President Obama’s budget released Monday proposes using revenue from the trust fund that’s supposed to be dedicated to paying Social Security retirement benefits to shore up a separate trust fund for those with disabilities that’s on the verge of depletion. But doing so would just delay much-needed reform of the program.
“To address reserve depletion of the Social Security Disability Insurance (DI) Trust Fund, the Budget proposes to reallocate existing payroll tax collections between the Old-Age and Survivors Insurance (OASI) and DI trust funds while a longer-term solution to overall Social Security solvency is developed with the Congress,” the budget read.
Such a reallocation last occurred in 1995, with the same hope that a long-term solution would follow close behind. After 20 years, long-term reform is yet to come.
The 1995 annual trustees report used language similar to Obama’s budget. “While the Congress acted this past year to restore its short-term financial balance, this necessary action should be viewed as only providing time and opportunity to design and implement substantive reforms that can lead to long-term financial stability,” the trustees wrote at the time.
Charles Blahous, a current Trustee of the Social Security and Medicare Trust Funds, told the Washington Examiner last month, “Most past tax reallocations have not been controversial because they were enacted under very different circumstances, such as when the tax distribution between Social Security’s retirement and disability components was out of balance relative to their respective needs. That is not the root of the DI problem today.”
Fortunately, House Republicans already passed a rule that would keep trust fund revenue protected from reallocation that does not include a long-term fix. That means some kind of reform will be necessary in this session of Congress, because the DI trust fund is on pace for depletion by the end of 2016. At that time, benefits for over 10 million recipients would automatically be cut by about 19 percent.
“Doing nothing more than reallocating taxes again would violate the express intent of the last reallocation,” Blahous said. To be clear, the House rule allows for reallocation of trust fund revenue, but only if it is part of a more comprehensive fix.
Possible conservative solutions to save Social Security include reducing benefits for future beneficiaries, gradually raising the retirement age and establishing voluntary personal accounts. Unfortunately, all of these options seem unlikely to receive presidential approval. “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,” Obama’s budget read.
It is clear that Social Security is broken. The combined trust funds would not be facing depletion within 20 years if the system were working. In proposing a simple reallocation without any other fixes, the Obama administration shows it has not accepted the grim reality of Social Security’s shaky finances.
