Thursday, March 14, 2013

Social Security Disability Insurance Will Run Out Of Funds And Cease Payments By 2016: 20 Years Before Social Security Old Age And Survivors Benefits Expected To Run Out Of Money

Posted by Milton Recht:

From CBO summary, "Testimony on the Social Security Disability Insurance Program" before the Subcommittee on Social Security, Committee on Ways and Means, US House of Representatives, March 14, 2013:
The Number of Disabled Worker Beneficiaries Has Increased Nearly Sixfold Since 1970
The DI program pays cash benefits from the DI trust fund to nonelderly adults (those younger than age 66) who are judged to be unable to perform “substantial” work because of a disability but who have worked in the past; the program also pays benefits to some of those adults’ dependents. In the past four decades, the number of workers with disabilities who receive benefits from the DI program has increased nearly sixfold, rising from 1.5 million in 1970 to 8.8 million in January 2013. Including the dependent spouses and children of those workers, 10.9 million people received support from the program in January 2013.

The growth in the program can be attributed to changes in multiple factors, including demographics, the labor force, federal policy, opportunities for work, and compensation (earnings and benefits) during employment.

DI Program Outlays Are Outpacing Dedicated Revenues
Between fiscal years 1970 and 2012, DI expenditures on benefits (adjusted for inflation) rose more than ninefold. The DI program’s rapid expansion and the projected gap between its spending and dedicated revenues in the future raise questions about the financial sustainability of the program.

Since 2009, the program has paid out more each year in benefits than it received in dedicated revenues (which come primarily from the Social Security payroll tax). In 2012, total DI expenditures were $135 billion, or 0.87 percent of gross domestic product (GDP), while the program’s dedicated tax revenues totaled $102 billion, or 0.65 percent of GDP. In 2023, CBO projects, the program’s spending will be 0.82 percent of GDP, and dedicated tax revenues will be 0.66 percent of GDP.

CBO projects that the DI trust fund will be exhausted in 2016, nearly 20 years before the projected exhaustion of Social Security’s Old-Age and Survivors Insurance (OASI) trust fund for the Social Security retirement program. If a trust fund’s balance falls to zero and current revenues are insufficient to cover the benefits that are specified in law and administrative expenses, the Social Security Administration has no legal authority to pay full benefits when they are due.

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