A Social Security fund that provides benefits to nearly nine million disabled people is projected to run out by the end of 2016, and a new House rule could cause headaches for majority Republicans during the upcoming push to shore it up.
The rule, which the House passed earlier this month, puts up a procedural roadblock against legislation that would redistribute the payroll tax to replenish the Social Security Disability Insurance Trust Fund.
To fund Social Security, employees and employers each pay 6.2 percent each month. The main retirement fund, Old-Age and Survivors Insurance (OASI), receives 5.3 percent and the disability fund gets 0.9 percent of the tax.
Republicans oppose reallocating the payroll tax to keep the disability program solvent because it would hurt the retirement fund, but Democrats assert it’s been done nearly a dozen times before.
Meanwhile, the GOP has been short on alternative solutions.
“We think it’s not wise to continue to take from the Social Security trust fund to prop up the disability fund,” House Budget Committee Chairman Tom Price (R-Ga.) said this week.
Price, who spent part of his career as an orthopedic surgeon, said weeding out abuse and fraud within the disability program could be one solution to keep it solvent.
“There are a number of studies that demonstrate that a lot of people who are on the program are no longer eligible,” he said. “People get well, people do other things and other opportunities become available from a medical standpoint to treating whatever disability they have to make it so that they can contribute to a greater degree.”
Kathy Ruffing, senior fellow of federal fiscal policy at the Center on Budget and Policy Priorities (CBPP), said Republicans like Price are wrong.
“Republicans in Congress have systematically underfunded those efforts by the Social Security Administration and I think that the critics of the program who like to claim that it is somehow rife with fraud and abuse have a responsibility to document those claims,” she said. “They are frankly wrong.”
About 8.9 million people receive disability benefits from the fund and its eligibility guidelines are stringent. Beneficiaries must have worked at least one-quarter of their adult life and five of the last 10 years. They must be unable to work because of a severe medical issue that has lasted five months and is expected to last at least another year.
Roughly a quarter of recipients have a mental impairment, some have muscular or skeletal problems and others have diseases like diabetes, Lou Gehrig’s disease, congestive heart failure and cancer. A majority of them are 55 or older and many die within a few years of first receiving the insurance, according to CBPP.
The 2014 Social Security Trustees report determined that after the fourth quarter of 2016, the disability fund wouldn’t go bankrupt, but it would only be able to cover 81 percent of benefits, amounting to 19 percent in cuts. On average now, people receive about $1,165 per month.
Democrats have warned the new House rule could almost certainly lead to those cuts.
Rep. Sander Levin (D-Mich.), the ranking member on the tax-writing House Ways and Means Committee, said he suspects Republicans are trying to privatize the program as they’ve attempted before.
“That rule should not be used as a rule to essentially try to privatize Social Security. I think that’s the basic purpose of that rule.”
That’s not the case at all, said Rep. Tom Cole (R-Okla.). He said the rule is intended to force lawmakers to confront long-term entitlement spending problems.
“This is one where I think the president has shown a lack of leadership,” he said.
Cole said he and Rep. John Delaney (D-Md.) have reintroduced legislation that would create a bipartisan 13-member commission that would work on a legislative solution to fix both Social Security funds and bring it to the House floor.
“The commission would probably gradually raise retirement age, it would probably look at chained CPI, would probably look at means-testing and probably look at some sort of revenue, or reduce benefits for upper-income people,” Cole said. “Then you have to vote.”
Cole said he and Delaney plan to present it to Rep. Paul Ryan (R-Wis.), the chairman of the Ways and Means panel, which is going on a retreat next week.
None of the lawmakers to whom The Hill spoke offered possible alternative solutions for replenishing the disability fund, but most agreed it’s an urgent matter.
“I think that legislation is warranted ASAP, which is a difficult thing to say in Washington,” Rep. Bill Pascrell (D-N.J.). “We need legislation within this year, within the next six months. There are enough folks I’ve talked to on both sides of the aisle who I think will get us to that point.”
Congress last passed a major reform of Social Security in 1983 after which both the retirement and disability funds were expected to remain solvent through 2060. In the mid-1980s, however, the share of workers receiving disability benefits was at a record low.
Since then, the pool of disability insurance applicants has grown significantly because of population growth, the aging of baby boomers and more women participating in the labor force.
Democrats advocate redistributing the payroll tax to help prevent the disability fund from running out, a step Congress last took in 1994.
Charles Blahous III, one of the Social Security public trustees, emphasized in a column recently that a lot has changed since that last redistribution.
“The most responsible and ambitious choice would be comprehensive reform shoring up Social Security as a whole,” he wrote. “Transferring funds from OASI to DI would weaken Social Security’s retirement component, which is in even worse long-term condition.”
The trustees’ report said in order to keep the retirement and disability funds solvent for the next 75 years, the overall payroll tax would have to be raised by about 3 percentage points, something most Republicans would likely oppose.
Rep. Charlie Rangel (D-N.Y.) questions the GOP’s tactics so far, but holds out hope the House can still reallocate money to keep the disability program solvent.
“It’s really a stain on the reputation of this body. Thank God it doesn’t involve a crime, but it does involve the most gross misuse of political power,” he said of Republican efforts, adding, “Public pressure can change any damn thing.”