Budget quagmire revealed by Social Security disability program
Social Security’s disability program is a political quagmire — and a metaphor for why federal spending and budget deficits are so difficult to control. The numbers are too big; the details, too complicated; and the choices, when faced, too wrenching. President Obama’s new budget, estimated at $3.5 trillion or more, will raise all these problems. Experience suggests that little will be done to rein in long-term spending and deficits.
Social Security’s disability program opens a window on this larger paralysis. Created in 1956, more than two decades after Congress authorized Social Security, the program was initially seen as a natural complement to coverage for retirees. Through sickness or accident, some workers had to retire early. They, too, deserved protection. For many years, the costs were modest. But in recent decades, they have exploded.
Consider. In 2010, Social Security’s disability program cost $124 billion plus another $59 billion for Medicare (after two years, disability recipients automatically qualify for Medicare). This exceeded $1,500 for every U.S. household. For the past two decades, disability spending has increased at a 5.6 percent annual rate, compared with 2.2 percent for the rest of Social Security. As a result, disability represents nearly one in five dollars of Social Security spending, up from one in 10 in 1988.
All these facts come from a fascinating paper by economist David Autor of the Massachusetts Institute of Technology. The disability program, Autor writes, is a “central component of the U.S. social safety net” but doesn’t help “workers with less severe disabilities” to stay in the labor force (By law, recipients can’t be employed because disability is defined as the inability to work.) This means Social Security collides with the 1990 Americans with Disabilities Act, which aimed to keep the disabled in jobs.
Guess which prevails. One program, Social Security, pays the disabled not to work; the other, the ADA, simply encourages their work. Money wins. In 1988, 4 percent of men and 2 percent of women aged 40 to 59 received disability benefits. By 2008, the men’s rate was almost 6 percent and the women’s, 5 percent.
Autor attributes disability’s expansion mainly to liberalized, more subjective eligibility rules and to a deteriorating job market for less-educated workers. Through the 1970s, strokes, heart attacks and cancer were major causes. Now, mental problems (depression, personality disorder) and musculoskeletal ailments (back pain, joint stress) dominate (54 percent of awards in 2009, nearly double 1981’s 28 percent). The paradox is plain. As physically grueling construction and factory jobs have shrunk, disability awards have gone up.
For many recipients, the disability program is a form of long-term unemployment insurance, argue Autor and his frequent collaborator Mark Duggan of the University of Pennsylvania. Benefit applications surge when joblessness rises. From 2001 to 2010, annual applications jumped 123 percent to 2.9 million. On average, recipients start receiving payments at age 49 and keep them until 66, when they switch to Social Security’s retiree benefits.
Superficially, the case for overhaul seems overwhelming. Tougher eligibility standards would protect the genuinely disabled but limit benefits for others. Don’t hold your breath. For starters, any crackdown could become a public-relations disaster. It might seem gratuitously cruel. Many recipients command sympathy. With low skills, their jobs prospects are poor. “People are driven into the program by desperation,” says Autor. Nor are they rolling in money; the average payment is about $14,000 a year.
Advocates for the poor would protest. The disability program “isn’t in crisis,” says the Center on Budget and Policy Priorities, a well-known liberal think tank. Presidents Carter and Reagan tried to tighten eligibility. They failed. Indeed, the backlash against Reagan’s effort led Congress to relax the rules in the ways that now expand awards. High unemployment worsens the timing.
Lawyers would also resist big changes. The Social Security Administration initially rejects about two-thirds of applications, but about half of these are appealed by lawyers and other professional advocates before administrative law judges, where the approval rate is between 60 percent and 75 percent. In a series of well-reported stories, The Wall Street Journal’s Damian Paletta showed that the system is open to abuse. But it’s also lucrative. Lawyers and other advocates are entitled to 25 percent of back benefits up to $6,000 per case. Their total payments approach $1.5 billion annually.
The larger budget quagmire now comes into focus. What the federal government does is so vast that it suffocates informed debate and political control. The built-in bias for the status quo reflects the reality that the various parts of government are understood, defended and changed mainly by those who benefit from their existence. However strong the case for revision (and it is powerful here), it is tempered by political inertia. What’s sacrificed is the broader public good. The quagmire is of our own making.
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