Minor Thoughts from me to you

David Autor of MIT talks with EconTalk host Russ Roberts about the Social Security Disability Insurance (SSDI) program. SSDI has grown dramatically in recent years and now costs about $200 billion a year. Autor explains how the program works, why the growth has been so dramatic, and the consequences for the stability of the program in the future. This is an illuminated look at the interaction between politics and economics and reveals an activity of government that is relatively ignored today but will not be able to be ignored in the future.

Some interesting facts.

• Disability insurance includes both a monthly cash payment as well as access to Medicare.
• The disability rolls have more than doubled in in the last 13 years, from 1.2 million people to 2.9 million people.
• Divided by the number of U.S. households, we're spending more than $1500 per U.S. household, on disability insurance.
• By law, the program is biased on favor of people making disability claims. It's comparatively easy to get disability and very, very hard to prove that someone either no longer needs disability or that they made a fraudulent claim in the first place.
• Law firms helping people get disability are entitled to 25% of the disability back benefits. Each year, the Social Security Administration pays out more than $1 billion to these law firms.
• In 1984, SSDI consumed 5% of all Social Security revenues. In 2004, SSDI consumed 10% of all Social Security revenues. It now consumes all of the dedicated SSDI revenue and is cutting into the general Social Security revenue. At the current rate of expenditure, the SSDI trust fund will be exhausted within 5 years.

It looks like SSDI is something that we need to start thinking about reforming as well, as it grows increasingly more expensive to maintain.

∞