While the President’s proposed Medicare policies leave a lot to be desired, he gets it right on Social Security. The President proposes to move tax revenue from the Social Security retirement fund to the Social Security disability fund, which would otherwise not be able to pay full benefits towards the end of 2016.
Under the President’s plan, both the Social Security retirement fund and the disability fund would be able to pay full benefits until 2033. Without a reallocation, Social Security disability benefits to 11 million Americans would be cut by almost one-fifth (19 percent). Since the typical benefit is about $1150 a month, many severely disabled individuals would see their incomes fall well below poverty.
But, there will likely be a big fight on this proposal since the House Republicans passed a rule in January that would hold a transfer between the two funds hostage unless there is a plan in place to cut Social Security benefits overall. They are prepared to put millions of vulnerable Americans at risk. Notwithstanding how difficult it is to get disability benefits, they incorrectly argue that many of the people receiving benefits do not deserve them.
Reallocating money from the retirement fund to the disability fund should be a simple process. And, in fact, such transfers have happened 11 times in the past with a bipartisan vote.
To the President’s credit, his budget proposal insists that “Any reforms should strengthen retirement security for the most vulnerable, including low-income seniors, and should maintain robust disability and survivors’ benefits.” But, the budget proposal also gives him wiggle room to make cuts: “The Administration will oppose any measures that privatize or weaken the Social Security system and will not accept an approach that slashes benefits for future generations or reduces basic benefits for current beneficiaries.”
Of note, there’s a very easy fix to the solvency of the Social Security Disability Trust Fund that does not require a transfer. Raising the payroll tax by just .20 percent for both workers and employers would ensure people continued to receive their full Social Security Disability benefits for the next 75 years. And there is strong evidence that Americans would support a far larger payroll tax increase to strengthen Social Security overall.
Social Security benefits in the United States are far stingier than in other countries. Eliminating the cap on Social Security payroll contributions ($117,000 today), as is the case with Medicare payroll contributions, would help strengthen Social Security and ensure its solvency for many decades to come.