Don't Use A Manufactured Crisis to Cut Social Security Disability

Sanders urges use of payroll tax change and reallocation

WASHINGTON, Feb. 11 – Sen. Bernie Sanders (I-Vt.), the ranking member of the Senate Budget Committee, said today that Congress should reallocate funds into the Social Security disability fund to prevent a manufactured crisis jeopardizing income for the most vulnerable.

Sanders spoke at a Senate Budget Committee hearing to discuss the program. His remarks as prepared for delivery are below:

“Thank you Chairman Enzi. The Social Security Disability Insurance program is a life and death program for nearly 11 million Americans, including more than one million veterans, and 1.8 million children. This is a program that American workers have paid into - it is an insurance program. This is not charity. When Americans pay 6.2 percent of their income in the payroll tax, almost 1 percent of that amount goes into the disability insurance program.

“The average disability insurance benefit is less than $1,200 a month and for 30 percent of beneficiaries this is their entire income. Nobody is getting rich off of disability benefits.

“Sadly, on the very first day of the new Congress, House Republicans passed a rule that would lay the groundwork for a 19 percent cut in Social Security disability insurance benefits.

“This means that the average benefit of approximately $13,980 a year for a disabled person which is almost below the poverty level would be cut by $2,656 to just $11,324.

“Does anybody on this committee really believe that a person with a severe disability (maybe they’re facing a terminal illness; maybe they’re paralyzed; maybe they have had their legs amputated) does anybody in this room really believe that a disabled person in America should be forced to live on $11,324 a year? That is what my Republican colleagues are laying the groundwork for. We must not allow that to happen.

“Mr. Chairman, in my view, the debate we are having today is nothing more than a manufactured crisis which is part of the long-term Republican agenda of trying to cut Social Security. And, in my view, that is a terrible idea.

“Today, Social Security has a $2.8 trillion surplus and can pay out every benefit owed to every eligible American for the next 18 years. That is not the opinion of Bernie Sanders. That comes from the report of the Social Security trustees.

“Now, because of an aging population, more women in the workforce, and an increase in the retirement age, there has been an increase in the number of Americans who are receiving disability benefits.

“Mr. Chairman, this is not a surprise. This is a demographic reality that the Social Security Administration predicted would happen back in 1994. The fact that the Social Security Disability Insurance program is facing a funding shortfall next year is a surprise to absolutely no one. Furthermore, shortfalls in the Social Security Disability Insurance program or the Social Security retirement program is nothing new.

“It has happened 11 times in the past, and has always been resolved in a simple, non-controversial way. And that is by the reallocation of funds between the Social Security retirement fund and the Social Security disability fund.

“As this chart shows, reallocation was done in 1968 under President Lyndon B. Johnson; in 1970 under President Richard Nixon; in 1978, 1979, and 1980 under President Jimmy Carter; in 1982, 1983, and 1984 under President Ronald Reagan; and 1994, 1997, and 2000 under President Bill Clinton.

“Interestingly, of the 11 times that funds were reallocated it turns out that on five occasions it was the disability fund that was reallocated to help the retirement fund.

“Mr. Chairman, every major senior organization in this country -- including the AARP (which submitted a very strong letter to us today), the National Committee to Preserve Social Security and Medicare; and the Alliance for Retired Americans – together representing more than 60 million older Americans – all support reallocation and are united in opposition to the rule passed by the House Republicans to make reallocation more difficult.

“Here is what the AARP letter says: “To prevent any imminent reductions in SSDI benefits, we urge you to rebalance the allocation of Social Security payroll taxes between the OASI trust and the DI trust, as Congress has done with success in the past. Because of SSDI, millions of disabled Americans are able to live their lives with dignity and support their families … The highest priority in the near term is to ensure that SSDI beneficiaries – most of whom are older Americans – are not put at risk of a 20 percent benefit cut in the very near future.”

“I am delighted that President Obama proposed this reallocation plan in his budget request.

“Mr. Chairman, the Social Security trust fund can pay out every benefit owed to every eligible American for the next 18 years. There is no imminent crisis. But I do agree with many of my colleagues on both sides of the aisle that it is important that we do better than 18 years – that we make sure that Social Security is there for our kids and our grandchildren.

“In my view, the best way to extend the solvency of the Social Security trust fund over the long-term is to eliminate the cap that currently exists on taxable income that goes into Social Security.

“Right now, in the midst of massive wealth and income wealth and income inequality in our country, a Wall Street CEO who makes $20 million a year pays the same amount into Social Security as someone who makes $118,500. That is wrong.

“In 2013, I asked the chief actuary of the Social Security Administration to estimate how long the solvency of Social Security would be extended based on legislation that I offered which would apply the Social Security payroll tax on income above $250,000. His answer was that Social Security would be made solvent until 2060 – 45 years from today.

“Mr. Chairman, I ask unanimous consent to insert this letter into the record.

“Mr. Chairman, we all know that the huge increase in wealth and income inequality in America has seen millions of Americans lose a substantial part of their income. In fact, while the rich have become much richer, real median family income today is almost $5,000 less than it was in 1999. This is a tragedy unto itself. But it has also had a major impact on Social Security.

“If income inequality remained at the same level as it was in 1983, Social Security would have $1.1 trillion more than it does today because workers with higher income would have contributed more into the system. If the payroll tax had simply continued to cover 90 percent of all earnings which it did in 1983, rather than the 83 percent that it covers today, the Social Security trust fund would be able to pay every benefit owed to every eligible American not just for the next 18 years, but for the next 38 years.

“By the way, the Center for Economic Policy Research has estimated that my proposal would only impact the top 1.5 percent of wage earners. Fully 98.5 percent of Americans would not see their taxes go up under this plan.

“Further, Mr. Chairman, let me say a word about fraud. While we have got to do everything we can to eliminate fraud in the Social Security Disability Insurance program, we should also be clear in understanding that Social Security’s Inspector General and the GAO have both found that fraud in this program is less than 1 percent.

“Thankfully, we know that there are solutions to combat fraud. By adequately funding anti-fraud programs such as Continuing Disability Reviews, we can greatly reduce the fraud that exists. I look forward to working with my Republican colleagues to make sure that that program is adequately funded.

“But, Mr. Chairman when we talk about fraud I hope that looking at fraud within the Social Security Disability Insurance program is not the only area that this Committee examines for fraud.

“Each and every year, the IRS is unable to collect $350 billion in taxes that are owed because tax cheats are able to defraud the system. In my view, that is an issue we have got to address.

“Today, large corporations and the wealthy are able to avoid paying $100 billion a year in taxes by stashing their cash in the Cayman Islands, Bermuda and other offshore tax havens. That is an issue that we have got to address.

“In terms of defense spending, virtually every major defense contractor in this country has been either convicted of fraud or reached a settlement with the government to address allegations of fraud.

“If we’re really interested in fraud, we would find that virtually every major financial institution in this country has paid billions in fines or legal settlements for fraudulent activities since the financial crisis.

“Fraud is also rampant in the pharmaceutical industry. Since 2004, the top settlements of fraud in the pharmaceutical industry have grown by nearly tenfold, from $345 million in 2004 to $3 billion in 2012. That is an issue we have got to address.

“So Mr. Chairman, I look forward to working with you to combat fraud. But, if we are serious about fraud we have got to make sure that those on Wall Street and some of the largest corporations in America are no longer able to consider settlements of fraud simply as just another cost of doing business.”

Contact: Vince Morris (202) 224-3728