ON-Lion Letter

"In late 2016, right around the time we elect the 45th president of the United States, we are due for our first entitlement crisis in two decades," begins an article by Scott Winship in the Spring 2015 issue of National Affairs.  "That's when the actuaries in the Social Security Administration project that the Disability Insurance Trust Fund will be depleted.  That trust fund -- a pool of U.S. Treasury securities purchased with past excess payroll-tax revenue -- helps pay for the benefits provided by the Social Security Disability Insurance [SSDI] program now that current payroll-tax revenues are no longer sufficient to cover the program's cost.  SSDI insures most American workers and their families against the risk of a long-term illness or injury that would prevent them from working."

Winship is the Walter B. Wriston Fellow at the Manhattan Institute for Policy ResearchThe Lynde and Harry Bradley Foundation in Milwaukee supports both National Affairs and the Manhattan Institute.

"If the Disability Insurance Trust Fund is exhausted, we will be in uncharted territory," Winship continues in "How to Fix Disability Insurance."  "The Social Security Administration would be statutorily prevented from paying out full benefits on schedule, meaning that benefits received will, in total, be less than promised.  Payroll-tax revenue would cover just 81% of scheduled benefits.  At the same time, SSDI beneficiaries would be legally entitled to receive full benefits, setting up a dilemma that would probably end in a rushed legislative fix or legal action by beneficiaries.

"Legislatively, it could be a relatively simple matter to extend the solvency of the DI Trust Fund by, for instance, reallocating payroll taxes between SSDI and the Social Security retirement program," he writes.  "But doing so would ignore SSDI's more fundamental problems.

"SSDI was intended as a program to support those struck with health conditions or injuries that make working difficult or impossible," Winship goes on.  "It continues to serve that vital role.  But it has also become a permanent dole for a rising number of adults with limited earning potential who clearly are physically able to work.  Reforming SSDI could both slow the growth of program spending and ensure the responsible stewardship of program funds.  It could also boost economic growth by reducing federal budget deficits and increasing employment.  But most important, SSDI reform could promote personal responsibility and help those who would benefit in the long run from continuing to work, even as it offered a stronger private safety net for older men and women.

"The looming insolvency of the DI Trust Fund offers a rare opportunity to fundamentally reform SSDI in order to ensure its financial sustainability, better target assistance to those with debilitating impairments, help them if they want to work, arrest excess growth in program spending, and encourage able-bodied workers to self-insure against the risk of long-term unemployment," he concludes.  "The welfare reforms of the 1990s constitute a remarkable success for conservative reform of the means-tested safety net, and SSDI presents a similar opportunity for reform of social-insurance programs.

"As with the earlier welfare reforms, we have a chance to demonstrate that a fiscally viable, smaller safety net that promotes personal responsibility and reflects the value of work and independence can be more beneficial to 21st-century Americans experiencing hardship than the unaffordable and inefficient 20th-century approaches that are the legacy of the New Deal and the Great Society."

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