Social Security

Ideas to Reduce Fraud in the Disability System

As we have been reporting, many reforms to the Social Security Disability Insurance (SSDI) program could improve its effectiveness, fairness, and sustainability. One potential area for improvement is program integrity. The Office of the Inspector General (OIG) recently published a report on preventing and detecting fraud in the Social Security Disability Insurance (SSDI) system. The report summarizes existing recommendations to reduce fraud in light of recent cases in New York, Puerto Rico, and West Virginia.

Over the past decade, the number of SSDI applications, awards, and beneficiaries has increased substantially as baby boomers have reached an age range with a higher probability of disability. Benefit payments have increased, but revenue coming into the system has not. As a result, the Disability Insurance Trust Fund is projected to run out of funds in late 2016.

The increase in applications and beneficiaries poses organizational challenges for the Social Security Administration (SSA), which must review applications in a reasonable timeframe while preventing fraud. The report outlines vulnerabilities and recommendations throughout the benefit process.

Reps. McCrery and Pomeroy Stress Need for Disability Insurance Reforms

In a commentary published today in Roll Call, former Congressmen Jim McCrery (R-LA) and Earl Pomeroy (D-ND) argue Congress should take a closer look at Social Security Disability Insurance (SSDI).

As they explain, the looming 2016 deadline, when the program’s trust fund is projected to become insolvent and result in an immediate across-the-board cut in benefits, will force Congressional action. Given the importance of the SSDI program, they worry about the dangers of waiting until the last minute. They are calling for a constructive debate on SSDI well in advance of the insolvency date, saying "if policymakers wait until the last minute to start cobbling together solutions, they could make things far worse."

In an effort to help inform the debate on potential reforms to the SSDI system, they joined forces to launch the bipartisan McCrery-Pomeroy SSDI Solutions Initiative.

Reps. McCrery and Pomeroy Launch SSDI Solutions Initiative

Former Congressmen Jim McCrery (R-LA) and Earl Pomeroy (D-ND) today launched the McCrery-Pomeroy SSDI Solutions Initiative, a bipartisan effort to identify potential improvements to the Social Security Disability Insurance (SSDI) program.

The goal of the SSDI Solutions Intiative will be to solicit practical, implementable, and thoughtful ideas to improve the SSDI program through a "call for papers," a peer-review process, and an academic-style conference.

As we've explained before, the SSDI trust fund is projected to run out of funds in just two years – after which current law calls for a 20 percent across-the-board benefit cut. This could be avoided by borrowing or reallocating funds from the old-age system, but doing so would further strain the OASI trust fund, which also faces projected insolvency in the early 2030s. More importantly, the SSDI Solutions Initiative argues, it represents a missed chance to begin making improvements to various aspects of the SSDI program. They explain:

Instead of viewing the avoidance of trust fund exhaustion as a political liability, we believe policymakers should regard it as a policy opportunity. If provided with thoughtful and practical ideas to improve the SSDI program, policymakers could not only avoid insolvency but begin to reform the SSDI program for the better. This means identifying proposals well in advance of the deadline, rather than waiting for Congress to cobble together a last-minute, poorly conceived solution.

General Revenue & the Social Security Trust Funds

Social Security is often portrayed in one of two ways, either as its own self-contained program (the “trust fund perspective”) or as part of the broader budget (“the unified budget perspective”). Although focusing on these two lenses is sensible, the reality is more complicated; especially when it comes to the role of general revenue. Even though Social Security is mainly funded by a 12.4 percent payroll tax, general revenue comes into play even under the trust fund perspective. Indeed, since 1965, over $2.5 trillion ($3.1 trillion in today's dollars) of the $20 trillion of income received by the Social Security Trust Funds has come from sources other than the payroll tax, representing 12 percent of the total.

There are three main ways that general revenue has directly or indirectly made its way into the Social Security Trust Funds:

  • Direct transfers from the General Fund: The general fund has occasionally reimbursed the Social Security Trust Funds in specific cases to compensate it for policy changes that would otherwise lower its balance. Most recently, Congress passed a payroll tax cut for 2011 and 2012, lowering the payroll tax rate by 2 percentage points to stimulate the economy but authorizing a general fund transfer so the Social Security Trust Funds would be no worse off. The holiday was responsible for $225 billion of transfers. Congress has also used general fund transfers to pay for extra benefit credits to active-duty military between 1957 and 2001, special age-72 benefits for people not covered by the program by 1968, a payroll tax credit in 1984, and other reasons. Overall, nearly $260 billion has been transferred from the General Fund since 1965, or $300 billion in today's dollars.
  • Taxation of Benefits: Since 1983, retirees with significant income from sources other than Social Security have paid income tax on a portion of their Social Security benefits (prior to that, benefits were tax-free for everyone). Although this money is paid via the income tax, it is credited back to the Social Security Trust Funds. Since 1983, $370 billion has been transferred from the General Fund due to the taxation of benefits, or $440 billion in today's dollars.
  • Interest paid on Social Security bonds: The Social Security Trust Funds currently contain $2.8 trillion of assets, mainly as a result of significant surpluses in the 1990s and 2000s. That money is invested in U.S. Treasury bonds, which earn interest paid from general revenue. The trust funds earned about $100 billion of interest last year and have earned about $1.9 trillion since 1965, or $2.3 trillion in today's dollars.

Event Recap: "Can Simpson-Bowles Save Social Security?"

On August 15, PublicSquare.net hosted a debate on Social Security featuring CRFB's very own Ed Lorenzen. The event, titled "Can Simpson-Bowles Save Social Security?" involved Benjamin Veghte, Research Director at Social Security Works, and Lorenzen, a Senior Advisor at CRFB who served on the National Commission on Fiscal Responsibility and Reform that was chaired by Erskine Bowles and Al Simpson. The debate was moderated by Taylor Kinzler.

On Social Security’s 79th Birthday, CRFB Releases Updated "Social Security Reformer"

It was on this day 79 years ago that President Franklin Roosevelt signed into law the Social Security Act of 1935. While lawmakers have expanded the program since 1935 and changed it in many ways, the Social Security system still protects Americans against the “vicissitudes of modern life.” Social Security is the flagship program of social insurance in the United States.

It’s no secret that Social Security faces serious long-term funding challenges, as the latest report from the program's very own trustees highlights. If no action is taken, all benefits are set to drop by 23 percent in 2033, when all the programs assets would dry up, and disability benefits are on course to drop by almost one-fifth by 2016 when the Disability Insurance trust fund goes dry. It is critical that lawmakers address the gap between Social Security spending and revenues so the program can enjoy another 79 years (and more) of providing full benefits to retired workers, disabled workers, spouses, and any surviving family members. And the longer we wait, the more difficult solutions will become.

Luckily, CRFB has an incredible interactive tool to get lawmakers and the public started on picking and choosing from many reform options to set the program on a sustainable path: CRFB’s Social Security Reformer.

CRFB's MacGuineas Dispels Five Social Security Myths

In an op-ed that appeared in several papers, including the Providence Journal, CRFB President Maya MacGuineas dispelled five myths about Social Security that are often brought up in the debate about the program (and have been revisited with the release of the Trustees' Report).

MY VIEW: Maya MacGuineas

Maya MacGuineas, President of the Committee for a Responsible Budget, wrote an op-ed distributed via McCatchy wire service that appeared in several papers around the county, including today's Providence Journal. It is reposted here.

Updating the Cost of Delay for Social Security

The Social Security Trustees recently showed what it would take to make Social Security solvent over 75 years: immediately raise everyone’s taxes by over 2.8 percentage points, immediately cut everyone’s benefits by 17 percent, or cut benefits for new beneficiaries immediately by 21 percent. They also warn that those costs will go up substantially if our leaders in Washington procrastinate. Indeed, waiting until 2033 will increase the needed adjustments by 50 percent. As they explain:

If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Much larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2033.

The Trustees make clear that there are two costs to waiting.

Same Sex Marriage Won’t Alter Social Security Predictions Much

In the recent Social Security Trustees report, the issue of same sex marriage made a surprising appearance. Without calling much attention to it, the Trustees assume that all states will eventually legalize same-sex marriage. And while this would increase spending somewhat, they estimate the financial impact would be minimal.

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