Social Security Privatization and People with Disabilities
Social Security disability benefits may not be safe from the across-the-board cuts that are likely in President Bush's proposal to allow personal investment accounts.Note also that this undermines a key part of the President's argument that his privatization plan will help African Americans. Since African Americans disproportionately benefit from SSDI, cuts in SSDI will disproportionately harm them.
Retirement and disability benefits are calculated using the same formula, so if future promised retirement benefits are cut, then disability benefits also would be reduced - unless the program is somehow separated.
That also raises big questions about how investment accounts would be structured for disabled people, especially if they get injured at a young age or are dependent on a parent. Disabled beneficiaries typically work less and need benefits sooner, so the accounts would not provide enough income to these people.
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Supporters of Bush's overhaul say that disability should be treated as a separate program.
"The proper way to deal with this is to essentially make it clear that these are two different programs and to separate the benefit formulas," said David John, Social Security senior analyst at the conservative Heritage Foundation.
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But disability advocates argue that the two programs can't be easily separated. Bush wants to let younger workers invest much of their 6.2 percent in payroll taxes into personal investment accounts, similar to a 401(k). Of the tax, 0.9 percentage point funds disability benefits, while the remainder is for retirement benefits.
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"Anything they do to the retiree formula will affect people with disabilities," Ford said.
That's what occurs in the main plan offered by Bush's 2001 Social Security Commission charged with crafting a proposal for investment accounts. Promised disability benefits get reduced along with retiree benefits, in some cases up to 46 percent. The cuts were used to make the plan's finances add up in the report.
The commission plan is serving as a blueprint for legislation the Bush administration would like Congress to consider. Bush's commission did not recommend changes for the disability program and cautioned that the benefit reductions shouldn't be viewed as a suggestion.
But, "in the absence of fully developed proposals, the calculations carried out for the commission and included in this report assume that defined benefits will be changed in similar ways for the two programs," the commission said.
The commission noted that disabled beneficiaries may not have their full adult lives to accumulate enough funds in their accounts, a rationale for maintaining their traditional benefits.
But if future retirement benefits are cut and disability benefits were maintained at levels being promised under current law, that would encourage an increase in disability applicants, and potentially, fraud, the commission said.