In previous years, the 2015 Social Security and Medicare Trustees Reports were usually released in the spring, albeit on a Friday or perhaps around a holiday when little attention would be paid. This year, the reports were released yesterday, months later than usual, with little fanfare, except for a few media outlets praising the findings. The Huffington Post even went so far as to suggest that Social Security should be expanded because we can afford it. (huh?) It should include eliminating the salary cap on the Social Security payroll tax, and expanding the benefit to include paid sick leave and parental leave. Why? Because Europe, of course.
Those who suggest that Social Security is affordable evidently do not know what is buried in the pages of the full 266-page report. First, while it is true that the Retirement benefits portion of OASDI (the OAS part) took in more revenue than it paid in benefits last year and has a “trust fund” of $2.7 trillion, that fund will be exhausted in 2035. If nobody cares what happens 20 years from now, consider the Disability portion of the OASDI (the DI part). Its trust fund, now at only $60 billion, will be exhausted at the end of next year because the program has paid out more in benefits than it has collected in revenue. Since federal law prohibits borrowing of additional moneys to finance either, it has been suggested that some of the Retirement benefit trust fund money be shifted to the Disability benefit trust fund in order to avoid having to cut disability benefits. In other words, robbing Peter to pay Paul. It’s like taking water from one end of a bathtub and pouring it into the other end expecting the water level to rise. So how logical would it be to expand Social Security benefits to include non-retirement/disability benefits? Even if the salary cap on payroll taxes was lifted?
The Obama administration is open to such a cockamamie shell game, and will likely sell it to an enthusiastic Congress that cares only about the present. Not to mention, 11 million disability recipients would not be thrilled about the alternative – a 19 percent cut in benefits. But consider the long-term burden, it not for ourselves, for our grandchildren. Table VI.FI of the Trustees report shows that over 75 years, the unfunded obligations for OASDI are $10.7 trillion. That means promised benefits that have no funding even after payroll taxes and interest income are accounted for. If expanded over the infinite horizon, the amount rises to $25.8 trillion. This does not even count the rapidly growing Medicare program, which my colleague Devon Herrick writes about here.
Meanwhile, the rising costs of the Disability program have been attributed to the aging population and “some” improper payments. But there is more to it. More can be done to reform many parts of the program while keeping benefits for those who truly need them, from the application process to benefit determination, as I have suggested in a recent NCPA study.