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The Right Way to Avoid Disability Cuts

With the Social Security Disability Insurance (DI) trust fund expected to run short next year, my new paper explains why forcing DI to borrow from Social Security’s retirement fund is a bad idea — and what Congress should do instead. 

Congress must act soon to avert a nearly 20 percent benefit cut in DI, a critical part of Social Security that serves as a lifeline for workers who can no longer support themselves because of a life-changing illness or injury.  Some congressional Republicans want to force the DI trust fund to borrow money from Social Security’s much larger retirement and survivors fund.  This is misguided.  Congress shortchanged DI in rebalancing money between the disability and retirement funds in the past, helping to create a shortfall that borrowing will not fix.  Instead, borrowing would set the stage for potentially draconian cuts in DI when the loans come due.

Advocates of so-called “interfund borrowing” sometimes invoke as a precedent the one time it was used, in the early 1980s.  The circumstances, however, were very different then.  Policymakers allowed Social Security’s retirement fund to borrow from the DI fund at the same time that they began addressing overall Social Security solvency; ultimately, they enacted legislation giving the retirement fund a clear way to repay its debt and strengthening the program as a whole.  This time, supporters of borrowing offer no proposals that would increase DI’s resources (or cut benefits) enough to enable it to repay a loan.

Instead of interfund borrowing, Congress would be wise to rebalance, or “reallocate,” Social Security’s revenues between the program’s two trust funds, as Congress has done many times in the past in both directions, with large bipartisan majorities.  Shifting a small portion of payroll tax receipts to the DI trust fund would avert a sudden cut in DI benefits, have only a tiny effect on the solvency of the much larger retirement fund, and give the President and Congress time to focus on strengthening and restoring long-term solvency to Social Security as a whole.