Social Security Disability Payments May Cease in 2017

The Congressional Budget Office has come out with a new analysis that says the ability of the Social Security disability fund to make payments may end in 2017. The estimates depend, of course, to some extent on the economy. The CBO's 2011 Long-Term Projections for Social Security reports that "as more members of the baby-boom generation (that is, people born between 1946 and 1964) enter retirement, outlays will increase relative to the size of the economy, whereas tax revenues will remain at an almost constant share of the economy. As a result, the shortfall (in the Disability Insurance (DI)) fund will begin to grow around 2017. The fund that provides Old-Age and Survivors Insurance (OASI) may not be able to make payments after 2040.

Laid off workers are also putting financial pressure on disability insurance as well. Some Americans are allowed to make use of the benefits from both of the Social Security programs which worsens the financing problem further. The total number of people who receive some kind of payment from the Social Security funds totals 56 million now. The CBO points out that this year, "Social Security's outlays will total $733 billion, one-fifth of the federal budget; OASI payments will account for about 82 percent of those outlays, and DI "payments, about 18 percent."

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The newly released data will challenge Congress and the administration to address the problem just as measures to bring austerity to the federal budget meant to bring down deficits and the national debt begin. So far, politicians have been reluctant to use a cut in Social Security benefits as a way to address high government costs, fearing the wrath of older voters. Some economists argue that Washington has no choice but to lower payments. Federal tax receipts will remain poor unless GDP picks up very sharply. But that is not likely based on most projections for economic growth and unemployment levels over the next three years. Stimulus spending to boost the economy is highly unlikely as Washington looks for ways to take expenses out of the federal system.

Many observers of Washington politics say that Congress and the administration will "kick the can down the road" and allow elected federal officials in office in five years to address the Social Security funding problem when it becomes acute. If the economy is not in a period of hyper-growth by then, the cuts to the programs may have to be radical.