Social Security Disability Insolvency – Kick The Can? Or Pay For What We Spend?

Jan 7, 2015 | WC & Other Laws

One of the major challenges facing the Nation is how to pay for the programs we have promised (and charged) the country’s workers. The Social Security Payroll tax forces workers to part with 6.2% of their hard-earned wages, plus force the employer to contribute an additional 6.2% of wages.

The cost of an employee to the employer is the same in the the employer’s eyes, whether it pays the money to you or to Social Security so the employer’s portion still comes out of “your” pocket – so really 12.4% of your pay goes to Social Security.

Social Security is supposed to do three things that responsible adults would normally do on their own: Save for retirement; buy longterm disability insurance; and buy life insurance. Unfortunately the program can’t be properly invested, because Congress requires that any money taken in above and beyond what is paid out is “invested” in Government Treasury Bills.

In other words, the Government is taking money from working Americans, and borrowing the money that will be needed to pay future benefits and paying minuscule interest rates that do not keep place with inflation.

So long as we paid more into the system than Social Security paid out, we didn’t have to worry, but that changed in 2010 when we started paying out more to retirees than was paid into the system. Now the Government must pay back Social Security all the money it borrowed over the last thirty years – and that money must either come from tax revenue or borrowing more from other investors.

Social Security Disability is also running out of money and in the middle of 2016 the law requires the benefits to disabled workers will have to be cut unless the Government puts more money into the Disability Trust Fund.

Congressional Republicans proposed rules that would not allow the House to discuss legislation that moves funds from Social Security’s Retirement Trust Fund to the Disability Trust Fund, unless those bills also raised taxes or cut Social Security benefits for current and future beneficiaries.

Learn About How To Obtain Social Security Benefits In Colorado

The House’s proposed rules put millions of people who receive disability benefits at risk. Unless Congress acts by mid-2016, Social Security will only be able to pay about 80% of disability benefits; this shortfall largely occurred because of changes to America’s population and retirement age.

The House rules prohibits Congress raiding the depleting Social Security Retirement Fund (previously used 11 times in the past to shift money from one trust fund to the other when shortfalls arose.)

While this so-called “clean allocation” protects people with disabilities and does not immediately hurt retirees or survivors – it hastens the day that we will deplete the Retirement Trust Fund.

Social Security disability benefits are a lifeline for millions of Americans who worked hard and paid into the system. There are many ideas of how to preserve these benefits beyond 2016, and they deserve full discussion in the public and in Congress and proper funding, rather than kicking the can down the road yet again.