Social Security / SSI

UCP Testifies Before President's Commission to Strengthen Social Security

On October 17, 2001, Judy Chesser, UCP's Director of Public Policy, Bob Williams, UCP's Senior Policy Advisor, and other disability advocates tesified before members of the President's Commission to Strengthen Social Security. The following are transcripts of their testimonies and supporting documents.

JUDY CHESSER:

Currently, the same benefit formula is used to calculate both Social Security retirement and disability benefits. A common element in reform plans is a modification to the benefit formula so that the Primary Insurance Amount (PIA) is lower. This change also would cut disability benefits since they, like retirement benefits, are based on the PIA. In some of the major proposals, such a modification would reduce disability benefits from 24 to 30 percent. Reducing the PIA would force more people with disabilities into poverty. (Please refer to Factsheet A.)

Eighteen percent of disability beneficiaries and their families are living in poverty. This is higher than for other beneficiaries. This figure is twice as high as for non-disabled Social Security recipients. Without Social Security that 18 percent figure would climb to 55 percent for people with disabilities. As you explore options for changes in Social Security, we ask that you do no harm. Please preserve the benefit formula for disability benefits so that more people with disabilities are not forced into poverty.

Provide protection against inflation. Social Security benefits are adjusted for inflation so that the value of the benefit is not eroded over time. Some proposals would reduce annual cost-of-living adjustments (COLAs) by arbitrary amounts. I am aware that there is a debate about the CPI overstating inflation, however, we must all be careful when surrogate reductions are proposed or adopted. Accumulated over time, a 1 percent COLA reduction would result in a 20 percent reduction in benefits after 20 years. Many people with disabilities must rely on Social Security benefits for longer than 20 years therefore any COLA cuts would be devastating. Please see Fact Sheet A and note that Disabled Adult Children may be receiving benefits for 50 years. It is critical that benefits be set at meaningful levels to support such individuals and that appropriate COLAs be included to ensure that the purchasing power of the benefit is not reduced over time.

Raising the retirement age would put increased pressures on the disability insurance program. Raising the normal retirement age (NRA) would create an incentive for older workers to apply for disability benefits in two ways. (1) If only the NRA is increased and the early eligibility age (EEA) is not, then the early retirement age benefit (currently paid starting at age 62) would be reduced to a greater degree than under current law. Disability benefits, unless similarly reduced, would then become more attractive to older workers. (2) For many of those in hard, manual labor jobs who simply can no longer work at the same level of physical exertion, leaving the workforce before NRA will be necessary. Many would apply for disability benefits. These added pressures on the disability insurance program (to make up for changes in the retirement program) would increase costs and potentially create political pressure for more drastic changes in the disability program based upon its "growth."

The Supplemental Security Income program can also be affected by similar pressures. Some have suggested using the SSI to accommodate cuts in the traditional Social Security benefits. This would result in increases in expenditures in the SSI program and would put political pressure on making changes in that program due to "growth". Since SSI serves only the aged, blind and disabled, the disability community is extremely wary of putting SSI at risk. Many workers feel that they should be paid from the trust fund programs, into which they have contributed, rather than being forced to rely on SSI which is a means tested anti-poverty program. They have paid into the trust funds and feel they should receive an adequate benefit for themselves and their children.

Individual accounts do not work for people with disabilities occurring at an early age. Many beneficiaries become disabled at an early age. Approximately 6 percent of those awarded benefits in 1999, the most recent year that statistics are available, were under the age of 29. Approximately 20 percent were under the age of 39. Adult disabled children who are substantially unable to earn a living or save for retirement, or those workers who are disabled early in their work years, could potentially have no individual retirement account to access, even if allowed, and could have few or no personal assets to supplement benefits.

On January 24, 2001, at the request of Senator Harkin (D-IA), the General Accounting Office (GAO) released a study of several plans to divert FICA dollars to Individual Accounts (IAs). The GAO concluded that such "reform proposals would reduce insurance benefits while creating IAs with the expectation that the income from an IA would largely offset reductions in the insurance benefits. In our estimates, the income from the IA was not sufficient to compensate for the decline in the insurance benefits that disabled beneficiaries would receive." Many of the bills analyzed by the GAO did drastically reduce disability benefit. Some tried to paper this over by promising a study.

As you consider options for reform, please protect those most vulnerable, individuals with disabilities and their families.

BOB WILLIAMS:

Any serious discussion about Social Security reform must be based on the following major premise. People with disabilities, and our families, must be able to rely on the benefits, provided by all facets of the Social Security insurance program. Social Security is an insurance program that protects families, including those in which one or more of its members have disabilities.

As we all know, beneficiaries with disabilities depend on Social Security for a significant proportion of their income. According to a 2000 National Organization on Disability, Harris Poll, 68 percent of working age people with disabilities are not employed, as compared to 19 percent of the non disabled. The employment rate among those with more significant disabilities is less than one in five. Hence, the capacity of beneficiaries with disabilities to work and to save for the future, given their higher rates of poverty, must be taken into consideration in any efforts to change the Title II programs.

The nature of the OASDI programs as insurance against poverty is a vital protection for millions of people with disabilities of all ages. They provide benefits to multiple beneficiaries, and across multiple generations, under coverage earned by a single wage earner's contributions.

If the goal is to achieve, 75-year solvency, of the Trust Funds, then any diversion of the current FICA contribution going to Social Security, could exacerbate the current shortfall in revenues, and put great pressure to cut deeply into the Social Security benefits. Two percent of payroll equals 16 percent of the total revenues supporting Social Security. If 2 percent is diverted to private accounts, it doubles the shortfall in the trust funds, and puts disability benefits at grave risk of reduction. To achieve 75-year solvency, current benefits would have to be substantially reduced.

In 2000, the average monthly benefit for a disabled worker was 786 dollars per month. If nothing is done under current law, an unlikely scenario, benefits would be reduced approximately 20 percent. A diversion of the type suggested by President Bush during the campaign, would require an approximate reduction in benefits of 40 percent to achieve 75-year solvency. This would reduce the average disability benefit from $786 to $472 per month. I wouldn't want to try to live on $472 a month, and somehow pay for rent, food, clothing and medicine. And, I do not think anyone else in this room would, either.

As the GAO has said, individual accounts would not make up the difference for people with disabilities. Such a reduction is unacceptable. Marty Ford will speak more to this in a second, but I would be remiss if I did not make the following point. My parents grew up in the Depression and my dad served in World War Two. They are rightly being recognized as being part of the Greatest Generation. But, for my parents, and many others like them, the greatest sacrifice and contribution they made to our country is when they decided to raise their sons and daughters at home and in our own communities, where we belonged.

They believed in the fundamental fairness of America, and that one day those with even the most significant disabilities would be welcomed in to the American community rather than being shunted aside. Fortunately, this belief paid off in my parent’s eyes. But hundred of thousands of other elderly parents are now counting on Social Security to support their adult sons and daughters with disabilities long after they are gone. They deserve this peace of mind.

Attachments:
DOC	FACT SHEET A (27 kb.)
DOC	FACT SHEET B (22 kb.)
DOC	FACT SHEET C (35 kb.)