Congress Could Cut Social Security Disability Insurance (SSDI) Payments 19 Percent by 2016

To shore up the SSDI, Congress could redirect payroll taxes from Social Security's much larger retirement fund — as it has done in the past. However, the House adopted a rule Tuesday blocking such a move, unless it is part of a larger plan to improve Social Security's finances, by either cutting benefits or raising taxes. If Congress doesn't act, benefits for 11 million disabled workers, spouses and children would be automatically cut by 19 percent. The average monthly payment for a disabled worker is $1,146, or a little less than $14,000 a year. Advocates for older Americans are warning that the rule could be used to help push through benefit cuts, especially since House Republicans have opposed raising taxes. 

"It is difficult to believe that there is any purpose to this unprecedented change to House rules other than to cut benefits for Americans who have worked hard all their lives, paid into Social Security, and rely on their Social Security benefits, including disability, in order to survive," said Max Richtman, president of the National Committee to Preserve Social Security and Medicare. 

David Certner of AARP said it would be a mistake to eliminate the option of redirecting money from the retirement fund, which Congress has done in the past. Social Security has more than $2.7 trillion in reserves, but the retirement program has been paying out more in benefits than it collects in payroll taxes since 2010. The disability program has been paying out more than it collects since 2005. Social Security is supported by a 12.4 percent tax on wages up to $118,500. Half is paid by workers and half is paid by employers. Most of the payroll tax — 10.6 percent of wages — goes to the retirement fund. The remaining 1.8 percent of wages goes to the disability fund. [Source]

The GOP majority adopted a procedural rule to bar legislators from using Social Security retirement funds to support the disability program unless the move is accompanied by measures that stabilize the overall Social Security system. The Disability Insurance Trust Fund is projected to be unable to pay full benefits at some point in 2016. The 2011 Budget Control mandates automatic spending cuts.

Republican Congress Launches With Back-Door Attack On Social Security Benefits

January 7, 2015

Think Progress - Republicans are starting the new Congress by attacking Social Security funding through a subtle, obscure policy measure buried in the gigantic bill that establishes parliamentary rules for the new session.

The rules measure, passed late Tuesday after other day-one business like formal swearing-in ceremonies for members were completed, escalates the threat of a significant cut to Social Security Disability Insurance (SSDI) within the next two years. The measure bans a common accounting technique that the people who manage Social Security funding have used many times in the past to prevent benefit cuts. The two funds that comprise the Social Security system have essentially borrowed from one another as necessary over the years to ensure that benefits can be paid in full each year. SSDI, which is the primary program for providing federal benefits to people unable to work due to disability, is projected to hit a shortfall in late 2016. Reallocating revenue from the much larger Social Security retirement benefits fund to SSDI would cover the shortfall, and trust fund managers have performed such reallocations 11 times since the late 1950s.

But the Republican rules package prohibits Congress from authorizing such a transfer. That will force a showdown over how to finance disability benefits sometime in the next two years, with the threat of a nearly 20 percent cut to SSDI payments looming over the debate. The measure was overshadowed in the news by a separate rules package measure that threatens to rig the legislative process in favor of trickle-down tax policy, until the beginning of this week when critics began to decry the change.

The Center on Budget and Policy Priorities called the rule an “attempt to pit retirement and disability beneficiaries against each other” that misrepresents how the two funds operate, and pointed out that the only reason SSDI is in funding trouble next year is that it got short-changed by the past two reallocations of funding between disability and retirement benefits. Sen. Elizabeth Warren (D-MA) accused the GOP of “inventing a Social Security crisis that will threaten benefits for millions & put our most vulnerable at risk.” Sen. Sherrod Brown (D-OH) called it “a dangerous new rule” that will “set the stage to cut benefits for seniors and disabled Americans,” and pointed out that reallocating funds between the accounts is so uncontroversial that President Reagan oversaw four of the 11 times it has been done in the past.

Rep. Tom Reed (R-NY), who is taking credit for engineering the rules change, has received significant campaign financing from at least one well-heeled conservative supporter of cutting Social Security. Reed has gotten over $134,000 in contributions from people tied to vulture capitalist Paul Singer’s firm Elliott Management, according to the Center for Responsive Politics. Singer is most famous for his battle to force the nation of Argentina to prioritize debt payments to Elliott Management over public expenditures for its 41 million citizens. But the generous Republican donor is also a sharp critic of American government spending and has called for cutting benefits in Social Security, Medicare, and Medicaid.

Reed told the Associated Press that his rules proposal is intended to force a reckoning over social insurance spending. “We need real reform,” he said, and “this makes that real reform that much more likely.” Leaving aside the question of what Reed means by “real reform,” and the fact that the proposed reallocation would have extended disability funding by 17 years while reducing retirement funding by just one year, the move is raising serious procedural concerns among retiree advocates.

Social Security experts Nancy Altman and Eric Kingson labeled the move “hostage-taking to force changes that the American people do not want to a vital program” in a piece for the Huffington Post. Reed’s rule means that “we could be facing a deadline, and certainly over the last couple of years ,we’ve seen Congress seemingly unable to pass bills, even with deadlines in front of them,” the American Association of Retired Persons’ David Certner told the AP.

The other political ingredient in the debate Reed and the GOP are trying to force is years of skewed media coverage of the disability insurance system. Reports that SSDI is riddled with fraud and overrun with false claims have showed up in an ideologically diverse array of news sources over the past two years, from public radio’s This American Life to CBS’ 60 Minutes to the conservative media machine. The reality is that just 41 percent of those who apply for disability benefits receive it thanks to the program’s uniquely strict eligibility rules and stringent, multi-layered application process. Among those who do clear the program’s hurdles and enroll, fraud is extremely rare. A 2011 Government Accountability Office report found an erroneous payments rate of just 0.6 percent, among the lowest of any government program, and President Bush’s Social Security Administrator estimates waste, fraud, and abuse account for less than 1 percent of SSDI spending. But the reality of the program — such as the fact that disability insurance is getting more expensive because of long-anticipated demographic shifts — has likely already been lost in the trans-partisan furor over a supposed epidemic of freeloading.