Legislative Update: March 2011

Legislative Update: March 2011

By Mike Watson, TSCL Legislative Assistant

During our slow, arduous economic recovery that followed the financial crisis and recession of 2008 and 2009, many government programs, Social Security in particular, were stretched to the limit.  A number that made headlines last year was the Social Security Trustees’ estimate that the Social Security trust funds would run a $41 billion cash deficit in 2010.  Most of the time when the Social Security trust fund is referred to, we mean two trust funds —the old-age and survivor’s insurance (OASI) trust fund, that pays retirement and widow(er)s benefits, and the disability insurance (DI) trust fund.

The fact that there are actually two Social Security trust funds is important when you break down the numbers behind the trust funds’ cash deficits.  According to the Social Security Trustees’ “intermediate” projections, the OASI trust fund would run a cash deficit of $9 billion in 2010, and the DI trust fund a $32 billion cash deficit.

The disability program has been redeeming the assets, or IOUs, held in the DI trust fund for several years and is projected to become totally insolvent in 2018.  Upon insolvency, legislation would be required if the DI trust fund were to borrow money in order to pay benefits, even if the money is borrowed from the OASI trust fund.  The two funds have borrowed from each other in the past.  During the 1980’s, the OASI trust fund borrowed from the DI trust fund and the money was later repaid.  However, in 2018 the OASI trust fund will be facing its own financial problems.

While some view Social Security’s retirement program as relatively easy to reform (if a few tough decisions are made), Social Security’s disability program is a very complex operation which has been notoriously difficult to change.  Past efforts to reform the disability program have led to vast administrative difficulties as well as public outcries.  On the other hand, the retirement program’s reform efforts have faced fewer administrative difficulties.  Part of the problem is determining what constitutes a disability.  For that reason, and others, reform of the retirement program is discussed on Capitol Hill more often, while reform of the disability program seems to fly under the radar.

With the cash deficits of the disability trust fund growing and with the trust fund’s projected insolvency in 2018, something will need to be done about the disability program, and soon.