Disability Insurance is the Real Driver of Social Security’s Underfunding

The unfunded liabilities of Social Security get a lot of attention, with both to cut benefits and expand funding, as well as other more comprehensive efforts at reform, but few remember the vastly underfunded Disability Insurance program also run through the Social Security Administration, and expected to run out of money entirely by 2016.

Disability payments have been skyrocketing over the past several decades. Theories as to why are varied, but the salient point is that there is simply not enough funding to handle the influx of claims, and when it runs out cuts will have to be made in other areas. What this likely means is dramatically reduced benefits, not just for the disabled, but for retirees in general as the SSA is forced to raid the general fund to pick up the slack on its other liabilities.

Higher taxes to help pay for these shortfalls are also a real possibility that would effect everyone, not jut retirees or those collecting disability benefits. Reform is badly needed if we are not to expect drastic and sudden cuts that will leave millions out in the cold, but whether that means changes to eligibility requirements, greater protection against waste and fraud, means testing or alternative revenue remains to be seen.

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