President Obama’s $4 trillion budget blue print for fiscal 2016 has garnered a lot of attention for its proposals for raising caps to bolster spending for defense and domestic programs largely geared to the middle class.
However, tucked away in the massive budget document is a series of proposals for salvaging a program critically important to the middle class – the Social Security Disability Insurance trust fund that experts warn is fast running out of money.
Related: Beat the Coming Disability Insurance Disaster, Stay Healthy
Social Security trustees and other financial experts have been warning for years that lawmakers and the administration must act to prop up the hemorrhaging trust fund, as trustee Charles Blahous noted recently in The Fiscal Times. SSDI supplements the income of physically disabled workers and automatically enrolls them in Medicare after two years. The plan is funded by federal payroll taxes.
With more and more Americans turning to the program--and increasing evidence of billions dollars in fraud--the latest trustees’ report projects that the fund’s reserves will be depleted in late 2016. By law, Social Security can only pay benefits if there is a positive balance in the appropriate funds. Actually, there are two funds: one for old age and survivors’ benefits (OASI) and the other for disability benefits (SSDI).
Absent those reserves, Blahous said, the only funds the government can use to cover disability claims is the incoming tax revenue. Unfortunately, there would only be enough to cover 81 percent of scheduled disability benefits.
Congress is fast running out of time to address the brewing financial crisis. Legislation will be required during this session of Congress or, at the very latest, in a rush of activity early next year, to prevent large sudden benefit cuts. The House of Representatives recently passed a procedural rule to prepare for the coming legislative debate.
Related: The Government Entitlement Program That’s About to Dry Up
If Congress fails to act, however, more than 10 million beneficiaries essentially will face a nearly 20 percent reduction to the scheduled benefits that they rely upon for financial wellbeing. According to the Bipartisan Policy Center, here is a summary of the president’s recommendations
Shore up the SSDI Trust Fund. Currently, employers and their workers each pay a total of 6.2 percent of their wages to the Social Security system: 0.9 percent is allocated to SSDI and 5.3 percent to OASI. Under Obama’s approach, neither the overall tax rate nor the solvency of the combined trust funds would be affected. Instead, it would reallocate a few tenths of a percentage point of payroll tax revenue from the OASI fund to the SSDI fund, so that both trust funds would be sustained until 2033.