Monday, February 24, 2014

The State of Social Security

This article first appeared on The Epoch Times    


     There is no denying that entitlement reform is necessary.  Created during the Great Depression by President Roosevelt, programs such as Social Security were not expected to last as long as they have.  The old system was based on a 1930's life expectancy but Americans are living much longer now than they did in 1935.  While Social Security is the primary income for millions of retired seniors, serving as a bulwark between a home and living on the streets, many are not aware of the disability insurance to which qualified individuals are entitled.

     Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) serve millions of additional qualified Americans and keep them afloat when and if they are incapable of working.  With millions of Americans drawing Social Security retirement, survivor benefits, and disability insurance, it's not surprising that the programs' funds are expected to dry up. Recently, many reports have surfaced of individuals cheating the system and unqualified individuals being approved for Social Security Disability, meaning the reception of checks from the federal government for the remainder of their life, provided their aliment does not improve.  

     The Social Security Administration (SSA) has been working to reform the system to allow for greater oversight in order to ensure unqualified individuals do not receive lifelong benefits and the mitigation of the severe backlog that has plagued the system.  Last week, SSA proposed changes to their system to require individuals applying for disability to submit any and all medical records pertaining to their claim even if contrary to their case.  Many who apply for disability obtain legal representation to assist with the arduous process.  As recent reports have indicated, some legal representation have only submitted evidence to bolster their claimant's case and in some extreme cases, submitted medical records from doctors with whom they have friendly relations.  While lawyers are always looking for ways to win cases, SSA has been doling out disability checks to a record number of individuals as well.  There are more than 10 million Americans currently on disability, which has forced lawmakers on Capitol Hill to begin investigations on the current system.

     According to the Security Protection Act of 2004, the government can impose a monetary penalty to those who are untruthful when filing disability claims.  For those who knowingly withhold material, SSA may "impose, in addition to any other penalties that apply, civil monetary penalties of up to $5,000 (and assessments) for withholding of information that is material in determining eligibility for, or the amount of, benefits, if the person knows, or should know, that the withholding of such information is misleading."  

     The government stated that in FY 2012, over 3.2 million initial disability applications and over 820,000 hearing requests were handled.  The system is severely backlogged and is only reserved for individuals who are truly disabled and incapable of performing any work in the future - not just incapable of performing one's past work but any type of job, no matter how low skilled (in fact if one can perform any type of job such as a Wal-Mart greeter, by statute, they do not qualify for Social Security disability.)  Certain untruthful law firms and individuals are bleeding the system and creating a dire need to reform entitlements to ensure they are around for future generations.

     News leaked this week of President Obama's proposed FY 2015 budget, which is not going to include cuts to Social Security and Medicare.  In the past, President Obama has attempted to compromise with Republicans over the budget on entitlement reform.  In previous proposals, the president proposed adjusting the way yearly cost of living adjustments for Social Security are determined.  Rather than a standard percentage increase, he proposed using Chained Consumer Price Index or Chained CPI - a method that would ultimately decrease monthly benefits for Social Security recipients (retirement, survivors, and disability) for the purpose of extending the fund well beyond 2025.  Chained CPI is based on the notion that consumers will purchase equivalently cheaper goods.  For example, if the price of apples increases, consumers will then resort to purchasing bananas, which could be priced lower but are comparable products.       

     While news of the proposed budget is good for Democrats who do not want to see cuts to Social Security, it is sure to antagonize Republicans whose chief concerns are reducing the deficit and balancing the federal budget.  Zachary Goldfarb of the Washington Post quoted Vermont Independent Bernie Sanders (who typically caucuses with Democrats) as saying, "I applaud President Obama for his important decision to protect Social Security," while a Boehner spokesperson stated, "This reaffirms what has become all too apparent: the president has no interest in doing anything, even modest, to address our looming debt crisis."

     With Congress gridlocked and a "grand bargain" virtually off the table in terms of a budget, the next logical step for entitlement reform is agency rulemaking, which SSA is proposing.  While this is a very conservative way to start, baby steps must be taken first.  If SSA can eliminate some of the pool who apply for disability, maybe the Treasury will not be writing as many checks to unqualified individuals with great legal representation who "misrepresent" the ailments of their clients and the system may move more efficiently.  

     Entitlement reform has been at the crux of previous budget negotiations with Democrats refusing to budge and Republicans demanding changes.  Rulemaking is another method of getting an auxiliary result yet probably not as effective as legislation.  Privatization is not the answer either.  President Bush wanted to privatize Social Security and invest retirements into the volatile stock market.  In light of the 2008 crash, this would have had disastrous consequences.  Social Security is an important program for millions of Americans despite being bled by a few bad apples.  If reforms are not undertaken, however, the funds will dry out and seniors, widows, and disabled individuals will be cast into the cold.  

     A possible solution to the retirement dilemma could be President Obama's proposed MyRA program, which he outlined in his State of the Union speech.  This program was enacted by executive order and directs the Treasury to establish a fund in which individuals can put money in to an account via standard Roth IRA and offers safe principle returns and interest.  This could solve one crisis, but disability is still an unresolved quarrel.  While the Social Security Act of 1935 did not anticipate today's life expectancy, MyRA may be a way to remedy this old legislation.  Rulemaking is a start to remedying entitlements but ultimately, Congress is going to have to act because these baby steps initiated by agencies are not going to cut it.       

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