Soaring Social Security Disability Rolls Headed for Collapse

March 27, 2013

America's unemployment rate has come down significantly from its peak of 10 percent in late 2009. That may seem to suggest a steady improvement in the employment picture, but the impression is misleading, says the Washington Examiner.

Statistically concealing the dire reality are labor force dropouts. A smaller percentage of Americans now work or seek work than at any point since the Carter era. James Pethokoukis, of the American Enterprise Institute, has calculated that if labor force participation had not declined so much since Obama took office, the unemployment rate for January would have been 10.8 percent.

What happens to the workers who drop out of the labor force? Some retire, some become full-time parents, some go on welfare. But consider:

  • In 2011, on average, one net person was added to Social Security's Disability Insurance (DI) rolls (and 3.3 to its retirement program) for every five net new jobs created.
  • Since 1970, the number of individuals receiving DI has grown sixfold (from 1.4 million to 8.8 million), and the program expenses have grown tenfold, which is unsustainable.
  • The federal government now spends more on disability than food stamps and welfare combined.
  • In 2009, DI began paying out more in benefits than it took in from payroll taxes; by 2016, it is set to run out of money.

Two factors are driving the program's explosive growth: first, newly liberalized eligibility standards.

The second reason for the exploding disability rolls and continued record-setting is the continued weakness of President Obama's economic recovery. It has been thoroughly established that DI applications correlate not with worker health but with worker employment prospects. Indeed, one classic study shows that when coal prices fall, the number of DI beneficiaries skyrockets in Appalachia.

Once a worker qualifies, he or she possesses an asset producing a guaranteed income of $13,000 a year for life, plus free health care through the Medicare program. The benefits are far from extravagant, but they can offer older workers a bridge to the Social Security retirement age and an early start on Medicare. Less than 1 percent of workers who go on DI ever leave the rolls.

Source: "Soaring Social Security Disability Rolls Headed for Collapse," Washington Examiner, March 25, 2013.

 

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