Social Security and the mingling of DI and OASI

The 2012 Social Security Trustees report estimates the year at which benefits will outpace Social Security (OASDI) payroll tax receipts plus spending authority granted by IOUs (from when more payroll taxes flowed in than benefits were paid out), and the program will no longer able to pay full benefits as 2033.

However, under current law, the disability portion (DI) of Social Security and the old-age retirement portions (OASI) are separate and always have been. The date of 2033 reported in the media and shown below under OASDI, assumes that Congress will pass a law allowing the mingling of funds from the old age (OASI) and disability (DI) portions of Social Security to pay for the disability shortfall, that will come about in 2016.

As a stand alone program, the old age portion of Social Security can pay full benefits through 2035. Assuming the parts of the program are going to be co-mingled (which has always been assumed) puts the year when the combined program could no longer pay full benefits without changes at 2033. The shortfall facing the disability portion of Social Security is much smaller (stated as percent of taxable payroll [and not GDP], 0.37 v. 2.30) than is the one facing the old age retirement portion.

At some point, Congress will actually have to do some of these things that have always been assumed to be straightforward. I wrote nearly the same post about 11 months ago. Also, keep in mind that the long range financing of Medicare is set to move away from payroll taxes, and therefore trust fund accounting, and toward income taxes, by default.

PS: I apologize for the quality of tables. Taken from pdfs in a manner that usually results in higher quality.

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

3 thoughts on “Social Security and the mingling of DI and OASI”

  1. Somewhat off-topic, but as the mom of someone who might very well be at least partially dependent on SSDI when he grows up, I’ve long wondered about the relationship between SS and SSDI — especially when the movement to privatize SS seemed to be picking up real steam during the Bush years. I worried back then that if SS was privatized, that the funding stream for SSDI would disappear, leaving my kid in the lurch.

    Back on-topic, of course one of the straightforward things Congress should do is raise the cap!

    1. It is complicated, and Medicaid and Medicare are also involved….there is not a consistent definition of disability across these programs. I will look and see if Harold Pollack has posted on this….it will take me some time to pull together a meaningful post. Bottom line is there is no coherent definition of disability that cuts across all the programs for which a person under age 65 could be entitled due to disability of some sort. Here is a CBO report from 2011 showing raising OASDI payroll tax cap back to 90th percentile would reduce defict by ~$500 Billion over 10 years. If you totally uncapped it that would be very large revenue increase indeed, and would more than make SS solvent for the entire 75 year window

  2. Thanks for you quick reply. Our family has a really terrific DDS (the agency formerly known as MR/DD) caseworker, so I know that for the time being, my kid is receiving all the support to which he is entitled (including but not limited to a Medicaid Waiver). But watching the never-ending attacks on the safety net is anxiety-provoking. Unlike other families, we don’t have the luxury of deluding ourselves that we’ll never need it, it’s for other people, the ones who don’t matter.

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