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A Sensible Bipartisan Approach to Budget Savings

By Shai Akabas, G. William Hoagland

Wednesday, June 12, 2013

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Peter Huff contributed to this post.

A bipartisan bill was introduced in the Senate on June 6 to reduce overlapping unemployment and Social Security disability benefit payments. The proposal, submitted by Senators Angus King (I-ME), Tom Coburn (R-OK), Joe Manchin (D-WV), and Jeff Flake (R-AZ) and projected by the Office of Management and Budget (OMB) to save the government $1 billion over the next ten years, is an important step promoting bipartisan cooperation to address duplicative federal spending. While the legislation offers only small savings compared to the $2.3 trillion combined cost of these programs over the coming decade, the bill importantly portends sensible steps toward achieving budget savings finding support in both parties.

As addressed in a previous post, the Social Security Disability Insurance (DI) program faces serious financial issues – the recent Social Security Trustees Report projects that the DI Trust Fund will become insolvent by the end of 2016. At that point, absent reform, an immediate 23-percent across-the-board benefit cut to DI benefits would be required. In addition to the DI Trust Fund, according to the Government Accountability Office (GAO), the federal Unemployment Insurance (UI) program “face[s] serious fiscal sustainability challenges.” With over 10 million Americans dependent on each of these programs for assistance, meaningful reforms are necessary to improve their stability and prioritize their resources for those who most need them.

The central and sensible issue raised by the bipartisan group of senators in the Reducing Overlapping Payments Act – an issue that was previously cited in both President Obama’s 2014 budget and a 2011 package of reforms from Senator Coburn – can serve as a starting point for this reform process. The proposed statute suspends disability payments to individuals receiving unemployment benefits in the same month. The reasoning behind this prohibition is that each type of benefit is intended for a distinct group of people and the two are, in fact, mutually exclusive. UI is meant to assist individuals whose employment has ended and are looking for work, while DI is meant to support individuals who have left the workforce entirely due to disability, such as an illness, injury, or condition that prevents them from seeking work.

By preventing individuals from “double-dipping,” this bill can begin to alleviate some of the financial difficulties facing both programs. GAO found that in Fiscal Year 2010, 117,000 individuals received overlapping benefits – in particular, $281 million from the DI program and $575 million from the UI program. GAO’s report suggested several reforms (later endorsed by the Department of Labor) that are included in the Senate bill.

The legislation attempts to reduce the inefficiency in the system by explicitly granting the Social Security Administration (SSA) authority to identify and automatically reduce or eliminate overlapping benefits. GAO writes that, as of today, “no federal law authorizes an automatic reduction or elimination of overlapping DI and UI benefits.” Several of the bill’s provisions enable SSA to easily collect information regarding the eligibility of UI and DI recipients. Much of this information is readily available from and already gathered by states, but it is not currently being shared with federal officials, thereby forcing SSA to rely on beneficiaries for information about other received benefits. With this new, expressly delegated authority, SSA will be expected to both increase its efforts and be held accountable for its ability to identify, target, and prevent overlapping payments.

The senators’ proposed statute also attempts to limit unintended consequences. It will not affect benefits received by retirees or other OASI beneficiaries or the ability of dependents of DI recipients to collect UI benefits on their own. Similarly, eligibility for UI and DI programs will not be affected by the legislation; instead, SSA will simply suspend DI payments for any months of overlap. In addition, individuals whose DI benefits are suspended in a given month will receive written notice regarding their lost benefits and will have the opportunity to appeal the decision in a hearing before an Administrative Law Judge. These two provisions will serve as safeguards to prevent eligible individuals from losing their proper benefits.

While the major financial issues facing many of the federal mandatory programs – and the federal budget, more broadly – clearly will not be solved by this one bill alone, it does provide a small but important precedent for bipartisan reform to reduce government debt and improve the efficiency of government activities. GAO’s annual 2013 report highlights numerous programs and areas that contain similarly redundant or otherwise wasteful government spending (which also occurs through the tax code). If bills like this become common solutions to these problems, progress can be made toward long-term fiscal responsibility and the increased effectiveness and sustainability of important federal programs.

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2013-06-12 00:00:00
Setting a small but important precedent for bipartisan reform to reduce debt and improve efficiency