Saturday, September 21, 2013

Social Security disability benefits program use grows, pressuring a sooner "day of reckoning" for retirement benefits

Social Security disability benefits, which are available to workers who become unable to work for medical reasons, have increased markedly and threaten the sustainability of the retirement program, which is, of course, much better known.  The Washington Post has a major front page story Saturday morning by Michael A. Feltcher, link here.
Social Security disability income should not be confused with SSI, which is totally separate and not funded by FICA.  SSA explains the difference (web url) here
The Post story focuses on eastern Maine, which I have visited myself in 1974 and 1995. 
As a weaker blue collar job market, especially in manufacturing, takes over, employers are less willing to hire mildly disabled workers. I would have thought that such practice was illegal under the ADA.  
That may be part of the problem.  Qualification for disability benefits seems to be a gray area and loosely defined, so employers and workers may “abuse it”.  Growing use of the disability program can threaten the actuarial sustainability for retirees in the long run, hastening the date when SSA can no longer pay full benefits, and increasing pressure to raise FICA taxes or wage ceilings and delay retirement age, or perhaps prohibit “early” retirement.
But FICA taxes also pay for the disability benefits program, and law firms specialize in helping workers get them (they even advertise on daytime television).  When people collect disability benefits, they generally have not paid as much into the system relative to benefits as retirees.  Therefore, the disability program can contribute to the notion of the Social Security program as a kind of “welfare” rather than an “annuity”, which is how most retirees see it.
As noted here before, the debt ceiling issue probably would not stop the Social Security Trust Fund from being “reimbursed” by the Treasury since SSA is a legal priority bond holder. But Congress, according the Supreme Court ruling (Flemming v. Nestor) does not have to honor the value of FICA paid as “property” and could implement means testing (even based on wealth as well as income) if it had the political desire to do so.

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