NCPA - National Center for Policy Analysis

Jobless Tap Disability Fund

January 3, 2012

The prolonged economic slump has fueled a surge in applications for Social Security disability benefits, with many desperate Americans seeking refuge in the program as a last resort after their unemployment insurance and savings run out.  The Social Security Disability Insurance program was created to provide financial support and health care for Americans no longer able to work because of injury or ill health.  These days, an influx of applicants with moderate, potentially manageable health issues is contributing to a growing backlog of cases and adding to financial stress on the system, says the Wall Street Journal.

  • Currently, there are 10.6 million Americans collecting disability benefits -- a figure that has increased from 7.2 million in 2002.
  • The recession contributed to the number of disability claims, as those with moderate problems find it harder to obtain jobs: Mark Duggan, a University of Pennsylvania professor, estimates that the economic downturn has increased applications by 3,000 per week compared to 2007.
  • The increase has placed enormous financial strain on the program: it paid out $130 billion in fiscal year 2011, currently runs a $4 billion monthly deficit, and is expected to deplete its reserves by 2017.

Two new studies, one of them coauthored by the White House's top economist, show a correlation between when people seek Social Security disability payments and when their unemployment benefits are exhausted.  Some economists say that connection shows many people now view the system as an extended unemployment program.

  • The researchers found that 10 percent of jobless workers age 50 to 65 with access to less than $5,000 were likely to file for disability benefits when their unemployment benefits expired, while 1 percent of such people sought benefits when they had 50 weeks of unemployed benefits left.
  • In the 2007 fiscal year, as the downturn began, 2.5 million people applied for benefits, yet this figure increased in fiscal 2011 to 3.3 million.

The drastic increase in disability claims is particularly troublesome because of the duration of the benefits.  Most recipients remain on disability until retirement benefits kick in.  This means that most of those who are accepted by the program will not contribute to the economy for the rest of their lives, and will act instead as a substantial economic burden on the federal budget.

Source: Damian Paletta and Dionne Searcey, "Jobless Tap Disability Fund," Wall Street Journal, December 28, 2011.

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