The Social Security privatization debate has omitted the fate in store for Social Security Disability Insurance (SSDI) as a part of the program’s family of benefits. Social Security not only provides Old-Age protection, it consists of often overlooked Survivors and Disability Insurance protections as well.
I’ll wager that most Americans are unaware of the importance of SSDI, especially young workers who are the target of Bush’s campaign to divert funds into private stock market accounts.
I was unaware too until in the late 1980s I found myself unable to work with an 8-year-old child to support. I had worked to put myself through college and made a career in the film industry. Even though I was born with cerebral palsy it never occurred to me that someday I might not be able to hold down a job and pay my own way. In fact, three in ten Americans have a chance of becoming disabled before retirement age.
I had been paying into SSDI (payroll taxes) so when faced with a bodily breakdown I could apply for disability benefits. Like retirement, SSDI is a wage earner social insurance. It is calculated based on wages earned over the number of years worked, it is not a personal savings account. If one becomes unable to engage in “substantial gainful activity” due to bodily impairment, SSDI is there to furnish income in place of wages, as opposed to one’s 401K, for instance.
SSDI won’t be there in any meaningful form, however, if President Bush succeeds in duping the public into supporting his privatization plan. The Bush administration could deliver a blow to the Disability Insurance Trust Fund (a separate account in the United States Treasury) just as it plans for the retirement fund.
The President’s Social Security commission, in fact, recommended cutting disability benefits to help pay for the cost of private accounts–to make up the 2 trillion dollar shortfall that must either be paid for by cutting retirees benefits or added onto the deficit in order to continue to pay current benefits. If the disability insurance elements of the program were insulated from benefit cuts, then much larger cuts in retirement benefits would be necessary to achieve the same overall level of cost reductions–reductions which are necessary because of the loss of the Trust Funds’ revenue to the individual accounts.
The sums are not insignificant. According to the Center on Budget and Policy Priorities, one Bush plan being tossed around to “save” Social Security–price indexing–would cause a 46 percent drop in some workers’ Social Security retirement benefits compared to current law.
Currently retirement benefits are matched to changing wage levels but tying Social Security to an inflation index will significantly cut retirement benefits for all working Americans since inflation usually grows at a much slower rate than wages. SSDI is also matched to wage levels and it too could be switched to an inflation index lowering the already meager disability benefits to levels one cannot survive on. In December of 2004, for instance, the average disability benefit was $894 per month.
There are more ways SSDI regulations could be manipulated to result in a lower output of government cash. The Bush administration could make eligibility rules more restrictive by changing the definition of “disabled” or make formula changes that cut benefits. They could use Continuing Reviews that determine whether a disabled person can work or not to purge disabled people from the rolls, increase the number of work credits required to qualify, and eliminate the annual cost of living adjustments, to name a few.
Over the years there have been rumblings about how the disability rolls have grown out of control, how Social Security bureaucrats function poorly by not meeting mandates and that the disability system is in disarray. These kinds of messages helped to drive the devastating cuts to SSDI in the 1980s when Reagan was president. The Reaganites arbitrarily sent tens of thousands of disabled people notices that they were no longer “disabled” and cut off their benefits entirely. This resulted in extreme hardship and death in many instances.
In a double whammy to the SSDI program, Bush’s Social Security commission also recommended that access to disability accounts prior to retirement age be barred. This means reduced Social Security benefits, and no money from the accounts to cushion the loss. Such a change would defeat the purpose of SSDI entirely.
So you say, private disability insurance can pick up the pieces. There is no private insurance plan that can compete with the amount workers pay into Social Security and the return on those payroll tax dollars. For a 27-year-old worker with a spouse and two children, for instance, Social Security provides the equivalent of a $353,000 disability insurance policy. The vast majority of workers would be unable to obtain similar coverage through private markets.
According to the General Accounting Office, in 1996, only 26 percent of private-sector employees had long-term disability coverage under employer-sponsored insurance plans. Work-related coverage has been shrinking not expanding since then. It is not unheard of that after 40 years of paying into private disability insurance the insurer refuses to recognize impairment as incapacitating and denies a claim.
How about the prospect that private investment accounts could replace lost disability benefits? In January 2001, after examining a number of privatization plans, the General Accounting Office concluded, “the income from (workers’ individual accounts) was not sufficient to compensate for the decline in the insurance benefits that disabled beneficiaries would receive.”
This is in part because balances would accumulate over much shorter periods of time than retirement accounts and would, therefore, provide much less income in the event that a worker becomes disabled.
Almost 8 million disabled workers and dependents rely on SSDI. It is shameful that the Bush administration is forcing us to defend Social Security rather than improve it. I would like SSDI not only to remain intact for my daughter in the event she may need it, I would like to see it provide disabled workers with an income above the poverty level. I suspect other parents feel the same.
MARTA RUSSELL is an independent journalist and author who writes on the political, social and economic aspects of disablement. She is the author of BEYOND RAMPS, DISABILITY AT THE END OF THE SOCIAL CONTRACT (Common Courage Press, 1998). She can be reached: email@example.com