Its drafters state that the rule “would protect the Old-Age and Survivors Insurance (OASI) Trust Fund from diversion of its funds to finance a broken Disability Insurance system.” But DI — a vital part of Social Security — isn’t broken. Its recent growth stems primarily from well-understood demographic and program factors, chiefly the aging of the baby boom into their 50s and 60s, the growth of women’s role in the labor market and hence their eligibility for DI, and the rise in Social Security’s full retirement age. And the Social Security trustees have long anticipated the need to replenish the fund in 2016.
Reallocating some taxes between the retirement and disability trust funds is a historically noncontroversial measure that Congress has taken 11 times, in both directions depending on which trust fund was running short. Another reallocation to replenish the DI trust fund wouldn’t threaten seniors, contrary to the rule’s implicit attempt to pit retirement and disability beneficiaries against each other.
More specifically, here’s what people need to know:
The last two reallocations have shortchanged DI, underfunding it compared with the retirement program. Congress redirected a big chunk of payroll taxes from DI to OASI in 1983 and only partly offset that in a 1994 law. (See graph.) If DI’s tax rate had remained at its pre-1983 level, we wouldn’t need to replenish the fund today. Yet nobody claims that the 1983 reallocation, which helped stave off OASI’s imminent depletion, “robbed” DI … nor could they reasonably claim that reallocating in the other direction would “rob” OASI.
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