Jonathan Bydlak in Rare: The road to debt crisis is a marathon, not a sprint

Writing today in Rare, CRS president Jonathan Bydlak takes on the unfolding Greek debt crisis and what the United States can learn from it.

On July 4, millions of Americans will be relaxing under blue skies, watching fireworks, and fighting family members to be the first in line for burgers hot off the grill. On the other side of the world, citizens of Greece will be worrying about their nation’s debt crisis, figuring out their position for the upcoming referendum, and fighting strangers to be the first in line for an ATM that may be as empty as their government’s coffers. The pictures couldn’t be any more different.

Or could they? In the spirit of celebrating Independence – and making sure it remains into the next generation – maybe it’s worth asking if the countless comparisons between Greece and the United States have a point after all.

Read the full story here.

Straight Talk: What’s next for Social Security Disability?

Originally posted at the Institute to Reduce Spending.

The Basics:
Social Security Disability Insurance, or SSDI, is a component of the overall Social Security program. Its official purpose is providing monthly payments to workers with disabling medical conditions that prevent them from earning above a set amount in a given year or more. It also provides benefits to those who have worked in the past, paying into Social Security, whose disabilities prevent them from working at all. SSDI pays these benefits until the individual can begin drawing from the Social Security retirement program. The goal of SSDI is to provide income enough to prevent poverty to those unable to work at all, and enough supplemental income to partially disabled people so that they can remain hired in a situation when their employer would not be able to pay them enough to continue employment.

The Problem:
While SSDI provides vital aid to many truly disabled individuals, its trust fund will hit insolvency near the end of 2016. Without action by Congress, benefit payments will automatically drop by nearly 20%.

This issue raises serious questions about the propriety of both its program acceptance and benefits structures. The cause of this fiscal crisis is rather simple: program costs are growing faster than program revenues. The impending insolvency of the SSDI trust is not new or unexpected, however, as the SSDI Trustees warned of it in their 2013 annual report.

While benefits per capita are growing to compensate for inflation and other factors, one of the fundamental problems is a growing beneficiaries pool, resulting from baby boomers in their peak age-range for disability, in addition to the unexpected increase in the number of women in the job force who would now be eligible for benefits.

These factors, however, still cannot account for the increased growth in benefits payouts, because there has been very little change in the rate of disability among the working population. There is reason to suspect deeper issues with SSDI’s structure in the first place.

A surge in applications after the acceptance criteria were liberalized, mostly during the 2008 economic crisis, is a likely culprit. Even just considering this issue of poor accountability and widening program scope, it’s clear SSDI needs significant structural reform if it is to continue its stated purpose.

An unexpected and steep drop in benefits following continuance of the status quo is something that both Republicans and Democrats will avoid at all costs, if not to protect their own jobs from disenamored constituents, then for the sake of those who truly need the aid. Unfortunately, it’s likely Congress will continue to push back real reform debate as long as possible, and such last minute, ad-hoc plans tend to favor expensive, inefficient, and ultimately “tie-over” solutions that do not address the root of the problem.

Where Do We Go From Here?
Solutions for restoring solvency to the SSDI trust range from redirecting a portion of tax funds going to other SS programs like OASI (Old-Age Survivors Insurance), and thus avoiding permanent solutions, to deeper reforms to the structures of both SSDI and OASI in approval qualifications, benefits payout structures, and funds sourcing.

The first proposed solution would include allocating a larger share of payroll tax revenue to SSDI, and thus a smaller portion to OASI, as the former currently gets 1.8 points of the 12.4 percent payroll tax, and the latter gets 10.6 points. In a perfect world, this would theoretically extend the solvency of both programs to around 2033. However, this tactic would not do anything to address the fundamental causes of the fiscal shortfalls in the first place. Given that, Congress has enacted legislation to prevent such a funds reallocation without some kind of structural reforms. While this measure may help catalyze some small change, its guidelines are still loose enough for Congress to avoid needed, substantial reforms. Worse still, OASI actually faces the largest actuarial imbalance in the long-run, so such a funds reallocation could only set the stage for an even worse fiscal battle down the road.

Another idea would be to allocate funds from general tax revenues rather than just payroll taxes. While this plan may ultimately access a funds source large enough to bridge the actuarial gap in SSDI, it too obfuscates the fundamental issue of long-term increases in mandatory spending. The issue is not insufficient tax revenue, but rather, out-of-control and unchecked spending. It is important to note here that SSDI does no means testing whatsoever, further aggravating potential issues with spending wastage.

In his 2016 budget proposal, President Obama suggested that in addition to reallocating funds from OASI, unemployment benefits could be used to offset disability benefits. Simply put, if an individual is entitled to $1000 per month in disability benefits, but also receives $400 per month in unemployment benefits, then their DI benefits would be reduced to $600, effectively preventing “double dipping” into the safety net. Additionally, he suggests providing funding for Continuing Disability Reviews (CDR’s), which would shorten the period between reassessments of individuals’ eligibility for the program based on their medical status.

The President’s two latter ideas certainly would be a step in the right direction, and all efforts to offset spending, especially when it adds accountability to the system, should be applauded. These proposed changes are expected to save over $32 billion in 10 years. Still, more significant improvement in the program is the only guarantee of its effective workings for generations to come.

Retired Senator Tom Coburn, a longtime champion of offsets such as those proposed by the President, introduced legislation that would significantly cut SSDI costs by providing funds for targeted vocational rehabilitation, thereby reducing the number of individuals on SSDI long-term, requiring beneficiaries to be converted to the retirement fund at the EEA age standard of 62, rather than 65, mandating CDR’s, time-limiting benefits when individuals are expected to recover within 3 years, and a whole host of other reforms.

Sen. Coburn’s plan is a contains the deep structural reforms needed to ensure that SSDI, OASI, and SSRI maintain solvency well into the future, but whether such significant changes are politically possible is another issue entirely. It’s unlikely we’ll see Sen. Coburn’s plan adopted wholesale anytime soon, but there is reason to be hopeful that good reforms will be made with continued pressure on policymakers to focus on more sustainable, long-term solutions. As insolvency creeps ever closer, they simply can’t afford not to.

Jonathan Bydlak in Rare: ACA puts America in fiscal jeopardy

Writing today in Rare, Jonathan Bydlak takes on this morning’s Supreme Court decision:

In a majority opinion authored by Chief Justice Roberts, the Court held the challenge invalid, calling on precedent that “The Court nevertheless must do its best ‘bearing in mind the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’”

The fact that the Court has pushed forward with such a questionable precedent may be troubling from a constitutional perspective. But the bigger concern, of course, is the fiscal future of the states and federal government, given this second consecutive win for the massive law.

Read the rest here.

Supreme Court upholds the ACA

‪Breaking‬ news out of Washington this morning, as the US Supreme Court has just ruled 6-3 to uphold the Affordable Care Act’s federal subsidies in ‪‎King v. Burwell‬.

In a majority opinion authored by Chief Justice Roberts, the Court held that challenge invalid, calling on precedent that “The Court nevertheless must do its best ‘bearing in mind the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.’”

Beyond constitutional debate, the bigger concern, of course, is the fiscal future of the states and federal government, given this second consecutive win for the massive system.

This law has proven costly and unsustainable for the federal government and many states, and fiscal conservatives should continue to work even harder to seek better, cost-saving options that provide truly affordable coverage to all Americans.

When is an increase not an increase?

Originally posted at Institute to Reduce Spending

You might have heard that House Appropriations has approved a large increase in funding for food safety activities:

The House Appropriations Committee has allocated a $41.5-million increase for the Food and Drug Administration’s food safety activities for fiscal year 2016, but it’s less than half of what President Obama’s budget requested.

Agriculture Subcommittee Chairman Robert Aderholt (R-AL) said Thursday in his opening remarks before the subcommittee’s markup of the draft appropriations bill that the increase is “to help implement the pending regulations associated with the Food Safety Modernization Act.”

He also said that the bill includes a funding increase for the Department of Agriculture’s Extension services “instead of FDA officials to serve as the sole educator at the farm level on FSMA regulations.”

Even though this bill represents a significant increase over last year, some are very upset about this turn of events:

[the allocation] would leave the agency with a $234 million “funding gap.”

President Obama’s budget proposes a $109.5 million increase for the FDA’s work to meet requirements of the Food Safety Modernization Act of 2011. Even if the Republican-controlled House committee had met the president’s request, the FDA would still have a funding gap of $166 million, based on estimates from the Congressional Budget Office.

It’s rather striking that in today’s budgetary climate, a $40-million increase manages to leave a “funding gap.”

It’s time to rethink the troublesome process that assumes spending will massively increase every year. In an age of soaring deficits and debts, such an assumption simply isn’t true.

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