The year 2035 is far off in the future – and that’s one reason Congress has kicked the can down the road so many times when it comes to Social Security reform.
The program’s retirement trust fund is projected to be depleted that year, requiring sharp cuts in benefits if nothing is done. Closing the shortfall calls for tough choices that invite political procrastination – revenue increases, benefit cuts or some combination of the two.
Then there’s 2016, which is just around the corner. Congress will need to take action by then if it wants to avert painful benefit cuts in the retirement program’s first cousin – Social Security Disability Insurance, or SSDI.
SSDI and the Old-Age & Survivors (OAS) retirement programs really are joined at the hip. Both are social insurance programs designed to protect against the risk of lost income – one in the event of retirement, the other, disability. They also share a funding source: the payroll tax. The retirement program is much larger; currently, workers and employers pay a combined 12.4 percent employees’ payroll, with 10.6 percent going to the retirement fund and 1.8 percent toward disability.
SSDI’s trust fund will be depleted in 2016, which would translate into a 20 percent cut in benefits to nine million disabled people and an additional 2 million dependents who rely on benefits from it.
The problem, and its solution, are right in front of us, but easily avoided. All Congress needs to do is reallocate a small portion of payroll tax revenues from the retirement to the disability program. Learn more at Reuters Money.