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Hard times ahead for Social Security Disability Insurance

As that "fiscal cliff" just down the road looms closer and closer, people depending on Social Security Disability Insurance (SSDI) need to understand just how serious their situation is. First, the fund will run dry in fiscal 2016, which actually begins on October 1, 2015. All the money set aside for the benefits millions depend upon will be gone, the accounts empty, all the bonds redeemed. The Congressional Budget Office says Congress will have to decide whether to borrow money, transfer it from someplace else, or just pay out what comes in via payroll taxes. It's a safe bet they're looking for coins in the couch cushions at the Social Security Office.

The Social Security system has been a train wreck for years now, overwhelmed with applications, months behind on resolving cases, making mistakes that waste billions of dollars and not efficiently allocating the available money to those who genuinely need it. Making things worse is, the Great Recession added two million new enrollees. Some of these are people whose unemployment ran out or who couldn't land new jobs, so they applied for, and got, disability. Couple this with the fact that the percentage of the labor force that actually has a job is at record lows -- 63.5 percent in August - and it is clear that not enough money is coming in from those working to pay the benefits for those who are not.

All this bad news means there will be more competition for fewer resources. Don't be surprised if Congress makes some big changes in the eligibility rules either. One change under consideration is putting disability recipients back into the workplace, as much as their condition permits. Employers would be offered insurance subsidies and other incentives to cover the costs of having disabled employees on the job. Right now there is limited support for this particular reform but the experts predict it will gain more as fiscal 2016 approaches. In other words, the days of "retiring" on disability may be coming to an end.

Other stopgap measures under consideration include raising the ceiling on Social Security taxes from the current $110,000 to $180,000, which would bring in $50 billion additional each year. Extending taxes is pretty unpopular in Congress so expect two other tactics to come into play; reducing the number of new SSDI grants and making the requirements for disability payments tougher. Right now, taxes are at the forefront for lawmakers but, once that issue is managed, the next likely target will be the program that uses more of America's tax dollars than almost any other.

Source: Policymic, "The most critical part of the debt crisis that no one is talking about," Rick Matthews, Nov. 30, 2012

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