During last week's debate on the Bipartisan Budget Act of 2015, Sen. James Lankford (R-OK) offered up an amendment making many further changes to the Social Security Disability Insurance (SSDI) program beyond the ones already included in the law.
Sen. Lankford's amendment contained a number of well-known ideas for improving the program, including some presented by the McCrery-Pomeroy SSDI Solutions Initiative.
The recently-introduced Bipartisan Budget Act of 2015 tackles a laundry list of items that lawmakers needed to address over this Congress, including the upcoming exhaustion of the Social Security Disability Insurance (SSDI) trust fund. Because the Social Security Trustees and the Congressional Budget Office (CBO) had estimated that the trust fund would run out of reserves by the end of 2016 and in the beginning of Fiscal Year (FY) 2017, respectively, leaders included a payroll tax reallocation to shore up the trust fund. This is coupled with very modest changes to Social Security, including one that would close loopholes in the Old-Age and Survivors' Insurance (OASI) program as well as a number of measures that affect the disability program.
According to estimates from Social Security's Chief Actuary, the changes would improve long-term solvency of the combined OASDI trust fund by 0.04 percent of payroll over 75 years. Over the next 10 years, the Chief Actuary estimates these changes will save the trust funds between $5 billion and $9 billion, and CBO estimates these changes will save about $3 billion. This bill would close 1.5 percent of the 75-year shortfall and reduce total Social Security costs by about 0.1 percent.
Today, Republican presidential candidate and former Florida Governor Jeb Bush unveiled a new plan – among the most detailed we have seen so far from any presidential candidate – to reform Social Security and Medicare. According to our estimates, Gov. Bush's plan would save about $285 billion (including interest) over ten years and very roughly $2.7 trillion over twenty years. It would also close Social Security's shortfall over 75 years and beyond.
This blog is part of the “Fiscal FactCheck” series designed to examine the accuracy of budget-related statements made during the 2016 presidential campaign.
Last night marked the first Democratic Presidential debate, held in Las Vegas, and the candidates debated a number of different issues. While they did not mention any of our 16 Budget Myths to Watch Out For in the 2016 Presidential Campaign, there were other claims that related to the federal budget. Below is our analysis of these claims, and be sure to check our other fact checks of the first and second Republican debates.
Eliminating the Payroll Tax Cap Could Extend Solvency to 2061 and Allow for Expanded Benefits
Sen. Bernie Sanders (I-VT) discussed his plans to increase Social Security benefits and extend the program's solvency by saying "And the way you expand it is by lifting the cap on taxable incomes so that you do away with the absurdity of a millionaire paying the same amount into the system as somebody making $118,000. You do that, Social Security is solvent until 2061 and you can expand benefits." He is presumably referring to his plan that the Social Security Administration (SSA) evaluated in 2013, a plan that taxed all income over $250,000 and allowed the current payroll tax cap to eventually catch up so that all income was taxed. This plan did extend solvency to 2061 -- leaving a deficit of 1.5 percent of payroll in 2062, growing to 2 percent by 2090 -- but did not also increase benefits. If it had increased benefits, the insolvency date would be sooner.
In an op-ed for the Washington Post, Robert Samuelson called attention to a new report by the National Academies of Sciences, Engineering, and Medicine which found a notable increase in the life expectancy gap. In his piece, Samuelson points out the disparity means more federal spending going towards wealthy retirees who may not need help.
The Urban Institute published a new report showing that younger generations will receive much more in lifetime Social Security and Medicare benefits than today's retirees, and all generations will receive more benefits than they have paid in taxes, leading to ballooning economic shortfalls in the two programs.
The study, by CRFB board member Eugene Steuerle and Caleb Quakenbush, shows that benefits for an average-earning couple retiring today are valued at $1 million and expected to be $2 million for millennials turning 30 this year. Left unchanged, this trend will continue to rise for future generations.
Last week, the Technical Panel to the Social Security Advisory Board issued a report on the assumptions and methods used by the Social Security Trustees Report. The Technical Panel's role is to improve the way the Trustees analyze the health of the Social Security program. This year's findings and suggested changes to the technical assumptions would result in a worse than the originally projected outlook for Social Security's financial wellbeing.
The Technical Panel publishes reports every four years with suggestions for improving the methodology, presentations, and assumptions used by the Trustees to estimate the future financial health of the Social Security Trust Fund. The 2015 Trustees Report projected the 75-year shortfall of the program was 2.7 percent of payroll. Using the more pessimistic assumptions recommended by the Technical Panel, the 75-year shortfall is 3.4 percent. The effects of the panel's recommended assumptions grow larger over time, making the shortfall in the final year of projections (the 75th year) 30 percent higher at 6.1 percent of payroll instead of 4.7 percent.
Senators Tom Cotton (R-AR) and Joe Manchin (D-WV) wrote an op-ed that appeared on Fox News Tuesday advocating for measures to help those who do or could receive Social Security Disability Insurance (SSDI) benefits return to work. Warning of the upcoming exhaustion of the SSDI trust fund (one of the Fiscal Speed Bumps the 114th Congress will need to address before the end of 2016), the senators would like to make SSDI more effective for those who are temporarily disabled to ensure its long-term sustainability for workers with permanent disabilities.
Cotton and Manchin state their goal: to help those who are temporarily disabled to return to work and preserve the funds for those who have serious, long-term disabilities. They note that almost 11 million Americans depend on SSDI, but the program has been paying out more than it has been receiving in recent years – $155 billion more since 2009.
Cotton and Manchin note:
According to the 2015 annual report from the Social Security system’s trustees, the SSDI trust fund will run out in late 2016. Unless Congress acts, every one of those 11 million people will see a 19 percent cut in benefits. This will mean the average beneficiary will receive $230 less per month – moving from barely above to below the poverty line.
The New York Times Editorial Board's Teresa Tritch posted a piece last week on short-term solutions to avert next year's depletion of the Social Security Disability Insurance (SSDI) trust fund reserves. She opposes interfund borrowing that would loan money from the Old-Age and Survivors' Insurance (OASI) trust fund and instead supports reallocating tax revenue from one to the other. Although we don't have a stance on which is better, we couldn't help but notice that Tritch used many misleading claims to support her position, many of which we previously discussed in Dispelling Common Myths in the SSDI Debate and Debunking 8 Social Security Myths on its 80th Birthday.
Below, we correct the record where Tritch relied on myths:
- Reallocation "would enable both funds to pay full benefits until 2033, plenty of time" for action on long-term program health.
Tritch is basically correct that reallocation would ensure combined solvency for about 20 years, with the Social Security Trustees estimating insolvency in 2034 and the Congressional Budget Office estimating around 2029. But there is not "plenty of time" for long-term action. The earlier that a plan is enacted, the more it can protect vulnerable beneficiaries, introduce changes gradually, and give people time to prepare. As the deadline gets closer, it becomes more difficult to avoid steep benefit cuts or tax increases. As we explained in Delaying Social Security Changes Ties Policymakers' Hands, a shortfall that could be solved with a 2.6 point tax increase or 16 percent benefit cut today would require a 4.0 point tax increase or 23 percent benefit cut if delayed until the date of insolvency. Indeed, if lawmakers wanted to protect current beneficiaries, it would be impossible to achieve solvency – even with fully eliminating benefits for new beneficiaries – by 2034. Even waiting ten years will hamstring the ability of lawmakers to make gradual changes which give beneficiaries time to plan and adjust.
The Bipartisan Policy Center (BPC) recently convened a Disability Insurance Working Group and released their recommendations to address the upcoming exhaustion of the Social Security Disability Insurance (SSDI) trust fund. The group brought together diverse stakeholders that spanned from disability community advocates and former policymakers to academics and business leaders to find consensus recommendations that involved tradeoffs from all perspectives of the situation in order to make a comprehensive proposal.
The Working Group, guided by 11 principles for their decision-making process, agreed that the immediate funding need would need to be addressed by reallocating payroll tax revenue from the Old-Age and Survivors' Insurance trust fund to the SSDI trust fund, and they also suggested the following program recommendations: