It has a catchy ring to it – Washington “thieves in the night” stealing $150 billion from the Social Security retirement fund to prop up a disability insurance program riddled with fraud and abuse.
Or at least that’s how Sen. Rand Paul of Kentucky, a struggling GOP presidential candidate trying to prop up his campaign, described it last Thursday night. He led a failed effort to block a provision of the new two-year, bipartisan budget agreement that would extend the solvency of the Social Security Disability Insurance program through 2022 and avert a nearly 20 percent reduction in benefits for 11 million beneficiaries.
In a speech that has gone viral on the Internet, Paul said, “…stealing money from people who will be getting money in the future to pay for immediate concerns is robbing Peter to pay Paul,” declared the Kentucky Republican, who went on to make the case that many members of Congress from both parties were “addicted” to spending.
The fiery and hyperbolic rhetoric played on the greatest fears of seniors and millennials about the long-term solvency of the Social Security system. Paul has long complained about the disability insurance portion of Social Security, insisting that it is rife with corruption and fraud. Last January, he told an audience in New Hampshire that more than half of those qualifying for benefits are either “anxious” or have routine back problems that they use as an excuse not to work. A media fact-checker subsequently discredited his claim.
The large growth in the disability insurance program, especially during the depths of the Great Recession, however, did document waste, fraud and abuse. The Government Accountability Office estimated that in fiscal 2011, the Social Security Administration made $1.29 billion in potential cash benefit “overpayments” to about 36,000 individuals who were working and making more than the limit to receive disability benefits.
While that certainly seems like a lot of people getting money they didn’t deserve, the GAO added that the overpayments represented about 0.4 percent of all beneficiaries.
What’s more, Paul, Sen. Mike Lee of Utah and other Republicans treated the transfer of funds from the retirement fund to the disability insurance account like it was some rare major heist, conjuring up an image of an armored truck backing into the Social Security Administration’s loading dock and then carting off $150 billion in cash.
In fact, the transfer, known as a “reallocation,” is a routine accounting maneuver that has been done at least 11 previous times in both directions to smooth out shortages, according to Kathy Ruffing, a senior fellow at the Center on Budget and Policy Priorities.
The overall Social Security program, including the retirement program and disability insurance benefits, is funded through a 12.4% payroll tax assessed on the first $118,500 of income. Employees are taxed 6.2 percent of their income, and employers match the employee taxes by paying the other 6.2 percent. Of the overall 6.2 percent payroll tax, 5.3 percent finances the retirement programs and 0.9 percent funds the disability payments.
Some – including Paul, apparently-- assume or pretend that the payroll tax revenues are stashed away in sacrosanct budget trust funds and are only used to pay out retirement checks and disability payments. In fact, the Treasury invests all of that payroll tax revenue and uses it along with other general tax revenues to pay the government’s multitude of bills and other obligations.
By shifting the funds from the retirement to disability accounts, the Social Security Administration will have relatively smooth sailing in providing full disability benefits for the next seven years, while lawmakers and the next administration consider proposals for addressing the long-term solvency of Social Security, according to some experts.
In the meantime, Republicans and Democrats in Congress agreed to a number of provisions to the new budget that will improve oversight of the disability insurance program, more closely review beneficiaries’ eligibility to remain in the program, and impose tougher penalties on those found to be engaging in Social Security fraud.
“Another reallocation to replenish the DI trust fund wouldn’t threaten seniors, contrary to the [Republicans’] implicit attempt to put retirement and disability beneficiaries against each other,” Ruffing wrote earlier this year in discussing the overall controversy.