona governor Jan Brewer has been under investigation for Social Security fraud. Let me hasten to say that the report suggests nothing more to me than an overpayment. The situation is that Governor Brewer's son, Ron, is severely mentally ill. Ron's father died. Ron started receiving disabled adult child benefits on his father's account. Governor Brewer was made his representative payee. In 1989 Ron was found not guilty of kidnapping and sexual assault by reason of insanity. He was sent to a state psychiatric hospital. In 1995 the Social Security Act was changed to make individuals confined to a psychiatric hospital after being found not guilty by reason of insanity ineligible for benefits. This made Ron ineligible for Social Security benefits but Governor Brewer never informed Social Security. Ron was overpaid by $75,000.

     Anyone want to put Governor Brewer in jail for being unaware of an obscure change in the Social Security Act? I don't think so but an Arizona paper says that Social Security's Inspector General has investigated and has presented the case to the Department of Justice which seems uninterested in prosecuting. The newspaper seem obsessive about pursuing this matter.

     A few points here:

• Republicans in Congress are eager to investigate Social Security overpayments. They imply that overpayments are due to rampant fraud at Social Security. They want aggressive action to root out this fraud and to punish the wrongdoers. As this case shows, plenty of Social Security's overpayments are due to the complexity of the programs the agency is administering. These overpayments happen to Republicans as well as Democrats.
• Investigating routine overpayments as if they were fraud is a waste of money and would harass a lot of honorable people, many of them Republicans.
• When they write about mental illness, many Republicans like to put the term "mental illness" in quotation marks. I doubt that Governor Brewer does this. I would wish a chronically mentally ill child on people who do this but that would be too cruel a punishment.

Union Objects To Plan To Stop Policing Questionable Retirements

    From a press release issued by the American Federation of Government Employees (AFGE), the union which represents most Social Security employees:

The American Federation of Government Employees cried foul today on the Social Security Administration’s plans to rescind Social Security Rulings 66-18c and 91-1c, which allow the agency to question retirement allegations made by corporate officers and the self-employed.

“Development of questionable retirement allegations have always been an important part of what SSA [Social Security Administration] employees do to ensure that only qualified individuals receive Social Security benefits,” said Steve Kofahl, regional vice president of AFGE Council 220. “By rescinding this policy, SSA will be ignoring potential fraudulent activity by wealthy corporate offices and self-employed individuals who shift their income in order to receive SSA benefits.”

Quiz Answer

Question: Who was Social Security Commissioner on August 14, 1985, when Social Security celebrated its 50th birthday?

Possible Answers:

• John Svahn
• Martha McSteen
• Dorcas Hardy
• Louis Enoff

Correct answer: Martha McSteen was Acting Commissioner