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White House budget director’s claim that Social Security disability is ‘very wasteful’

White House budget director Mick Mulvaney. (Manuel Balce Ceneta/AP)

Host John Dickerson: “Entitlements, that’s where the big money is. The president has said he didn’t want to touch Medicare, but he seems to be revising his thinking on that.”

Office of Management and Budget director Mick Mulvaney: “Well, I think the promise was he wasn’t going to affect anybody and we haven’t with this budget. Keep in mind what this budget is. This is just the discretionary spending part of the budget, which was a necessary first step.”

Dickerson: “But he might look at future retirement — future Medicare recipients?”

Mulvaney: “Let me ask you a question: Do you really think that Social Security disability insurance is part of what people think of when they think of Social Security? I don’t think so. It’s the fastest growing program. It grew tremendously under President Obama. It’s a very wasteful program and we want to try and fix that.”
— Exchange on CBS “Face the Nation,” March 19, 2017

Candidate Donald Trump vowed to protect and save Social Security “without cuts.” Yet President Trump’s budget director, Mick Mulvaney, recently seemed to indicate the administration is reconsidering Trump’s stance on saving the program without making reductions in spending.

Mulvaney said Social Security disability insurance is the “fastest growing program” that “grew tremendously under President Obama,” and a “very wasteful program” that needs to be fixed. Are his claims accurate?

The Facts

Social Security is designed to help the elderly and the poor, by providing workers disability pay and life insurance while they work, and a basic level of income in retirement.

About 73 percent of 61 million Social Security beneficiaries are retired workers, and about 17 percent are disabled workers and their dependents. The rest are survivors of beneficiaries. (Check out Fact Checker’s guide to Social Security for answers to basic questions on the program and how it is financed.)

The number of beneficiaries of disability insurance peaked under President Barack Obama, at nearly 11 million in 2013, and then came back down to about 10.6 million in 2016. There were 9.3 million beneficiaries as of December 2008, shortly before Obama took office.

There’s a reason for that: the Great Recession. Economic factors play a role, and the number of new recipients of disability benefits tends to go up in periods of unemployment and recession, according to the Social Security Administration’s chief actuary.

An OMB official said Mulvaney — who said “it grew tremendously under President Obama” — was actually referring to the general growth in disability beneficiaries from 1996 (6 million) to 2016 (10.6 million), rather than specifically to the Obama years. Spending went from $115 billion in 2009 to more than $140 billion in 2016, a 22 percent increase, according to the OMB.

But those raw numbers need to be put into context.

A lot of the growth during that period was related to demographics. Members of the baby boomer generation entered their peak disability years (their 50s), before they hit retirement at 66. As people aged, they continued to make more money on average, so the costs to the program increased.

More women joined the workforce and became eligible to collect disability benefits. The aging population and increased eligibility among women accounted for two-thirds of the increase in disability benefits since the 1990s, according to a 2015 study by Harvard University’s Jeffrey Liebman, an economist and Social Security expert.

The baby boomer population is now retiring. That means the costs and new beneficiaries in the disability program have started to stabilize and will continue to do so in the future, according to the chief actuary.

Is it a “very wasteful program”? The OMB pointed to improper disability payments, which can result from mistakes or incorrect information from either the Social Security Administration or from the beneficiary. In fiscal 2011-2015, there were $6.6 billion in overpayments and $1.5 billion in underpayments — but they represented 0.99 percent and 0.22 percent of total disability outlays, respectively, so it’s a stretch to use these figures to say the program is “very wasteful.”

The OMB official said Mulvaney spoke about the growth in the disability program to highlight that it will be insolvent by 2023. Something needs to be done before beneficiaries’ payments get cut, the official said: “Based on the Social Security Administration’s analysis, at that point the Trust Fund will only be able to provide 89 percent of scheduled benefits.”

Indeed, the Social Security and Medicare Boards of Trustees estimate that the disability trust fund will be depleted by the end of 2023 if no legislative changes are made. But it’s highly unlikely that Congress will let the program run out of money, given how many Americans rely on it. The disability insurance trust fund was expected to run dry in 2016, but Congress passed a bipartisan budget bill in 2015 that fixed financing imbalances. That pushed the projected depletion date to a later date.

Lastly, we’ll note the financing problems in the disability trust fund are a part of a larger financial imbalance in the Social Security program. Social Security is a pay-as-you-go program, which means that payments collected today are immediately used to pay benefits. Until 2010, more payments were collected than were needed for benefits. The most recent trustees report says the cash-flow deficit will average about $69 billion between 2016 and 2019 and “will then rise steeply” as “the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.” House Speaker Paul D. Ryan (R-Wis.) has called for an overhaul of the program.

The Pinocchio Test

While Mulvaney criticized the growth in Social Security disability insurance under Obama, the OMB said Mulvaney was referring to general growth in the program since 1996. But that’s still misleading. The program did grow since 1996, but a lot of that had to do with the shifting demographics of Americans who rely on the program. The baby boom generation aged and entered its peak disability years before retiring. More women entered the workforce and became eligible for disability benefits. The raw number of beneficiaries did peak under Obama, largely because of the Great Recession, but it came back down since 2013.

The OMB pointed to $6.6 billion in disability insurance overpayments in fiscal 2011-2015 to support Mulvaney’s claim that it’s a “very wasteful program.” But that’s a stretch; overpayments represented less than 1 percent of total disability outlays during that time.

According to the OMB, Mulvaney’s general point was that the disability trust fund is projected to be depleted in 2023 if no changes are made to the program. If that’s really what he meant to say, Mulvaney needs to deliver his talking points better than he did during this particular interview. After all, he does manage the federal budget.

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"It’s the fastest growing program. It grew tremendously under President Obama. It’s a very wasteful program and we want to try and fix that.”
in an interview with CBS "Face the Nation"
Sunday, March 19, 2017