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Is this Social Security trustee trying to undermine Social Security?

Why is this Social Security trustee advocating an effective cut in benefits?

In these parlous times when conservatives are sharpening their knives to slash Social Security benefits, the last thing nearly 60 million beneficiaries need is someone working to erode the program from the inside.

But that appears to be the role of Charles Blahous, a Social Security trustee who has just published a commentary endorsing the House Republican caucus' flagrant attack on Social Security's disability component and, by extension, on the entire program. Blahous' paper is misleading about the issues facing the disability fund, and his prescription points to benefit cuts across the board. More on that in a moment.

As I reported earlier, the House GOP's maneuver addressed the looming exhaustion of Social Security's disability fund, which provides benefits for some 11 million disabled workers and their families but which is projected to run dry in 2016. At that point, there will only be enough money available from its portion of the payroll tax to cover about 80% of disability benefits. Disability checks then would have to be slashed by almost 20%. Since the average benefit is only about $1,150 a month, any such cut obviously would be devastating to many recipients.

Most Social Security advocates say the proper course is to reallocate payroll tax revenues from Social Security's old-age fund to cover the shortfall -- similar to a step that has been taken 11 times since the 1960s. The GOP rule change blocks that action unless it's part of a comprehensive reworking of Social Security's fiscal structure. This is a goal conservatives have been trying to achieve for decades; now they propose to force the issue by manufacturing a severe disability crisis. As Politico reports, the GOP has left itself just enough flexibility to accommodate a one- or two-year reprieve for disability, but its intentions are clear. Why would any responsible Social Security trustee be on board with this?

Blahous occupies the public trustee seat on the Social Security board reserved for a Republican. (The other members are Democratic public trustee Robert D. Reischauer and, ex officio, the commissioner of Social Security and the secretaries of labor, health and human services, and the Treasury.) His resume reflects a long history of conservative opposition to Social Security as it's currently structured, including service as executive director of the 2001-2002 Commission to Strengthen Social Security, which was designed to promote President George W. Bush's privatization scheme. Blahous and I tangled last year over his assertion that Social Security adds to the federal deficit; a brief recap of our debate can be found here.

Blahous would certainly challenge my description of him as someone aiming to erode Social Security from the inside. In his Mercatus paper, he represents himself as a supporter of "reforms to strengthen the disability program and Social Security as a whole." This is the usual formula put forth by those who advocate cutting benefits now so that they don't have to be cut later. You can assert that such a change "strengthens" the program, but to the beneficiary, it means less money.

In his commentary, Blahous observes accurately that disability costs "have grown faster than the program's revenue base." But his description of the reasons for that growth is -- to be charitable -- incomplete. He cites the findings of Social Security's actuaries that most of the growth results from demographic factors, including the aging of the American population and the entry of more women into employment covered by Social Security. Good primers on the drivers of the disability increase have been produced by Social Security Chief Actuary Stephen Goss in 2013, and the Center on Budget and Policy Priorities last year.

But Blahous implies that there are hidden, unexpected forces at work -- that disability prevalence has risen sharply since 1980 "even though there is no evidence suggesting that actual disability is much more common than it was 30 years ago."

This is highly misleading. The definition of disability under the law actually has changed since 1980, largely to encompass more conditions that are truly disabling. In other words, "actual disability" as defined by law has indeed increased.

Notably, in 1984 Congress mandated the inclusion of mental disorders and pain in disability standards and required examiners to "consider the impact of multiple nonsevere impairments in determining disability." A few years later, Social Security instituted a major outreach program to ensure that those eligible for disability benefits applied for them; as expected, this increased the rolls.

But an important point that Blahous and other disability critics gloss over is that the rise in disability rolls is largely finished. Goss told a Capitol Hill audience in 2013 that "all factors increasing growth have peaked" -- and that the trajectory "has been understood and projected for decades." He added: "Is the sky falling, cost out of control? No."

Indeed, the overall per-capita disability incidence rate today is about where it was in the 1970s (see accompanying graphic); statistics showing rapid growth between 1980 and today start at a low point, after Congress sharply tightened standards to reduce the rolls but before the lawmakers reversed themselves, and end at a high point, during the especially severe recession of 2008-2010.

That brings us to Blahous' prescription for addressing the imminent funding crisis, which must be resolved either by cutting benefits or raising Social Security taxes. "Let us set aside political considerations from the outset," he proposes. This is crafty, but pointless. When you're talking about solutions that must be enacted by Congress, how can you possibly set political considerations aside?

That's especially true today, since the House GOP rule change aims to bring any discussion of Social Security finances forward to the Republican Congress of 2015-2016. Blahous writes that "the recently passed House rule allows for the full spectrum of responsible options," but he must know that this House and this Senate would fight a tax increase to the death. That effectively leaves the only option as a benefit cut. Is this what Blahous endorses? 

The only reasonable course right now is to reallocate the payroll tax to cover the disability shortfall. Blahous asserts this would "weaken Social Security's retirement component, which is in even worse long-term condition," but that's also misleading. In the first place, the program's old-age trust fund, which supports retirement benefits, isn't expected to run out until 2034, or 18 years after the disability fund runs out. So it's a bit of a stretch to argue it's in "even worse" condition than disability.

Reallocating payroll tax revenues as required to extend the life of the disability fund to at least 2033 would move the expected depletion of the old-age fund nearer by a single year -- also to 2033.

Blahous says he favors a "comprehensive response" to the finances of both programs because they're fundamentally integrated. He's right about that. But bringing the deadline to address both funds together in 2033 would achieve exactly that end. So why does he argue that reallocation is "the most irresponsible" option "other than doing nothing at all"?

Blahous should know as well as anyone that trying to address Social Security's finances in the next year, under the imminent threat of a 20% benefit cut to its neediest and most vulnerable beneficiaries, would produce a "solution" that solves nothing and hurts everyone.

If that's his goal, then he has no business serving as a trustee of Social Security. He should resign his seat, and conduct his campaign from the outside. 

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