Senior Policy Analyst
With the Disability Insurance (DI) trust fund — an essential part of Social Security — facing a long-anticipated need for more financial resources by late 2016, some congressional Republicans want to force it to borrow from Social Security’s much larger Old-Age and Survivors Insurance (OASI) trust fund rather than adopting the traditional fix of reallocating payroll tax revenues between the two trust funds. That’s a bad idea.
Congress has reapportioned payroll taxes many times between DI and OASI, in both directions and by large bipartisan majorities. Shifting a small portion of the payroll tax would avert a sudden 20-percent reduction in DI benefits, have only a tiny effect on OASI’s solvency, and give the President and Congress time to focus on strengthening long-run solvency for Social Security as a whole. The proposed interfund borrowing, in contrast, is unwise for several reasons:
Borrowing doesn’t solve anything. It’s just a gimmick that doesn’t address the underlying issue — namely, that the current allocation of payroll tax revenue between DI and OASI has shortchanged DI for several decades (see graph). Directing DI to borrow from OASI is useless unless DI also receives the means to repay the money.