Take a Deep Breath... and Exhale
A story earlier this week described how the Social Security disability insurance program is projected to experience a funding shortfall as early as 2017, meaning that benefits could not be paid in full and on time to those eligible to receive them. While the story struck an alarming tone – referring to the "stampede for benefits" and "a program that’s been running in the red for years" – the basic financial soundness of Social Security has not changed, which permits benefits to be fully paid for the next 25 years or so.
"This Disability Insurance shortfall in 2017 is nothing but a green eyeshade issue for accountants and actuaries. With a quick legislative correction involving no increased costs, Social Security’s disability benefits can continue to be paid for another quarter of a century," said Nancy Altman, Co-Chair of the Strengthen Social Security Campaign.
A few basic facts about Social Security below (explained in more detail here) help better understand the implications of the AP story:
1) Social Security is comprised of two programs with their own trust funds – Old Age and Survivors Insurance (OASI) and Disability Insurance (DI). OASI represents about 82 percent of total Social Security spending and DI represents about 18 percent.
2) OASI is fully funded through 2039, according to the Congressional Budget Office (2037 according to the Social Security Trustees); DI is fully funded through 2016, according to CBO (2017 according to the Social Security Trustees). Combined, both programs are fully funded through 2037, according to CBO, and through 2035, according to the Social Security Trustees.
3) To avoid the near-term shortfall in the DI program, Congress can simply pass legislation to reallocate funds between the OASI and DI programs in order to extend the full funding of the DI program for two more decades, consistent with the program’s overall solvency that is projected for the next 25 years or so. Such reallocations occurred most recently in 1994, when funds were reallocated from OASI to DI, and in 1982 when funds were reallocated from DI to OASI.
Social Security’s disability insurance, life insurance, and old-age annuities are seamlessly tied together. One benefit formula generates all benefits. In the past, when one of the two trust funds had insufficient income, Congress quietly and quickly reallocated the income to the two funds to ensure that they were on the same financial footing. It has six years to do it once again.