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Ruffing: Pending Insolvency of Disability Insurance Expected and Should Be Addressed

March 20, 2013 at 6:09 PM
BY
CBPP

In testimony today before a House Ways and Means subcommittee, CBPP Senior Fellow Kathy Ruffing explained that the expectation that the Social Security Disability Insurance (DI) trust fund will become insolvent in 2016 comes as no surprise and should not be considered evidence that the program is out of control.

Here’s an excerpt from her testimony:

While researchers cannot fully dissect all of the reasons for the program’s growth, it’s clear that the bulk of it comes from demographic factors, women’s entry into the labor force in large numbers, and the increase in the Social Security retirement age (see chart), and that the DI program’s growth will taper off in the next decade.

DI is an integral part of the Social Security program, and legislators should address it in the context of overall Social Security solvency.  The common features and interactions of DI and [the Old-Age and Survivors Insurance program] would make efforts to fix the two programs separately a mistake.

Because Social Security’s finances are fairly predictable, it is not difficult to craft revenue and benefit proposals that would place the program on a sound long-term footing.  The best proposals would protect vulnerable workers and beneficiaries and give all participants ample warning of future changes to this vital program.  That will enable them to plan their work, savings, and retirement with confidence — while continuing to count on Social Security’s protection in the event of early death or disability.

If policymakers are unable to agree on a well-rounded solvency package before DI faces depletion, they should reallocate taxes between the two programs as a stopgap, as they have done multiple times in the past, while intensifying efforts to develop a long-term solvency package that restores the program’s financial health for decades to come.