Oct 22, 201510:41 AMOpen Mic
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Is Social Security’s first crisis next year?
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Next year at this time an event many politicians assure us is far in the future is expected to occur: One of the two funds comprising Social Security — Disability Insurance (DI) ― will be depleted.
This is no surprise, although the issue has gone largely unnoticed by national political leaders and mass media.
In late July, Social Security’s six trustees warned, “The DI Trust Fund reserves become depleted in the fourth quarter of 2016, at which time continuing income to the DI Trust Fund would be sufficient to pay 81% of DI benefits.”
Formally, Social Security is known as OASDI, Washington-speak for the Old Age, Survivor, and Disability Insurance program. The OAS portion is what most Americans think of as Social Security with its 48.1 million beneficiaries who are either seniors or survivors.
However, it is the smaller disability insurance (again, DI) part of OASDI that is in trouble. Last year, $114.9 billion in income flowed into the trust fund, while $145.1 billion was paid out to 10.9 million beneficiaries.
The resulting $30 billion deficit was not the first; shortfalls date back to 2009. With only $60.2 billion in reserve at the end of 2014, it does not take a rocket scientist to see why DI fund reserves will run out by 2016.
What happens next? If Congress does nothing, in order to balance DI revenues and expenditures program payments would have to be cut almost 20%.
More likely, Congress will prove true to form and apply a last-minute “band-aid” to DI’s long-festering wound. It can do this by diverting some of the Social Security taxes we pay toward future retirement to funding disability benefits now.
Members of Congress will then be able to claim “problem solved!” Except it won’t be.