The Social Security Disability Insurance (DI) trust fund’s projected 2016 depletion will require Congress to act soon to prevent large, sudden benefit cuts.
Experts on both sides of the aisle have noted that a “quick fix” of simply shifting payroll taxes from Social Security’s much larger retirement trust fund (OASI) into DI, without further reform, could cost Congress its last chance to solve Social Security’s broader financing problems before it is too late. What more responsible reform options are available?
The Mercatus Center and the Committee for a Responsible Federal Budget hosted a discussion on May 12 on how best to respond to SSDI’s financing crisis.
5 charts on South Africa as a source country for international student recrui...
Stephen C. Goss Presentation for Mercatus Center SSDI Panel
1. The Current Projected Actuarial StatusThe Current Projected Actuarial Status
of the Social Securityof the Social Security
Disability Insurance Trust FundDisability Insurance Trust Fund
Presentation by Stephen C. Goss, Chief Actuary,Presentation by Stephen C. Goss, Chief Actuary,
Social Security AdministrationSocial Security Administration
Mercatus Center and CRFB DiscussionMercatus Center and CRFB Discussion
Rayburn House Office Building B-340Rayburn House Office Building B-340
May 12, 2015May 12, 2015
2. 2
Social Security Disability Insurance
155 million workers under age 66 are insured against
becoming unable to work
9 million workers now receive DI benefits
• 2 million “dependents” - mostly children
Many more protected from loss of insured status
• And from lower retirement benefits
Benefits replace 40% to 45% of career earnings on
average
• 76% for very-low earner, 27% for steady maximum earner
3. 3
DI cost as percent of GDP has peaked,
but scheduled income is too low
DI Cost and Income as Percent of GDP 1975-2090
2013 Trustees Report Intermediate Assumptions
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
2055
2060
2065
2070
2075
2080
2085
2090
Baby Boomers
reach ages 45-64
in 2010
Baby Boomers
reach ages 25-44
in 1990
DI Cost
DI Income
Note:
Recession raised
DI Cost/GDP
by 15% for 2010
4. How DI Compares to other Countries—
Disabled Worker Gross Prevalence:
Burkhauser/Daly 2014
Note that the US DI program costs 0nly 1/3 as much as Netherlands
5. 55
Rising cost as percent of GDP and Payroll
Aging population—increased DI cost 1990-2010,
increasing retirement cost now through 2030-35
Age Distribution of the Population Age 25+, 1940 to 2100 (2014TR)
0
10
20
30
40
50
60
70
80
90
100
1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
PercentofPopulationatAges25+
25-44
45-64
65-84
85+
Boomers
become
25-44
Boomers
become
45-64
Boomers
become
65-84
6. 6
Was Rise in Cost Foreseen? Except for Recession,
Cost is lower than projected in 1995!
Mature cost took time– disabled under 50 not fully reflected until after 2005
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
1995 2000 2005 2010 2015 2020 2025 2030
Actual and Projected Cost of DI as Percent of GDP:
1995TR versus 2013TR
1995TRadj
2013TR
Recession
7. 7
Economic cycles and policy changes fluctuate,
and DI incidence rates also vary
Applications have been declining since 2010
0
1
2
3
4
5
6
7
8
9
10
11
12
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
UnemploymentrateandDisabledworkerincidenceperthousandexposed
Calendar year
Age-sex-adjusted disabled worker incidence rate
Civilian unemployment rate
Historical Estimated
Recession
and SSI
1974
Recession
Recession
Recession
1980 Amendments:
PER, CDRs, EPE,
Lowered Family Max
1984 Amendments:
Multiple Impairments
Medical Improvement
Mental Listings
1996 Amendments:
Drug Addiction & Alcohol
CDR Plan 1996-2002
SSI Outreach
1970-74
Large Benefit
Increases
Recession
8. 8
Additional disabled worker beneficiaries are a
small fraction of reduced employment
Changes in Disabled Worker Beneficiaries and in
Covered Workers from 2008 TR to 2013 TR
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011 2012 2013
ChangeinThousands
Increase in
Disabled
Workers
Reduction in
Covered
Workers
9. 9
Most of the recession effect is from
less GDP, not more DI cost
Change in DI Benefit Cost and in GDP
Between 2008 TR and 2013 TR
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2010 2011 2012 2013
Increase in DI
Benefit Cost
Reduction in GDP
Increase in DI
Benefit Cost/GDP
10. 10
When applications go up in a recession,
allowance rates go down
0
2
4
6
8
10
12
0
10
20
30
40
50
60
70
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
UnemploymentRate
AllowanceRate
Year of Filing Claim
Ultimate Allowance Rate for Disabled-Worker DDS Claims by
Filing Date, Versus Unemployment Rate in Year-2
Total Allowance Rate
Unemp Rt in Yr Unemp Rt in Yr-2
Initial DDS Allowance Rate
12. Changes for DI alone are not likely to make
a big difference for the long run
• Time Limited benefit entitlement?
– Coburn proposal would save less than 1/3 of the
projected DI long-term shortfall
• Change the vocational grid ages?
– Coburn proposal would save only about 10% of the
long-term DI shortfall
• Offset DI for UI?
– Saves only 3% of of LR DI shortfall
• Increase Normal Retirement age?
– Increases DI long-term shortfall.
13. How to Fix Social Security (OASDI)
• First: Help DI soon---reallocate tax rate?
• Second: Address the long-term solvency
of the OASDI program;
–Raise scheduled revenue by about 33%:
increase revenue from 4.6 to 6.0% of GDP
–Reduce scheduled benefits by about 25%:
lower benefits to what 4.6% of GDP will buy
–Or some combination of the two
13
14. Ways to Lower Cost
• Lower benefits for retirees—not disabled?
– Increase normal retirement age (lowers OASDI cost, but
shifts a greater portion to DI)
– Can exempt long-career low earners
• Lower benefits mainly for high earners?
– Reduce PIA above some level
– Often combined with increasing PIA below some level,
subject to work year requirements
• Lower benefits mainly for the oldest old?
– Reduce the COLA
– Increase in COLA also proposed
14
15. Ways to Increase Revenue
• Raise tax on highest earners?
–Increase taxable maximum amount
–Some tax on all earnings above the maximum
• Tax employer group health insurance
premiums?
–Affects only middle class if taxable maximum
remains
• Maintain larger trust fund reserves?
–Added interest can lower needed taxes
15
16. For More Information Go To----
http://www.ssa.gov/oact/pubs.html
• There you will find—
–Current and all prior OASDI Trustees Reports
–Detailed single-year tables for recent reports
–Our estimates for comprehensive proposals
–Our estimates for the individual provisions
–Actuarial notes; including replacement rates
–Actuarial Studies; including stochastic
–Extensive data bases
–Congressional testimonies
16