When the subject of Social Security comes up in conversation many times someone suggests that Social Security retirement or disability may not be around when it is needed because of reported insolvency. Although these conversations offer a lot of smoke, there is some fire there too.
The last five Social Security trustee reports indicate that retirement and Social Security Disability Insurance (SSDI) trust funds will become depleted between 2036 and 2041 and less than full benefits could be paid as early as 2033. The latest actuarial projections even suggest that the disability insurance trust fund may be unable to pay full benefits as early as 2015.
This is disturbing news, but it is not the first time Social Security has been near insolvency.
In 1983 congress had to act to solve Social Security insolvency before the trust fund showed deficits by summer of that year. With crisis on the doorstep congress actually worked out a bipartisan agreement where both political parties had to sacrifice. The result was a six-month delay in the cost-of-living adjustment, an increase in the retirement age, and an increase in payroll taxes.
There is no doubt, and probably sooner than later, congress will again have to act to save Social Security as we know it today. Usually, the only way to fix a problem is to understand what caused the problem.
The recent economic downturn and high unemployment rates have contributed to reduce revenues for the trust fund, but so has the fact that, according to Social Security representative testimony, for every $1 Social Security spends on one program it would yield $9 in savings. The only problem is that program has not been fully funded until now.
The Continuing Disability Review (CDR) program ensures that current disability recipients are monitored and should continue to receive benefits. By Social Security’s own estimation, the CDR backlog has reached 1.5 million. Some of these people are receiving disability payments even though they may no longer be disabled. Fortunately congress appropriated $1.4 billion last year to spruce up the CDR program in an effort to cut Social Security waste. It won’t solve all of Social Security’s problems, but it’s a start.
Click here to learn more about the Social Security trust funds.
