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Disability Insurance Trust Fund Solvency: Act Now and Later

By Kelly Isom

Friday, February 27, 2015

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On Wednesday, February 25, the House Ways and Means Subcommittee on Social Security held a hearing to discuss the solvency of the Disability Insurance (DI) and Old Age and Survivors Insurance (OASI) trust funds. Witnesses included Chuck Blahous, who serves as a public trustee of the Social Security and Medicare programs; Ed Lorenzen, a senior advisor at the Committee for a Responsible Federal Budget; and Webster Phillips, a senior legislative representative for the National Committee to Preserve Social Security and Medicare.

Blahous, a commissioner of the Bipartisan Policy Center’s Commission on Retirement Security and Personal Savings, submitted testimony that emphasized the urgent need to “shore up” the financial status of the trust funds. He pointed to an important overriding principle: “any action having the effect of facilitating further delays in necessary substantive reforms is not in the interest of program participants.” Blahous noted that the current political climate may prevent comprehensive measures but that short-term solutions, such as “interfund shifting,” should not serve as a means to avoid solutions for long-term, financial solvency.

One hallmark of the Social Security system is that benefits are funded by payroll taxes –not by general revenues like most other federal programs. Blahous warned that this traditional funding method would likely have to be abandoned if comprehensive Social Security reforms are not undertaken well in advance of the projected depletion of the combined OASDI Trust Fund in 2033. He argued that changes to revenues or benefit levels would be too late to avert severing the link between payroll taxes and benefits.

Lorenzen’s testimony reiterated this stance, stating that short-term fixes like fund reallocation should be paired with provisions to address larger questions, such as Social Security’s financing structure; otherwise, not long from now, policymakers will be in an even more difficult predicament. Phillips, on the other hand, omitted any mention of program restructuring and instead advocated for “rebalancing the flow of revenue between the DI and the OASI trust funds so that they remain on an equal footing and remain fully solvent through 2033.”

BPC views the upcoming need for action on DI as an opportunity to ensure not only that benefits are preserved and protected for current beneficiaries but also to modernize elements of Social Security and improve the solvency of the trust funds. BPC’s Retirement and Savings Commission is currently reviewing the roles of DI and OASI and how they interact with other elements of the American system. BPC plans to make comprehensive recommendations on these and related issues in the coming months.

KEYWORDS: MEDICARE, HOUSE WAYS AND MEANS COMMITTEE, SOCIAL SECURITY DISABILITY INSURANCE, SOCIAL SECURITY, COMMISSION ON RETIREMENT SECURITY AND PERSONAL SAVINGS, OLD-AGE AND SURVIVOR'S INSURANCE TRUST FUND