July 16, 2012
The Social Security Disability Insurance (DI) program has expanded rapidly during the past few decades, and CBO projects that, under current law, future spending for the program will significantly exceed the revenues dedicated to it.
In a study prepared at the request of the Ranking Member of the Senate Budget Committee, CBO has examined a variety of potential modifications to the DI program. CBO has also prepared an infographic summarizing the application process for DI, the number of beneficiaries and benefits paid under the program, and policies regarding disabled people in other countries.
Alleviating the financial pressures on the DI program would require a substantial increase in revenues for the program, a substantial decrease in the program’s costs, or some combination of those two approaches. Options to increase revenues are straightforward but limited: DI taxes paid (through the Social Security Payroll tax) by employers or employees must rise, or some other source of funding must be used. In contrast, options for reducing costs are both more complex and more numerous: For example, the components of the formula that is used to calculate DI benefits could be altered, as could one or more of the rules used to help determine eligibility for the program. Alternatively, policymakers might want to increase spending for the program by providing greater amounts of support to certain disabled workers or their dependents. CBO in conjunction with the staff of the Joint Committee on Taxation has estimated the budgetary effects of a variety of such modifications to the DI program.
Policymakers could also alter the program in more fundamental ways. A disability insurance system that emphasized workers’ continuing in their jobs, for example, might lead to a higher rate of employment among those with disabilities than is now the case. In this report, CBO reviewed proposals for several such changes to the DI program and described the main themes among them.
Jonathan Schwabish of CBO’s Health, Retirement, and Long-Term Analysis Division wrote the report. Other CBO analysts, including Sheila Dacey, Charles Pineles-Mark, and David Rafferty, contributed significantly to the analysis.