How to Fix Disability Insurance

 

The Trust Fund for Social Security Disability Insurance will run out of money by the end of 2016.  If no changes are made, all SSDI benefits will have to be reduced to 81% of scheduled benefits after that.  Congress must act to avoid this outcome.  The easiest fix would be to merge SSDI into the larger Social Security program in which case both SSDI and SSI would run out of money about 2033.
CaptureBut as the Manhattan Institute’s Scott Winship points out in National Affairs, “How to Fix Disability Insurance,”  “the looming insolvency of the SSDI Trust Fund offers a rare opportunity to fundamentally reform SSDI” to better target assistance to those with debilitating impairments who truly need this support. The share of adults age 25 to 64 receiving SSDI benefits has tripled from 1.6% to 5% between 1970 and 2010 during a time when a shift from manufacturing, agriculture and mining to service work has reduced physical demands on workers.
Mr. Winship suggests the following reforms be implemented in the SSDI program:

  • Raise the 1.8% (out of the total 12.4% of the payroll tax going to SS) going to SSDI slightly to solve the immediate problem.
  • Expand the support options available to able-bodied men and women who can work, at least for a significant number of hours.
  • Reduce the number of people applying for benefits. For example, by increasing employer incentives for taking stricter safety measures, accommodating and rehabilitating those who become disabled and making greater use of claims management.
  • Use a stricter definition of disability. For example, mental and musculoskeletal conditions may be amenable to treatment.
  • Make it less attractive and more difficult to receive benefits for those who, while impaired, are able to work. Conditions likely to improve would be automatically subject to review after a short period of time.
  • Facilitate work among those with serious impairments who would still like to work. The point here is to make sure they benefit from working without feeling threatened with possible termination of benefits.

The point is that there are many practical steps which can be taken to make SSDI more cost efficient while preserving it for those who truly need it.  This is a good example of the sort of changes that need to be made in all entitlement programs to shore them up for future generations by bringing their huge costs under control.

Are Welfare Benefits Too High?

The CATO Institute has just released a new study “The Work Versus Welfare
Trade-Off: 2013”, which analyzes the total level of welfare benefits on a state by state basis.  The authors, Michael Tanner and Charles Hughes, show that welfare pays more than a minimum-wage job in 35 states and, moreover, in 13 states, it pays more than $15 per hour. The authors recommend that Congress and state legislatures strengthen welfare work requirements, remove exemptions from working and narrow the definition of work.  Also many states should consider shrinking the large gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.
Clearly welfare benefits as well as disability payments, through the Supplemental Security Income (SSI) program of Social Security, have grown too large and have become a disincentive for many people to find a job.  Getting something for nothing is a moral hazard which induces an attitude of entitlement and helplessness.  It also causes the labor force participation rate to shrink and therefore hurts the economy.
Tightening up welfare payments and disability income are among the many actions
which Congress could take to speed up economic growth and lower government
spending.  We need more representatives in Washington who understand that change is needed and who can advocate effectively for policies which will get this done!