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Hatch Calls for Bipartisan Approach to Shore Up SSDI Trust Fund
In a speech on the Senate floor, Utah Senator Says, “I want to take this opportunity to once again urge the administration and my colleagues - particularly those on the other side of the aisle - to begin to work with me to find solutions that will at least begin to chip away at the known financial imbalances in the DI trust fund so that we can prevent the coming benefit cuts.”
WASHINGTON – In a speech today on the Senate floor, Finance Committee Chairman Orrin Hatch (R-Utah) urged Congress and the Administration to work together and take bipartisan action to address the financial imbalance with the Social Security Disability Insurance (SSDI) trust fund. The SSDI trust fund is expected to be exhausted in late 2016, meaning cuts of around 20 percent for beneficiaries.
“Rather than engaging in yet another unnecessary partisan battle, we need to take this opportunity to work together to see what can be done in a bipartisan way to address the impending exhaustion of reserves in the DI trust fund. Once again, I urge the administration and my friends on the other side of the aisle to work with me on this issue,” said Hatch.
The complete speech, as prepared for delivery, is below:
Mr. President, I rise to speak about the impending exhaustion of the disability trust fund administered by the Social Security Administration.
The Social Security system contains two important programs. One is the Old-Age and Survivors Insurance – or OASI – program, often referred to as the retirement program. That program provides income to insured workers and their families at retirement or death, based on their payroll tax contributions to the OASI trust fund.
The other is the Disability Insurance – or DI – program, which provides income to insured workers who suffer from a disabling condition, based on their payroll tax contributions to the DI trust fund.
Unfortunately, both trust funds face trillions of dollars in unfunded obligations.
Each trust fund is legally distinct, though they have been comingled in the past into an imaginary fund labeled the OASDI trust fund or mingled with the General Fund.
Reserves in the DI trust fund are projected to be exhausted sometime late in calendar year 2016, after which beneficiaries face benefit cuts of around 20 percent. The DI program alone faces unfunded obligations over the next 75 years of more than $1.2 trillion.
Reserves in the OASI trust fund are projected to be exhausted in 2034, after which retirees and their survivors face benefit cuts of around 25 percent. The retirement program alone faces unfunded obligations of around $9.4 trillion over the next 75 years.
Financial operations of the OASI and DI trust funds are overseen by a Board of Trustees composed of six members. Four of them serve based on their positions in the federal government and two are appointed by the President and confirmed by the Senate.
Currently, Treasury Secretary Lew, Labor Secretary Perez, HHS Secretary Burwell, and Social Security’s Acting Commissioner Colvin serve on the board. This is not what anyone would consider a band of fiscal hawks. Yet, in their most recent report, those Trustees – who are, once again, high-ranking officials in the Obama Administration – urged Congress take action “as soon as possible to address the DI program’s financial imbalance.”
Those are pretty clear words.
Those are not the words of any Republican trying to manufacture a crisis. They are not the words of any Republican trying to hold anyone or anything hostage, as some of my friends on the other side have claimed. Rather, they come from Obama administration officials who, in their roles as trustees, are forced to acknowledge reality.
Mr. President, I want to take this opportunity to once again urge the administration and my colleagues – particularly those on the other side of the aisle – to begin to work with me to find solutions that will at least begin to chip away at the known financial imbalances in the DI trust fund so that we can prevent the coming benefit cuts.
Last year, in a Finance Committee hearing on the DI program, I made clear my willingness to work with anyone in Congress or the administration to examine options and ideas about the DI program before the DI trust fund becomes exhausted. Indeed, I have been trying for years to get the administration to engage on this issue. Unfortunately, to date, I have heard nothing from the administration and very little from my friends on the other side of the aisle about this issue.
What I have heard is fear-mongering about supposed Republican plans to slash benefits or engineer a false crisis or hold beneficiaries hostage. I’m not exaggerating, Mr. President, those are the very words they’ve used.
In budget after budget, the President has all but ignored Social Security in general, and the DI program in particular. The President’s budgets generally only include calls for more administrative funding for the Social Security Administration or the occasional idea for an experimental trial.
After years of my asking the administration to engage on the DI program’s financial challenges, the President quietly inserted his policy position on DI just recently. And, with his FY 2016 budget, we finally learned that the President supports a “stand-alone reallocation” of incoming tax receipts away from the retirement trust fund over to the disability insurance trust fund.
Oddly, one of the objectives appears to be to make a reallocation so that both the disability and the retirement trust funds become exhausted in the same future year, which, according to the budget, is 2033.
Needless to say, having a joint trust fund exhaustion as a target doesn’t solve any fundamental financial problem facing the long-run financial challenges of Social Security. Moreover, it takes away any urgency for Congress to improve the disability program now, before it becomes harder to do so down the road.
By stand-alone reallocation, the administration means that it wants to shift funds from the retirement fund to the DI fund for with no accompanying policy changes of any kind.
No change in overall payroll taxes.
No change in benefits.
No substantive changes in program integrity, aside from the persistent call for more mandatory administrative funds.
Not even a study.
Mr. President, there have recently been many misconceptions and misstatements about the idea of a reallocation in general and a stand-alone reallocation in particular.
The last time Congress made a reallocation from the retirement trust fund to the DI trust fund was in 1994. At that time, Social Security trustees wrote the following about the reallocation and the DI trust fund:
“While the Congress acted this past year to restore its short-term financial balance, this necessary action should be viewed as only providing time and opportunity to design and implement substantive reforms that can lead to long-term financial stability…”
Unfortunately, those reforms never came. And now, also unfortunately, the President wants to tell the American people same story: Punt now to provide time for later action.
In addition, the financial challenges facing Social Security are very different from past trust fund account reshuffling, including the one in 1994.
As the public trustees of the Social Security trust funds wrote just last year:
“The present situation is very different from that of 1994…The DI Trust Fund’s impending reserve depletion signals that the time has arrived for reforms that strengthen the financing outlooks for OASI and DI alike.”
Mr. President, some of my friends on the other side of the aisle say that we have had many reallocations between the DI and OASI trust funds in the past and that it’s just ordinary housekeeping, or a technical change. It’s something we do all the time, they say, so there’s nothing really to see here.
True, there have been trust fund reallocations in the past.
Sometimes from OASI to DI.
Sometimes the other way around.
Sometimes with overall payroll tax rate changes, and sometimes not.
But, there has never – let me repeat that, Mr. President – NEVER been a standalone reallocation from the retirement to the disability trust fund.
Most people who would dispute this talk about the reallocation of 1994, which I mentioned earlier.
But, if the 1994 reallocation is somehow to be considered a model of ordinary housekeeping that we should repeat today, I think it is a bad model for the reasons I just identified. Following that model, we would defer action until later, all the while claiming that real changes were on the horizon. And, following that model, we would continue to do nothing to place Social Security on a more stable financial footing.
Moreover, thinking of reallocation as just a normal way of doing business raises many questions.
Why was a separate DI trust fund set up to begin with?
Why do we even call them trust funds, if they are merely fungible accounting devices?
Why not merge the OASI and DI funds and call them the singular Social Security trust fund?
More generally, given the recent, stimulus-inspired mingling of General Fund revenues with the OASI and DI trust funds, why have Social Security trust funds at all?
And, if historical reallocations are to be used to guide what we should do today, then perhaps the recent reallocations from the general fund to both the OASI and DI trust funds, having been the most recent historical reallocation episodes, should be the most prominent precedents.
Mr. President, when circumstances make us focus on the solvency of any trust fund, there are two options.
Option one – we can face up to known financial challenges, examine what can be done about them in a bipartisan way, and try to enact solutions.
Option two – we can kick the proverbial can further down the road by taking the most expedient route to reshuffle resources temporarily in order to get the problem out of the way in the short term.
Unfortunately, the President and his allies here in Congress seem to prefer the latter, kick-the-can strategy. This is especially disappointing given what the President said about Social Security when he took office in 2009.
At that time, the President said about Social Security: “What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further. We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.”
Well, the President has been on watch for six years now. And, if we look at his administration’s proposed solution to the coming DI trust fund exhaustion, he seems more than content to push ANY hard decisions off until his term is over. President Obama now not only wants to kick the can down the road, but he also wants to do it in a way that has never been done before.
Mr. President, elementary budget arithmetic makes clear that you simply cannot strengthen the financial outlooks for our two Social Security programs and their trust funds simply by shifting resources from one to the other. Indeed, Director Elmendorf of the nonpartisan Congressional Budget Office recently said: “if you want to help both programs you’re not going to accomplish that by just moving money around between them.”
Rather than engaging in yet another unnecessary partisan battle, we need to take this opportunity to work together to see what can be done in a bipartisan way to address the impending exhaustion of reserves in the DI trust fund. Once again, I urge the administration and my friends on the other side of the aisle to work with me on this issue.
Mr. President, I’ll have more to say on this issue in the coming days. For now, I yield the floor.
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