The Hill | May 1, 2012

Since the Social Security Trustees report was released last week, we’ve heard a lot about the year 2033. That’s the year when the Social Security trust funds as a whole will run out of money and will no longer be allowed to pay full benefits. The real year to pay attention to, though, is 2016, when the Social Security Disability Insurance fund runs out of money.
 
What does this mean? It means that within half a decade, during the next presidential term, the disability program will no longer have the legal resources to fully pay its 12 million beneficiaries. At that point, current law calls for an immediate 20 percent benefit reduction for all disabled individuals.
 
Most observers don’t worry much about this year. They assume that when 2016 comes around, politicians will simply reallocate money from the old age program into the Social Security program and viola, problem solved. I wouldn’t be so sure that transferring the money will be so easy – and I’m not sure it should be.

The Social Security disability system is broken in many ways. Not only is the program financial insolvent, but the system is wrought with fraud, needlessly complex, difficult to navigate, inconsistent and unfair in determining eligibility, inflexible to changes in the structure of the workforce, administratively overburdened, almost completely uncoordinated with other government policies, and unable to help or reward those who are interested in reentering the workforce. 

Making the disability system solvent simply by taking money from the already-underfunded old-age system would represent a double policy failure by committing a disservice to both programs. Instead, policymakers should use the fast-approaching insolvency date in the same way they did when the trust funds ran low in 1983 – come together and fix both programs for this generation and the next.

Specifically, any plan which reallocates money from the old age program to the disability program should do the following:

Enact reforms to improve Disability Insurance over the short-term

When lawmakers worked to prevent the Social Security trust funds from running out of money in 1983, the primary focus was on identifying the $150 to $200 billion necessary to keep the program solvent through 1989. Similarly, they should work to identify savings approaching $200 to $300 billion through 2022 in order to keep the DI trust fund intact.
 
On the spending side, savings could come from enhanced anti-fraud efforts, reductions in duplicative benefits, limits to retroactive benefits, and changes to the way we treat beneficiaries who collect disability as an alternative to reduced early retirement benefits. On the tax side, one option would be to gradually increase or remove the “taxable maximum” on the 1.8% disability payroll tax in order to ask high earners to contribute more without dramatically increasing their marginal tax rates.
 
Take steps toward more structural reform

At the same time we identify short-term savings, we should be asking more fundamental questions about the program. How should disability be defined? How can we offer different types of support across various state and federal programs? Is there room for partial disability in the system? How can we help to train and reward beneficiaries to go back to work, or to avoid entering the disability system in the first place?
 
We need a disability system for the 21st century, a system which answers these and many more questions. Such a fundamental rethinking to the 55-year old program will take time, but we can more aggressively pilot new ideas starting today, and combine that with a study and review process to make bolder reform possible in the coming years.
 
Fix Social Security: Make it sustainable solvent 

The 1983 reforms focused on the short term, but used the opportunity to enact long-term changes as well. The combined Social Security program is incredibly underfunded over the long-run -- by one to one and a half percent of GDP depending on how one measures it. We can eliminate this gap through a comprehensive plan which slows benefit growth for higher earners, gradually increases the retirement age, and makes other tax and spending changes to make the old-age and disability programs sustainable over the long run.

Undertaking such reforms today would give workers plenty of time to plan and make changes, and offer them the security of knowing the program will be there for them and the next generation.

Ideally, we wouldn’t need a looming insolvency to force action on this important issue. But if politicians need the threat of a crisis in order to act responsibly, there is no shortage of these in the months and years ahead. Hopefully they will act in time to avoid them.

RealClearMarkets | April 24, 2012

We have already absorbed more campaigning from the Republican contenders than most people can stand. We have also seen President Obama, and friends, fire back when his programs were under attack in the Republican primaries. From all sides we have heard sound-bites, catch-phrases, and answers to questions never asked.

Sad to say, it's only going to get worse. You can run from the presidential campaigning, but you can't hide.

There will be more than enough money for general election spending to saturate TV and radio airwaves with political advertising. All of it will be loud. Much of it will be negative. Little of it will have to do with major problems which ought to be discussed by the candidates. In keeping with their managers' instructions, candidates will try to stay "on message" and "off-issue."

The fall debates will be better than the primary debates if only because there will be two candidates rather than 10. But the debates, if they follow precedents, are not likely to shed much light on the problems that really concern people.

Not since 1992 when Ross Perot asked us to "peek under the hood" have Americans been given much of a chance to hear about the long-term, persistent debt and deficit problems of the U.S. During the 8 year Clinton presidency which followed, we enjoyed 4 consecutive no-deficit years. Good fortune may have been partially responsible for that black-ink, but it was achieved in a period when control of the government was divided between the parties just as it is today.

The 2012 candidates, President Obama and Governor Romney, have now been identified. Each has had plenty of time to look under the hood for a careful study of the U.S. debt/deficit problem. So far, their proposals fall well short of the target supported by many budget analysts of stabilizing the debt at about 60% over the next decade.

Both candidates can improve their platforms on fiscal and budget issues, and both probably will. Even so, in an aggressive, noisy campaign, the public may not fully understand the candidates' positions. After all, precision and clarity have never been the hallmarks of presidential campaign advertising.

The incumbent Democrat has eschewed the high standards of his own Debt Commission (Bowles-Simpson) Report, and instead has proposed small tax increases and small spending cuts. The challenging Republican has promised tax cuts aplenty, but his overall economic plan needs clarification, especially since he endorsed the rigorous expense-cutting of the Paul Ryan Budget Plan.

The American people deserve a full debate and discussion on our fiscal problems. With four $1 trillion deficits in row and a debt ratio over 70%, the Washington response of both political parties has been to "kick the can down the road." Kicking the can is political-speak for saddling future generations with this generation's refusal to meet its own obligations.

Full debate for presidential candidates has come to mean the officially blessed TV debates, which began in 1960. These debates, and the questioners, are often justly criticized. Nevertheless, the TV debates remain the best way to probe the candidates' positions on the difficult issues. In contrast to the loud advertising wars of candidates and super-PACS, the debates are the public's best information source.

Because the fiscal problem is so important, the public interest would be well served if at least one of the fall debates were reserved for discussion of the debt, the deficit, and the budget. But, to ensure that the public is fully informed, searching questions should phrased by experienced, bi-partisan budget experts, and put to the candidates, as often as necessary, by skilled questioners.

Candidates can be as evasive as they wish, but slippery answers will be as revealing as bad answers, especially if the question is posed more than once.

The general idea is to guarantee, insofar as possible, that the candidates respond directly to unpleasant questions about the country's dire financial condition. Candidates love to talk about more tax cuts, and about preserving entitlements. That's easy. The hard part is telling the people about the difficult decisions that must be made so that future generations will not be subjected to slow growth, high interest rates and a lower standard of living.

A request has already been made that at least one of the presidential TV debates be reserved for a thorough discussion of the fiscal problem. Whether it will be granted is not yet known. There ought to be strong public support for it.

Many Americans know that we are now living on borrowed money from foreigners. They know that one rating service has already downgraded our debt, and that others may shortly follow. They know low interest rates won't last. They know about our recurring deficits that are always supposed to decline, but never do. Those Americans ought to be demanding at least one Fiscal Debate.