A hearing scheduled for tomorrow, Friday, December 2, 2011, is the first in a planned series of congressional hearings on the subject of the Social Security Disability Insurance (SSDI) program. The initial hearing will cover the history of SSDI, and the funding and financial challenges of the current SSDI program. Also addressed will be future financing hurdles which must be overcome if the program is to remain viable.
Hearings in the Series
Future hearings in the series will undoubtedly address the differing opinions presented within the congressional ranks in regard to handling the current and projected future financial shortcomings of the Social Security programs. There are several entrenched camps in congress on how to best deal with projections that by 2018 the SSDI will be unable to pay full benefits to recipients if changes are not made to the present financing methods.
Goals of the Initial Hearing
The scheduled hearing was announced by U.S. Congressman Sam Johnson (R-TX) who is also the Chairman of the Ways and Means Subcommittee on Social Security. Johnson emphasized that the purpose of the meeting series is to discuss the challenges of the SSDI program and begin to develop lasting solutions for sustaining the program in a manner that is fair to benefit recipients and the members of the workforce who, at least partially, fund the program through payroll tax dollars.
How Will this Hearing and Others in the Series Affect SSDI Benefits?
The manner in which these hearings may ultimately affect SSDI benefits remains to be seen. While the subject of Social Security reform has been in debate for decades, there has been little direct attention given to the SSDI. These hearings are intended to specifically address concerns with current and future SSDI, and as such, may have far reaching implications for the program and its beneficiaries.
The Current System
Social Security provides benefits to disabled and retired workers, and to the family members of retired and deceased workers. At the close of 2009 there were more than 52 million individuals receiving Social Security benefits. Of those beneficiaries, 15% were SSDI recipients.
Social Security is funded primarily through payroll taxes. Some funding for the program is also generated by beneficiaries paying a portion of their Social Security benefits back into the program through federal income taxes. The tax revenue and payroll taxes generated through the program are invested in federal securities. Profits from those securities are eventually deposited back into the Social Security program and used to pay retirement and disability benefits.
Social Security payroll taxes are 12.4% of every employee’s earnings, with employers and workers equally sharing in that contribution. Of that 12.4%, 1.8% is funneled into the SSDI Trust Fund. The rest of the funds go into the Social Security Old Age (retirement) Fund.
Here is where the funding problems with the current system arise, according to a report issued this year by the Congressional Budget Office.
- Between 1970 and 2009, the number of SSDI beneficiaries rose dramatically, from 2.7 million to 9.7 million individuals.
- Inflation during that same timeframe increased the administrative expenses associated with managing the program, rising from $18 to $124 billion annually.
- Women have entered the workforce in large numbers, which makes them eligible for SSDI.
- The Baby Boom generation, the biggest generation in U.S. history, is now approaching the age at which they are, or soon will be, prone to disability.
In essence, both the direct and indirect expenses associated with the program have skyrocketed but the methods for funding the program have lagged behind, with no sufficient procedural or legal adjustments being implemented to handle the increase in program costs.
The Social Security Reform Debate
Social Security reform has been a major subject of debate within the political arena for years. Since 2005, several Social Security reform bills have been introduced in congressional sessions, but none have been passed. Until the complex issues surrounding Social Security and SSDI funding have been resolved, the future of SSDI benefits is up in the air. The scheduled series of congressional hearings on SSDI could play a significant role in determining the future of the program and the benefits received by current and future disabled workers.
There are several camps in the reform debate, each with its own view of the best methods for restructuring the Social Security Old Age (retirement) program, though the way in which reform would directly and indirectly affect the SSDI has not been discussed in detail. The scheduled series of congressional subcommittee meetings is intended to shed light on the subject. Following are the major schools of thought on Social Security Reform.
- Some believe individual, pre-funded accounts, which would in essence be personal savings and investment accounts similar to an IRA or 401(k), are the best solution for dealing with Social Security and SSDI.
- Others think the current system can work with some adjustments to eligibility, increases in payroll taxes, and potentially some reductions in benefits.
- The third contingent of policymakers believes that a complete overhaul of the entire Social Security system, including the Old Age/retirement and SSDI programs, is now necessary.
Regardless of political and ideological differences in opinion on the best means of reform, it is commendable that Congress is putting forth a genuine effort to ensure forthcoming debates will be, at the least, informed on the history and current status of the Social Security Disability and Retirement programs.