Legislative Update: May 2015

Legislative Update: May 2015

No Consensus In Congress For Social Security Disability Program Funding

By Jessie Gibbons, Legislative Assistant

In 2016, just one year from now, Social Security’s Disability Insurance (DI) trust fund will become insolvent. If Congress fails to act, 8.9 million disabled beneficiaries and 1.8 million of their spouses and children will see a 20 percent cut in monthly benefits.

Members of Congress have averted similar benefit cuts eleven times in the past by reallocating revenues from the payroll tax between the DI trust fund and the Old Age and Survivors Insurance (OASI) trust fund. They last made a transfer like this in 1994, and many lawmakers – as well as President Obama – are advocating similar steps to be taken again, as a short-term measure, to address the funding shortfall.

A procedural rule that was adopted by the House of Representatives back in January, however, will make such transfers much more complicated. It prevents the adoption of legislation that would reallocate revenues unless other measures are included to improve the solvency of Social Security’s combined trust funds. In other words, if lawmakers want to transfer the funds, they’ll need to also include a long-term plan that either cuts benefits for DI and OASI enrollees or increases Social Security revenues, or both.

The authors of the rule did include a hidden life raft – it’s only triggered if a 0.1 percent threshold of the present value of future taxable payroll is hit. This means that lawmakers will be able to transfer approximately $38.6 billion to the DI trust fund, extending the trust fund by about one year.

According to a poll recently conducted by TSCL, simply reallocating funds has virtually no support from older Americans as a long-term fix. Today’s Social Security recipients appear to have serious concerns about proposals that would worsen the financing of the retirement trust fund. Less than 1 percent of respondents said shifting revenues from one trust fund to another would be the best way to fix the program’s solvency.

Instead, poll respondents – individuals who are already receiving benefits – would prefer to see a more permanent solution. Forty-eight percent said the DI program should tighten its eligibility requirements and conduct more continuing disability reviews to reduce fraud, and 51 percent said high wage earners should be required to pay Social Security taxes on all of their incomes.

At a recent Senate Budget Committee hearing that was focused on the DI program’s financing crisis, lawmakers agreed that they should be concentrating on a long-term solution. However, it was clear that there was no consensus among lawmakers on what that plan should look like. One committee member, Senator Bob Corker (TN), said he would support a plan similar to the Simpson-Bowles proposal of 2010 that would increase Social Security’s age of eligibility and adopt the “chained” CPI.

Other members, including Senator Bernie Sanders (VT), backed proposals that would address the issue by lifting the cap on income subject to the payroll tax. The cap currently sits at $118,500, and any earnings above that amount are not subject to the 6.2 percent payroll tax. TSCL agrees that lifting the payroll tax cap would be a fair and responsible solution to Social Security’s solvency issues, and we support a number of bills – including one from Senator Sanders – that would do just that.


For more information on the bills that TSCL supports, or for frequent updates on the DI negotiations, visit the Track Bills section of our website.