Social Security Report Released

In Social Security and Retirement, Uncategorized On

MONDAY’S PUBLICATION of the policy wonk’s bible known as the 2019 annual report of the Social Security and Medicare trustees was, as so often in the past, a reminder that the two key programs that depend on those giant pots of money, Social Security and Medicare, face long-term financial challenges. According to the report, Social Security’s costs will exceed its income next year for the first time in 38 years; Medicare, too, will soon be running in the red. Both programs could exhaust their reserves by 2035. Congress and the president must trim benefits or raise taxes — or some of both — to prevent that.

Buried below those all-too familiar headlines, however, the report contained a nugget of extraordinary good news: Social Security’s Disability Insurance (DI) Trust Fund, which helps nonelderly people too sick and injured to work, has gotten an unexpected, and apparently durable, new lease on life. In 2015, the trustees warned the DI fund’s reserves might not be able to cover 100 percent of expected benefits in 2016; now they see them as sufficient to cover all obligations until 2052. This comeback is cause for celebration — and reflection.

The first lesson has to do with the reasons for improvement. In theory, DI does not grow or shrink according to the business cycle’s ups and downs. In practice, though, the long-term jobless tend to use it when their unemployment benefits run out in recessions, such as the one that hit in 2008-2009. The pessimistic 2015 forecasts reflected the then-recent upsurge in disability applications and awards because of that unusually severe downturn. They failed to anticipate subsequent events: an extended period of tight labor markets and low unemployment rates, which has brought many formerly disabled people back into the labor force. As the report notes: “Disability applications have been declining since 2010, and the number of disabled-worker beneficiaries . . . has been falling since 2014.” Spending has been flat at roughly $140 billion per year for the past half-decade, while employed workers’ payroll contributions continue to rise, enabling reserves to accumulate. Meanwhile, modest and, for workers, generally painless administrative reforms — retraining of judges to make more accurate benefit-award decisions; accelerated work on a backlog of disability reviews — also helped contain program growth. And the existence of expanded health care for the working poor under Obamacare reduced an incentive to go on disability, which includes health insurance.

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