Paul Ryan has emphasized reforming the Social Security disability program so that disabled workers have more incentive to go back to work. Sources on and off Capitol Hill, liberal and conservative, say that House Republicans are now shaping a proposal in pursuit of that goal.
But depending on the final form it takes, the policy could become a political flash point between Republicans and Democrats—and complicate Congress’s efforts to avert a 20 percent benefit cut to 9 million disabled workers and their families next year.
The sticking point is how exactly to change the disability program to encourage work. Under discussion is a plan to gradually phase out benefits, sources said, while allowing disabled workers to earn more money than they currently can. But if the proposal hits those making the least amount of money, as some fear it might, Democrats are expected to balk.
Ryan’s office emphasized that nothing has been finalized and that negotiations are ongoing. “We continue to work with stakeholders and members to develop the policy, and none has been set,” said Brendan Buck, a Ryan spokesperson, in an email.
A cliff awaits in late 2016, at which time the Social Security disability insurance trust fund is projected to be unable to pay full benefits. That means money will likely need to be moved from the much bigger retirement program, either as a loan or as a shift in tax revenue, to avert the cut.
Republicans on Capitol Hill have pledged to prevent the cut, but they also passed a rule in January stipulating that they must improve Social Security’s overall solvency before agreeing to shift any funds around. Smaller changes to the administrative side of the program and anti-fraud measures are likely to get a look, but multiple sources following the issue said they thought Republicans were looking to make a more significant change.
And top conservatives like Ryan have been pretty transparent about wanting to overhaul the disability program to encourage people to work more if they can.
“A disability should in no way diminish a person’s right to fully participate in all aspects of society, and that should be the spirit of [disability insurance],” Ryan said at a Ways and Means hearing reviewing the issue on July 9. “It will be there for you if you can’t work. But if you want to work, we won’t get in the way. We should recognize everybody has something to offer. Everybody can contribute, and we should encourage that.”
The general idea, sources said, would be to increase the amount of money that disabled workers can make without risking the loss of their Social Security benefits. The current threshold is $1,090 per month, and Republicans have criticized the so-called cliff as a disincentive to work. (The average Social Security check for disabled workers is $1,165 per month.)
“The rules actually make it harder for people to work more,” Ryan said at the July hearing. “If you make just one dollar more than you’re allowed, you get kicked off the program. In other words, it’s a lot safer to stay on the sidelines. No surprise then that only one half of 1 percent earn enough to get off the program.”
But a straight increase in the cap would cost the federal government money because more people would receive disability insurance. The proposal under discussion would help offset the costs by introducing a tiered system, sources say. At the bottom threshold, people would start to lose some of their benefits, but beneficiaries would be able to keep receiving at least a small disability check while making more than the current $1,090 cutoff. The benefit losses would progress on a gradual scale up the income ladder
The devil is as always in the details, and one in particular sticks out: Where do benefits start to decrease? A possible bottom threshold being floated, as described by multiple sources, would be $300 per month. Once people start making more than that, their checks would shrink.
That’s where the GOP proposal could start to run into some problems with the other side. Most following the issue believe that Republicans want Democratic support for whatever they propose, to avoid making changes to Social Security along partisan lines in a presidential election year. But Democrats seem unlikely to vote for a policy that, its opponents would argue, gives the poorest people a disincentive to work.
“Such an offset would reward work among beneficiaries who can earn more than (the current cap). It would penalize work, however, among people with earnings between the new threshold and” the current cap, wrote Kathleen Romig at the liberal Center for Budget Policy and Priorities last week. “Such a change would essentially shift benefits from more severely impaired workers who are not able to earn more to less impaired workers who can.”
Other details will also be watched closely: Would the policy be implemented nationally and permanently, or with a limited authorization? Or does Congress approve pilot projects, with the expectation that if it proves successful, it will be taken nationwide? Everything is said to be on the table.
The general concept isn’t inherently partisan, and there might be a way to structure the policy so that it doesn’t devolve into partisan infighting. A working group from the Bipartisan Policy Center, which looked at options for improving the Social Security disability program and put out a report last month, said that there was “widespread interest” in overhauling the program so that benefits start to decrease gradually as people earn more money but people would be allowed to earn more than the current $1,090 cap.
The preferred starting point for the taper, the authors wrote, would be $700 or $800. But they found that would be prohibitively expensive. The bipartisan group recommended instead that Congress approve gradual benefits for the roughly 1.6 million people eligible for both disability insurance and the Social Security supplemental insurance program. They also proposed a national pilot project for people under 50 who have only disability insurance. The pilot would test different thresholds, above which every $2 in earnings would be offset by $1 in benefit cuts.