Will Congress Go Over the Social Security Cliff?

Paul Ry­an has em­phas­ized re­form­ing the So­cial Se­cur­ity dis­ab­il­ity pro­gram so that dis­abled work­ers have more in­cent­ive to go back to work. Sources on and off Cap­it­ol Hill, lib­er­al and con­ser­vat­ive, say that House Re­pub­lic­ans are now shap­ing a pro­pos­al in pur­suit of that goal.

But de­pend­ing on the fi­nal form it takes, the policy could be­come a polit­ic­al flash point between Re­pub­lic­ans and Demo­crats—and com­plic­ate Con­gress’s ef­forts to avert a 20 per­cent be­ne­fit cut to 9 mil­lion dis­abled work­ers and their fam­il­ies next year.

The stick­ing point is how ex­actly to change the dis­ab­il­ity pro­gram to en­cour­age work. Un­der dis­cus­sion is a plan to gradu­ally phase out be­ne­fits, sources said, while al­low­ing dis­abled work­ers to earn more money than they cur­rently can. But if the pro­pos­al hits those mak­ing the least amount of money, as some fear it might, Demo­crats are ex­pec­ted to balk.

Ry­an’s of­fice em­phas­ized that noth­ing has been fi­nal­ized and that ne­go­ti­ations are on­go­ing. “We con­tin­ue to work with stake­hold­ers and mem­bers to de­vel­op the policy, and none has been set,” said Brendan Buck, a Ry­an spokes­per­son, in an email.

A cliff awaits in late 2016, at which time the So­cial Se­cur­ity dis­ab­il­ity in­sur­ance trust fund is pro­jec­ted to be un­able to pay full be­ne­fits. That means money will likely need to be moved from the much big­ger re­tire­ment pro­gram, either as a loan or as a shift in tax rev­en­ue, to avert the cut.

Re­pub­lic­ans on Cap­it­ol Hill have pledged to pre­vent the cut, but they also passed a rule in Janu­ary stip­u­lat­ing that they must im­prove So­cial Se­cur­ity’s over­all solvency be­fore agree­ing to shift any funds around. Smal­ler changes to the ad­min­is­trat­ive side of the pro­gram and anti-fraud meas­ures are likely to get a look, but mul­tiple sources fol­low­ing the is­sue said they thought Re­pub­lic­ans were look­ing to make a more sig­ni­fic­ant change.

And top con­ser­vat­ives like Ry­an have been pretty trans­par­ent about want­ing to over­haul the dis­ab­il­ity pro­gram to en­cour­age people to work more if they can.

“A dis­ab­il­ity should in no way di­min­ish a per­son’s right to fully par­ti­cip­ate in all as­pects of so­ci­ety, and that should be the spir­it of [dis­ab­il­ity in­sur­ance],” Ry­an said at a Ways and Means hear­ing re­view­ing the is­sue on Ju­ly 9. “It will be there for you if you can’t work. But if you want to work, we won’t get in the way. We should re­cog­nize every­body has something to of­fer. Every­body can con­trib­ute, and we should en­cour­age that.”

The gen­er­al idea, sources said, would be to in­crease the amount of money that dis­abled work­ers can make without risk­ing the loss of their So­cial Se­cur­ity be­ne­fits. The cur­rent threshold is $1,090 per month, and Re­pub­lic­ans have cri­ti­cized the so-called cliff as a dis­in­cent­ive to work. (The av­er­age So­cial Se­cur­ity check for dis­abled work­ers is $1,165 per month.)

“The rules ac­tu­ally make it harder for people to work more,” Ry­an said at the Ju­ly hear­ing. “If you make just one dol­lar more than you’re al­lowed, you get kicked off the pro­gram. In oth­er words, it’s a lot safer to stay on the side­lines. No sur­prise then that only one half of 1 per­cent earn enough to get off the pro­gram.

But a straight in­crease in the cap would cost the fed­er­al gov­ern­ment money be­cause more people would re­ceive dis­ab­il­ity in­sur­ance. The pro­pos­al un­der dis­cus­sion would help off­set the costs by in­tro­du­cing a tiered sys­tem, sources say. At the bot­tom threshold, people would start to lose some of their be­ne­fits, but be­ne­fi­ciar­ies would be able to keep re­ceiv­ing at least a small dis­ab­il­ity check while mak­ing more than the cur­rent $1,090 cutoff. The be­ne­fit losses would pro­gress on a gradu­al scale up the in­come lad­der

The dev­il is as al­ways in the de­tails, and one in par­tic­u­lar sticks out: Where do be­ne­fits start to de­crease? A pos­sible bot­tom threshold be­ing floated, as de­scribed by mul­tiple sources, would be $300 per month. Once people start mak­ing more than that, their checks would shrink.

That’s where the GOP pro­pos­al could start to run in­to some prob­lems with the oth­er side. Most fol­low­ing the is­sue be­lieve that Re­pub­lic­ans want Demo­crat­ic sup­port for whatever they pro­pose, to avoid mak­ing changes to So­cial Se­cur­ity along par­tis­an lines in a pres­id­en­tial elec­tion year. But Demo­crats seem un­likely to vote for a policy that, its op­pon­ents would ar­gue, gives the poorest people a dis­in­cent­ive to work.

“Such an off­set would re­ward work among be­ne­fi­ciar­ies who can earn more than (the cur­rent cap). It would pen­al­ize work, however, among people with earn­ings between the new threshold and” the cur­rent cap, wrote Kath­leen Romig at the lib­er­al Cen­ter for Budget Policy and Pri­or­it­ies last week. “Such a change would es­sen­tially shift be­ne­fits from more severely im­paired work­ers who are not able to earn more to less im­paired work­ers who can.”

Oth­er de­tails will also be watched closely: Would the policy be im­ple­men­ted na­tion­ally and per­man­ently, or with a lim­ited au­thor­iz­a­tion? Or does Con­gress ap­prove pi­lot pro­jects, with the ex­pect­a­tion that if it proves suc­cess­ful, it will be taken na­tion­wide? Everything is said to be on the table.

The gen­er­al concept isn’t in­her­ently par­tis­an, and there might be a way to struc­ture the policy so that it doesn’t de­volve in­to par­tis­an in­fight­ing. A work­ing group from the Bi­par­tis­an Policy Cen­ter, which looked at op­tions for im­prov­ing the So­cial Se­cur­ity dis­ab­il­ity pro­gram and put out a re­port last month, said that there was “wide­spread in­terest” in over­haul­ing the pro­gram so that be­ne­fits start to de­crease gradu­ally as people earn more money but people would be al­lowed to earn more than the cur­rent $1,090 cap.

The pre­ferred start­ing point for the taper, the au­thors wrote, would be $700 or $800. But they found that would be pro­hib­it­ively ex­pens­ive. The bi­par­tis­an group re­com­men­ded in­stead that Con­gress ap­prove gradu­al be­ne­fits for the roughly 1.6 mil­lion people eli­gible for both dis­ab­il­ity in­sur­ance and the So­cial Se­cur­ity sup­ple­ment­al in­sur­ance pro­gram. They also pro­posed a na­tion­al pi­lot pro­ject for people un­der 50 who have only dis­ab­il­ity in­sur­ance. The pi­lot would test dif­fer­ent thresholds, above which every $2 in earn­ings would be off­set by $1 in be­ne­fit cuts.