Social Security Reform and
People with Disabilities: The Bush Plan
by Jeff Nygaard
President Bush has a
plan for “reform” of the Social
Security system that, if enacted, would have serious negative consequences
for people with disabilities.
Although most people think of Social Security as a retirement program,
the fact is that about one-third of the 47 million Social Security
recipients do not receive retirement benefits at all. Instead, 5.5
million recipients are disabled workers, 1.7 million are spouses
and children of disabled workers, and nearly 7 million are survivors
of deceased workers.
The Bush Plan
Under the current Social
Security system, all workers pay into a common fund, which is then
spent to pay benefits to anyone who has suffered a loss of wages
due to retirement, disability, or death. It works, in other words,
just like an insurance program: we all pay in, and people get benefits
if and when they need them. In fact, Social Security is an example
of what is called “social insurance.”
The Bush plan proposes
moving away from a system of social insurance towards a system
of private investment. Under his plan, a worker would save up money
in a “voluntary personal account” during
their working years, and that money, rather than going into a common
pool to supply benefits for everyone, would be used solely to finance
their own retirement. This would be similar to how a 401k, or an
IRA works.
The money for these
accounts would come from Social Security taxes, meaning that the
basic Social Security benefit for everyone would have to be reduced.
Proponents of this plan insist that the reduction would be more
than made up by the income from the personal accounts, but that
claim is questionable (as we’ll see below).
Social Insurance of Private
Investment?
Understanding the implications
of this major change—from social
insurance to private investment—is crucial for people with
disabilities. It all starts with the idea of a better “rate
of return.”
The President’s talk of getting a “better rate of return” makes
sense in the context of an investment system. A higher “rate
of return” will leave one with more assets to draw from.
However, under the current
system of social insurance, talk of a “rate
of return” makes no sense. In an insurance system, the only “return” one
gets is payment if a claim is made. For example, if you have a car
accident, you get money back from your insurance company to compensate
you. But if you never have an accident—or, in the case of Social
Security, if you never suffer a loss of wages due to disability,
death, or retirement—you will get no “return” because
you don’t need it.
For people with disabilities,
the problem with the President’s
plan is that it is based on the accumulation of assets over time.
For those lucky enough to rely on Social Security only for retirement
financing—and, again, this leaves out fully one-third of beneficiaries—they
can count on an average work-life of 40 to 50 years, during which
they can expect their “voluntary personal account” to
grow to a reasonable size.
However, not everyone
will have all that time to accumulate assets, and this is particularly
true for people with disabilities. In fact, a number of studies
have concluded that such a plan will reduce overall benefits received
by people with disabilities. A 2001 study by the Government Accountability
Office, for example, looked at three different proposals for reform
that include individual accounts, and found that, “The reform
proposals would reduce insurance benefits while creating individual
accounts, with the expectation that the income from an individual
account would largely offset reductions in the insurance benefits.
In our estimates, the income from the individual account was not
sufficient to compensate for the decline in the insurance benefits
that disabled beneficiaries would receive.”
In other words, under
the President’s proposal, people with
disabilities stand to get back less from their private accounts than
they will lose in the reduction in their Social Security benefits.
President Bush is aware
of the concerns of people with disabilities. In an April 28, 2005
press conference, he made a pronouncement on his plans for Social
Security. The President said, “As we fix
Social Security, some things won’t change: Seniors and people
with disabilities will get their checks.” While this may be
true, all the evidence so far suggests the size of those checks will
be greatly reduced, an issue the President has not yet addressed.
Saving the System, or Protecting
the People?
President Bush’s
emphasis on the long-range fiscal problems faced by the system
is that the criteria for evaluating the various reform proposals
has been limited to their impact on the health of the system itself,
as well as their impact on the federal budget and the overall economy.
Disability advocates
are demanding that another criteria be added: How do the various
proposals affect PEOPLE? The Consortium for Citizens with Disabilities
says, “The disability community urges Congress
to request a beneficiary impact statement on every major component
of any serious proposal. In a program that affects millions of individuals
of all ages, it is essential for policymakers to look beyond the
budgetary changes to understand the actual impact on people’s
daily lives.”
The CCDs call has been echoed by many activists and advocates for
disability rights, including Justice for All, the National Council
on Independent Living, the National Spinal Cord Injury Association,
United Cerebral Palsy, the ARC, the American Council of the Blind,
the Coalition on Human Needs, and others.
In conclusion, here are the words of Marty Ford, Co-Chair of the
CCD Task Force on Social Security and on Long Term Services and Supports,
in a statement made last December:
“Social Security as
insurance is essential to the protection for people with disabilities.
Individual contributions protect the worker and certain family members
for life with inflation protection. Partially or fully privatizing
the Social Security trust funds would shift that protection from
the federal government back to the individual, in the form of individual
risk. People with disabilities and their families will be paying
close attention to this debate and will work to ensure that disability
issues remain an important consideration in reform analysis and solution
development.”
Jeff Nygaard publishes
a newsletter on politics called Nygaard Notes, in which he discusses
Social Security— and many other things—at
much greater length. E-mail subscriptions are free; paper subscriptions
are $25/year, which covers printing and postage. To subscribe, send
a check to Nygaard Notes at P.O. Box 14354, Minneapolis, MN 55414,
or visit the Nygaard Notes website at www.nygaardnotes.org
For more information about
Social Security reform and its potential effects on people with disabilities,
check out these resources.
For an excellent overall
review of the Social Security program and the current discussion
about changing it, see “Social Security
Reform: The Basics,” from The Century Foundation (58 pages).
Find it on the web at www.tcf.org
or call 212-535-4441.
The Consortium for Citizens
with Disabilities has set up a Social Security Task Force, and
their website has very useful information, including a set of basic “Fact Sheets.” Find
it at www.c-c-d.org/tf-socialsec.htm or call (202) 783-2229.
The AARP put out a major
report in 2001 called “The Effect
of Social Security Reform Proposals on Social Security Disability
Insurance, Supplemental Security Income, and Private Disability Insurance.” It’s
somewhat lengthy, at 57 pages, but goes beyond Social Security Disability
Insurance to give a broad picture of the larger context of income
options facing people with disabilities. Find it on the web at: www.aarp.org
or call 1-888-687-2277.
