Social Security Disability Insurance: Admit What It Is and Adjust To Reality

The Truth Really Isn’t That Scary

The SS Disability Program and the SS Old Age and Survivors Program have separate trust funds.  So, there is some acknowledgment of the fact that they’re different.  However, the extent of the differences is something we fail to acknowledge. 

Disability claims (and thus the disability trust fund’s balance) are driven by unemployment.  Thus, they’re no more predictable than unemployment.  Planning for disability benefits involves preparing for surprises.  By contrast, Old Age and Survivor benefits (and its trust fund’s balance) are driven by demographics.  Although politicians like to pretend they’re surprised by failures to fund old age benefits, there are no surprises involved.  Planning only requires responding to highly predictable realities. 

There is no reason to believe the same funding method, a wage tax, is appropriate for the two very different programs.  They have totally different planning requirements.  Thus, it isn’t surprising that current and historical data demonstrate very different funding requirements.  Some minor changes in the funding of old age benefits were discussed last month.  By contrast, disability benefits require a total rethink. 

There are two options.  1)  If disability benefits are going to continue to be treated as a policy variable, they should be brought back into the budget process and be funded out of general revenue.  2) If they are going to be a response to disability, they should be fixed at a given level with a glide path toward zero as jobs continue to become safer, the antidiscrimination act is enforced, and medicine improves rehabilitative treatments. 

The use of SS disability benefits to conceal a failed economic policy is probably unavoidable.  To expect otherwise would be to expect a degree of frankness among pundits that just isn’t realistic.  Nothing better illustrates politicians’ willingness to consider putting expediency above common sense than the insane proposal to merge the two trust funds.

Since SS Disability is more like Unemployment Insurance (UI) than the Old Age and Survivors Program, it would be more logical to merge SS Disability and UI trust funds.  Since “regular” UI programs are state programs, the role of any federal government program would be analogous to the role federal emergency extended benefits currently plays.  This would be a logical way to address the role SS Disability plays and legitimize the SS Disability Program’s claim on the budget.  It might even stir politicians into thinking about prefunding emergency benefits (i.e., actually funding benefits they promise).

It is important to address disability from the macro, aggregate, perspective.   Trying to develop an overall policy by building up from individual cases has failed and always will.  The failure is apparent in the data.  It results in data that only makes sense under ridiculous conditions.  The increase in disability claims could only be valid if medical research is proceeding backwards and medical rehabilitative capabilities are declining; vocational rehabilitation programs are failing or aren’t being used to rehabilitate; the Americans with Disabilities Act’s antidiscrimination clauses are backfiring, and unemployment causes disabilities.   Even if any of those were true, SS Disability benefits wouldn’t necessarily be an optimum response. 

People are all unique so the SS Disability option undoubtedly has a role in the policy mix.  However, increased expenditures for research on rehabilitation would seem a more humane response.  The objective of our policy toward disability should be to enable as many people as possible.  It should not the current administration’s focus on promoting dependence on government.