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21–288 2016

HEARING ON MAINTAINING THE DISABILITY 

INSURANCE TRUST FUND’S SOLVENCY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SOCIAL SECURITY 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 25, 2015

SERIAL 114–SS01 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

PAUL RYAN, Wisconsin, Chairman 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

DIANE BLACK, Tennessee 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

JIM RENACCI, Ohio 

PAT MEEHAN, Pennsylvania 

KRISTI NOEM, South Dakota 

GEORGE HOLDING, North Carolina 

JASON SMITH, Missouri 

SANDER M. LEVIN, Michigan, 

CHARLES B. RANGEL, New York 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

JOSEPH CROWLEY, New York 

DANNY DAVIS, Illinois 

LINDA SA ́ NCHEZ, California 

JOYCE MYER, Staff Director 

JANICE MAYS, Minority Chief Counsel and Staff Director 

SUBCOMMITTEE ON SOCIAL SECURITY 

SAM JOHNSON, Texas, Chairman 

JIM RENACCI, Ohio 

VERN BUCHANAN, Florida 

AARON SCHOCK, Illinois 

TOM REED, New York 

TODD YOUNG, Indiana 

MIKE KELLY, Pennsylvania 

XAVIER BECERRA, California, 

LLOYD DOGGETT, Texas 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 


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C O N T E N T S 

Page 

Advisory of February 25, 2015 announcing the hearing ...................................... 2 

WITNESSES 

Charles P. Blahous III Ph.D. Public Trustee, Social Security and Medicare 

Boards of Trustees ............................................................................................... 17 

Witness Statement .................................................................................................. 20 

Ed Lorenzen Senior Advisor, Committee for a Responsible Federal Budget ... 29 

Witness Statement .................................................................................................. 33 

Webster Phillips Senior Legislative Representative, National Committee 

to Preserve Social Security and Medicare .......................................................... 33 

Witness Statement .................................................................................................. 48 


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MAINTAINING THE DISABILITY INSURANCE 

TRUST FUND’S SOLVENCY 

WEDNESDAY, FEBRUARY 25, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SOCIAL SECURITY, 

Washington, DC. 

The Subcommittee met, pursuant to other business, at 2:03 p.m., 

in Room B–318, Rayburn House Office Building, the Honorable 

Sam Johnson [Chairman of the Subcommittee] presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SOCIAL SECURITY 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–3625 

Tuesday, June 30, 2015 

No. SS-01 

Chairman Johnson Announces Hearing on 

the Financial Risk of Returning to Work 

U.S. Congressman Sam Johnson (R-TX), Chairman of the House Committee on 

Ways and Means Social Security Subcommittee announced today that the Subcommittee will hold a hearing on the Social Security Administration’s (SSA) management of earnings reports from disability beneficiaries trying to go back to work. 

The SSA faces difficulties processing earnings reports and adjusting benefits in a 

timely fashion, in part due to the complexity of the work incentives in the Disability 

Insurance program. These difficulties can cause large overpayments for disability 

beneficiaries trying to return to work. The hearing will take place on Tuesday, 

June 16, 2015 in B-318 Rayburn House Building, beginning at 2:00 p.m. 

Upon the announcement, Chairman Johnson made the following comment: 

‘‘There are two problems for the American taxpayer when Social Security 

can’t manage earnings reports: first, dollars go out that shouldn’t; second, 

individuals who want to work are discouraged from doing so. It’s time Congress takes a look at what drives overpayments. The American people 

want, need, and deserve nothing less.’’ 

A list of witnesses will follow. Oral testimony at this hearing will be from invited 

witnesses only. However, any individual or organization may submit a written statement for consideration by the Committee and for inclusion in the printed record of 

the hearing. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on Tuesday, June 30, 2015. For questions, or if you encounter technical problems, please 

call (202) 225-3625 or (202) 225-2610 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any materials submitted for the printed record, and any written comments in response to a request for 

written comments must conform to the guidelines listed below. Any submission not in compliance with these guidelines will not be printed, but will be maintained in the Committee files 

for review and use by the Committee. 

1. All submissions and supplementary materials must be submitted in a single document via 

email, provided in Word format and must not exceed a total of 10 pages. Witnesses and submitVerDate Mar 15 2010 21:15 Nov 22, 2016 Jkt 021288 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\IN\21288\21288.XXX 21288

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ters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. The name, company, address, telephone, and fax numbers of each 

witness must be included in the body of the email. Please exclude any personal identifiable information in the attached submission. 

3. Failure to follow the formatting requirements may result in the exclusion of a submission. 

All submissions for the record are final. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202-225-1721 or 202-226- 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above 

Note: All Committee advisories and news releases are available at http:// 

www.waysandmeans.house.gov/. 

f 

Chairman JOHNSON. Thank you. This hearing will come to 

order and I’d like to welcome our Members today. 

Since becoming chairman of the Social Security Subcommittee, I 

have had 14 hearings on the disability program, including the one 

today, which is about maintaining Disability Insurance Trust 

Fund’s solvency, and before continuing, I see we have many individuals from the disability community in the audience today. I 

would like to welcome you all and thank you for coming. You know 

better than most that this program is not without its problems, and 

in fact, less than two years from today, the Disability Insurance 

program will not have enough money to pay full benefits. 

Now, as a subcommittee, we’ve looked at this program from nearly every angle and I think it’s fair to say this program can and 

must work better for people with disabilities, as well as for the 

hard-working American taxpayer. 

A few weeks ago, Representative Cathy McMorris Rodgers and 

Chairman Paul Ryan met with members of the disability community, including one of our witnesses today, Mr. Phillips. I wasn’t 

able to make that meeting, but I agree strongly with what my colleagues said. We need to have a conversation, a fact-based conversation, on how to make the program work better. 

During that meeting, the idea of a commitment to you all, the 

disability community, came up. As a follow-up to that meeting, 

Chairman Ryan and I want to extend my hand to you all and offer 

the following commitment that I ask my colleagues on both sides 

of the aisle to join me in. 

One, ensuring benefits continue to be paid to individuals with 

disabilities and their family members that rely on them; two, preventing a 20 percent across the board benefit cut; three, making 

the Disability Insurance program work better; and, four, promoting 

opportunity for those trying to return to work. 

That’s a common sense commitment to all Americans, and I 

know the devil’s in the details, but I hope all my colleagues on this 

Subcommittee, and especially the ranking member, can join me. 

Over the coming months, we’re going to have plenty more conversations about the disability program and as we have these conVerDate Mar 15 2010 21:15 Nov 22, 2016 Jkt 021288 PO 00000 Frm 00007 Fmt 6633 Sfmt 6602 I:\WAYS\IN\21288\21288.XXX 21288

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versations, it’s my hope that they will not be hijacked by political 

point scoring. The American people expect us to work together. 

Today we’re going to hear from our witnesses about the options 

to make sure benefits continue to be paid. They will discuss how 

Congress has addressed Social Security’s finances in the past and 

how Social Security’s finances then compare to today. 

Many people have said that we have reallocated the payroll tax 

11 times. While it’s true Congress has shifted the payroll taxes between the two Social Security Trust Funds, it’s happened only six 

times. Moreover, Congress has typically made changes to improve 

Social Security. Recently, Acting Commissioner Colvin argued for 

more research into the disability program before making any 

changes. Well, guess what? That was the same argument in 1994 

as well, the last time a reallocation took place. 

Now, some like to say the President’s proposal to reallocate some 

of the payroll tax that goes for the retirement program toward the 

disability program is no big deal. Well, I would argue it is a big 

deal. The Administration just wants to kick the can down the road 

and offers no ideas on how to make the program work better. 

That’s not right. Americans who have paid in to Social Security 

and are currently receiving benefits, as well as today’s younger 

workers, deserve better. 

This Congress should and must act to make sure that Disability 

Insurance benefits continue to be paid in 2016 and beyond to those 

who rely on them, and in doing so, we ought to make this program 

work better for those who depend on it. 

I thank our witnesses ahead of time for being here today and 

look forward to hearing your testimony. I really do appreciate you. 

I now recognize Ranking Member Mr. Becerra for his opening 

statement. 

Mr. BECERRA. Thank you, Mr. Chairman. 

Mr. Chairman, there is but one Social Security. One single Social 

Security system provides birth to death protection for American 

workers and their families. 

Just like the 168 million other Americans, I pay into Social Security with every paycheck. My paycheck doesn’t have a line that 

says Disability Insurance and a line that says retirement or survivorship benefit insurance when I pay my contributions in to Social 

Security. It has one line for Social Security contributions, FICA, 

FICA/Social Security. My Social Security contributions, just like 

those of every other American worker, pay for one Social Security 

system that protects my family and me, along with all other workers and their families, when we need it. You can’t break Social Security up into separate pieces. 

When we begin our working lives, none of us knows what kind 

of insurance from Social Security we’ll need or at what stage in our 

lives we’ll need it. Some workers die young, leaving family to use 

the survivors’ benefits portion of Social Security. About one in four 

of today’s 20 year olds will become disabled before reaching retirement age and therefore, will need the disability portion of Social 

Security. 

We also know that the risk of serious work-ending disability will 

rise significantly as Americans age. Americans are twice as likely 

to qualify for Social Security benefits because of—excuse me. 


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They’re twice as likely to qualify for Social Security benefits because of a disability at age 50 as they are at age 40 and they’re 

four times more likely to qualify at age 60. 

These three Social Security protections—disability, retirement, 

and survivors’ benefits—make up a seamless whole, but it seems 

that some in Congress are trying to segregate Social Security into 

separate parts, a retirement plan, life insurance, and a disability 

protection, but Social Security can’t be ripped apart. 

The 11 million Americans currently receiving Social Security Disability Insurance benefits paid for their benefits with hard work 

and now they rely on them, just like the other 48 million Americans who receive Social Security as well. They earned this Disability Insurance protection by paying into it every month. This 

isn’t welfare. They earned it with every paycheck. Their benefits 

average about $1,100 a month, but for these folks, it’s a lifeline. 

More than half of disabled workers receiving Social Security 

would live in poverty without their earned benefits, despite years 

of hard work before they became disabled, and don’t forget, as 

we’ve learned in many prior subcommittee hearings, it is very hard 

to qualify for Social Security on the basis of a disability. The eligibility rules are very strict and only 4 of every 10 applicants are 

found to have impairments which are severe enough to qualify for 

Disability Insurance under Social Security. 

Historically, Congress has treated Social Security’s Trust Funds 

as one unified reserve. Isn’t that the way everyone in America sees 

it, as one system? Congress has from time to time fine-tuned the 

Social Security contributions, going into the Trust Fund to ensure 

that they are equally able to pay Americans the benefits they’ve 

earned, whether disability, survivor benefits or retirement. 

Congress has never before used an accounting shortfall in one 

part of the system to prevent earned benefits from being paid to 

those who earned them elsewhere. The allocation of workers’ Social 

Security contributions has been fine-tuned by Congress for decades, 

11 times to date, but it seems like this time, some are trying to rip 

out Social Security’s earned disability protection and make it something separate or claim it is taking resources away from seniors. 

This is a manufactured crisis and I urge folks to take a look at 

some of the—at the chart that’s on the screens right now. Social 

Security has $2.8 trillion available in its Trust Fund to pay full 

earned benefits to all recipients. The 11 million people who are facing a 20 percent benefit cut helped build up that surplus with their 

contributions; however, rather than reassuring all Americans that 

Congress will let Social Security use its worker-funded reserves to 

pay 100 percent of earned benefits, this year it appears that my 

colleagues on the Republican side have adopted an unprecedented 

new rule that programs in a 20 percent benefit cut for 11 million 

Americans receiving Social Security Disability benefits. 

Americans of all ages and walks of life overwhelmingly support 

Social Security. 

Mr. Chairman, I have a—I have here statements from AARP and 

the Alliance for Retired Americans who represent millions of American seniors, from Paralyzed Veterans of America, who represent 

disabled veterans, and from 48 other groups representing disabled 

Americans. All of them ask Congress to let Social Security use its 


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reserves to prevent benefit cuts and they express concern about 

using earned Social Security benefits as a bargaining chip. 

Mr. Chairman, I ask you now to consent to include these statements in the record. 

Chairman JOHNSON. Without objection. 

[The submission of the Honorable Xavier Becerra follows:] 


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f 

Mr. BECERRA. Over the long term, Mr. Chairman, Social Security does face a challenge, but it’s a manageable one, one I look forward to addressing on a bipartisan basis, keeping in mind the vital 

role Social Security plays in every American’s life, but the first step 

is to let Social Security use its own money, the money workers 


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have contributed, to pay Americans the full benefits they need and 

that they have earned. 

And with that, Mr. Chairman, I look forward to the testimony of 

our witnesses. 

Chairman JOHNSON. Thank you. 

That was a nice statement. I happen not to agree with you, you 

know that. 

[Laughter] 

Mr. BECERRA. I think I was aware of that, Mr. Chairman. 

Chairman JOHNSON. As is customary, any member is welcome 

to submit a statement for the hearing record. Before we move on 

to our testimony today, I want to remind our witnesses to please 

limit your oral statements to five minutes. However, without objection, all of the written testimony will be made part of the hearing 

record. 

We have one witness panel today. Seated at the table are 

Charles Blahous, Ph.D., Public Trustee, Social Security and Medicare Board of Trustees; Ed Lorenzen, Senior Advisor, Committee 

for a Responsible Federal Budget; Webster Phillips, Senior Legislative Representative, National Committee to Preserve Social Security and Medicare. 

And with that, Dr. Blahous, welcome, and thank you for appearing this afternoon. You may proceed. 

STATEMENT OF CHARLES BLAHOUS, PH.D., PUBLIC TRUSTEE, 

SOCIAL SECURITY AND MEDICARE BOARD OF TRUSTEES 

Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member, all the Members of the Subcommittee. It is, as always, an 

honor to appear before the subcommittee, in this case to discuss 

the financing challenges facing Social Security’s Disability Insurance Trust Fund. 

If I could, I’d like to issue a brief disclaimer before I begin the 

main points from my written testimony. As trustees, there are certain things that we deal with and certain things that we don’t tend 

to. Generally, as trustees, we make big picture financial projections 

for the Trust Funds as a whole. We don’t typically analyze alternatives to current law or the policy details of the programs. So I 

can offer the trustees’ projections and some of the history of those 

projections and statements, but there are no trustees’ positions 

with respect to policy alternatives. 

The first point that I would like to make is simply that under 

our current projections, we are anticipating a financing shortfall in 

the Disability Insurance Trust Fund, a substantial one, and one 

that is now nearly immediate. In our last report, we projected that 

the Fund’s reserves would be depleted in the fourth quarter of 

2016, at which point the program would only have sufficient revenues to make about 81 percent of scheduled benefit payments, and 

obviously that date could move a few weeks in either direction, but 

as we closer to it, it’s clear that it’s coming very quickly. 

Second point is that—and the member statements have already 

alluded to this—there are certainly issues that are unique to Disability Insurance that many are concerned with, but the biggest 

problem that the Disability Insurance Trust Fund faces is simply 

that the entirety of Social Security is out of financial balance, and, 


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in fact, the actuarial balance in the other Social Security Trust 

Fund, the Old-Age and Survivors Fund, is actually somewhat later 

in both absolute and relative terms, and this is relevant today because it means that if Social Security were in actuarial balance 

today as a whole, we wouldn’t need to have a larger share of the 

payroll tax going to the Disability Insurance Trust Fund. 

The main reason that DI is hitting the wall before the Old-Age 

and Survivors Fund is that the boomers are moving through they 

have moved through their ages of peak disability incidence before 

they reach retirement age, and so those pressures are in the process of shifting from the DI Trust Fund to the OASI Trust Fund. 

And the third point I’d make is simply that delay in dealing with 

the larger financing problem is dangerous and this is a point that 

the trustees’ reports have made for the last several years. We always include various illustrations to make this point in each report, but, basically, if we were to take the path of least resistance 

and just sort of shuffle the accounts around until 2033 and try to 

act then, it would be too late. By that point, there would be no 

practical likelihood of being able to fix the shortfall. So anything 

that has the effect of further delaying the necessary financing corrections is inimical to the interest of the program and its participants. 

One example that we give in last year’s report is that if you 

imagine a solution enacted today where we hold current beneficiaries harmless and ask how much would you have to reduce 

scheduled benefits for people newly coming into the system in order 

to balance the system’s finances and the answer is about 21 percent, which is unpleasant but mathematically doable, but if you 

tried to do the same thing in 2033, at that point even a 100 percent 

reduction in benefits for people newly coming onto the rolls would 

be insufficient to right program finances. So, at that point, it’s really too late to fix the shortfall, and so early action is definitely important. 

The last point that I would make is simply that it would be a 

fairly significant break with past practice to have a tax rate reallocation between the Trust Funds without some type of action improving Social Security’s overall financing outlook. 

Now, obviously, as lawmakers, you’re well within your rights to 

act however you choose, according to whatever rationale you 

choose, whether it’s in keeping with past practice or not, but I 

think it’s important to be aware of not only the adverse substantive 

implications of further delaying financing corrections, but also just 

some of the history of how we got here. 

Generally speaking, there have been a number of tax rate reallocations throughout Social Security’s history. Pre-1972 they 

tended to be accompanying other benefit increases that were being 

legislated and the tax rate reallocations reflected the changed expectations of benefits, and then in ’77 and 1983, there were tax 

rate reallocations to reflect the financing corrections that had been 

enacted in the program as a whole. 

What happened in 1994, and I realize I’m running out of time, 

but in 1994 we had something happen that was fairly unusual. We 

had a situation where the disability costs had been rising in the 

late 1980s and early 1990s and there was a view that there wasn’t 


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sufficient information to inform a comprehensive solution at that 

time. So the trustees came before Congress and basically said we 

recommend a two-pronged approach. In the near term, reallocate 

the taxes in order to meet the trustees’ short-term solvency test, 

and also follow-up with more comprehensive reform. And after the 

taxes were reallocated, the next trustees’ message reiterated, 

‘‘While the Congress acted this past year to restore the 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,’’ et 

cetera. ‘‘We hope, et cetera, that the Congress will take action over 

the next few years to make this program financially stable over the 

long term.’’ 

Now, we know that the second half of that didn’t happen and 

now it’s 2015 and we’re very close to the wall, and it’s clear that 

at this point, there’s not enough time to have substantive reforms 

that would avert Trust Fund reserve depletion without some source 

of additional revenues to the Disability Insurance Trust Fund. So 

it seems we’re going to have that as at least part of our answer, 

but what I think both the history and the current projections tell 

us is that generally speaking, Social Security finances have been 

sustained to date because lawmakers have stepped up and made 

some difficult choices. They’ve raised revenues or slowed cost 

growth stats whenever they’ve been confronted with a projection of 

imminent Trust Fund depletion. 

To break with that precedent and to shift funds between the 

Trust Funds without similar financing improvements could render 

it more difficult to repair Social Security finances in the future. 

Thank you. 

Chairman JOHNSON. Thank you. 

You know, do you have a solution? 

[Laughter] 

Mr. BLAHOUS. Well, two-part answer. One is the trustees as a 

group do not have a position on what’s the optimal solution, and, 

the stat trustees put forth what’s called a Section 709 letter that 

lays out the range of options in terms of an all tax solution, an all 

benefit restraint solution and combinations between. 

You know, all six trustees probably have their own personal 

views and I’d be happy to respond particularly just to how I would 

approach the problem, but the trustees as a group do not have a 

position. 

Chairman JOHNSON. Are they all different? 

Mr. BLAHOUS. I think there’s probably more common ground 

than is usually supposed. I think there’s actually a tremendous 

amount of common ground between I think different trustees as to 

how they’d approach the problem. 

Chairman JOHNSON. Well, that’s good to know. Thank you for 

your testimony. 

[The prepared statement of Mr. Charles Blahous:] 


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f 

Chairman JOHNSON. Mr. Lorenzen, welcome. Please proceed. 

STATEMENT OF ED LORENZEN, SENIOR ADVISOR, COMMITTEE 

FOR A RESPONSIBLE FEDERAL BUDGET 

Mr. LORENZEN. Thank you. 

Chairman Johnson and Ranking Member Becerra and Members 

of the Subcommittee, I appreciate the invitation to appear before 

you today. 

I have been involved in Social Security issues as a congressional 

staff member and in the nonprofit sector for over 20 years. On a 

personal note, I had experiences with Social Security as I had the 

responsibility for managing my parents’ finances for several 

months after my mother was gravely injured in an automobile accident with only the very modest Social Security support from my 


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stepfather’s retirement benefit and my mother’s disability benefit 

providing their income. 

I’ve also come to know many people in the disability community 

through my mother’s work as a disability rights activist and my involvement with groups for people with spinal cord injuries. These 

experiences have given me a deep understanding of the importance 

of the SSDI program and its modest benefit levels. 

The Community for a Responsible Federal Budget has launched 

the McCrery-Pomeroy SSDI Solutions Initiative to identify potential improvements to the DI program. However, my testimony 

today does not reflect the views in the McCrery-Pomeroy Initiative 

or the co-chairs who have not taken a position on reallocation. 

I will briefly summarize a few conclusions from my review of 

prior reallocations. 

First, prior reallocations have typically been accompanied by reforms to improve overall solvency. The requirements in the Johnson Rule is more consistent with past reallocations than the current proposals for clean reallocation. 

Second, prior reallocations generally rebounds payroll taxes to 

align revenues with the relative cost of each program and shifted 

revenues from the Trust Fund in a stronger actuarial condition. 

Neither would be the case with a reallocation enacted today. 

Third, clean reallocations, which were intended to avoid imminent Trust Fund depletion and buy time for Congress to enact legislation to improve solvency, resulted in no action until the Trust 

Fund was facing depletion again. That is a risk we cannot afford 

to take again given that the entire Social Security Trust Fund is 

facing depletion in less than two decades. 

Finally, depletion of the SSDI Trust Fund should be an impetus 

for comprehensive Social Security reform that addresses solvency of 

both OASI and DI programs. Failing that, any reallocation should 

be for a limited period of time and accompanied by modest changes 

improving overall Trust Fund solvency and improving the DI program, along with a process that will facilitate further action on 

comprehensive reform. 

Congress has enacted reallocation legislation on six occasions. As 

Dr. Blahous has said, the first two were part of legislation increasing benefits when the overall program had a surplus and reallocation was necessary to cover the costs of increased benefits in the 

DI program. That’s very different than the situation we have today. 

The reallocations in 1977 and ’83 were parts of major Social Security reforms that reduced OASDI shortfalls. There were two reallocations in 1980 and 1994 that were closer to clean reallocation 

being discussed now, but with key differences. The 1980 legislation 

was a temporary reallocation, benefiting the OASI Trust Fund for 

two years and was preceded a few months by reforms to the DI 

program, which improved DI Trust Fund solvency. 

The 1994 legislation included modest changes in Social Security, 

but was framed as buying time for more significant reforms, and 

as Dr. Blahous noted, the 1994 reallocation was designed by the 

trustees to ensure that the DI Trust Fund met the test of short 

range financial adequacy, which resulted in the Trust Fund being 

extended for a little over 20 years. 


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However, the anticipated 2016 DI Trust Fund depletion does not 

mean that further reallocation wasn’t anticipated in 1994. In fact, 

when the trustees initially recommended the reallocation, they 

warned against further reallocation, writing, ‘‘Further reallocation 

could raise concerns about the financial viability of the OASI program.’’ 

Although the President’s proposal for reallocation that extends 

the life of the DI Trust Fund for nearly two decades is in many 

ways similar to the 1994 legislation, the current context is very different. In 1994, OASI depletion was projected to be 40 years away, 

whereas now we only have 20 years, leaving much less time to take 

action without severe disruption for beneficiaries and taxpayers. 

A key rationale for the 1994 reallocation does not apply today. 

The early ’90s’ shortfall in the DI Trust Fund was unexpected and 

due to factors that were not understood. In contrast, the current 

projections of DI Trust Fund have been anticipated for some time. 

Because Congress failed to heed the warnings of trustees after 

1994, some reallocation to the DI Trust Fund will be necessary. 

There are no realistic options to provide sufficient savings in time 

to prevent depletion by 2016. Nonetheless, one of the lessons we 

have learned is that a reallocation with no reforms will remove 

pressure on policymakers and increase the chances that we won’t 

act until we face the crisis of imminent Trust Fund depletion 

again. 

If we delay action for another 20 years, we won’t be able to solve 

the problem with reallocation. The only options will be extremely 

steep increases in taxes, deep and immediate reduction of benefits 

or general revenue transfers to the combined Trust Fund. 

Ideally, DI Trust Fund depletion should be viewed as a warning 

about the financial problems facing the entire Social Security program and provide the impetus for comprehensive Social Security 

reform. Addressing depletion of the DI Trust Fund in the context 

of comprehensive Social Security reform would provide policymakers with a much broader range of options on both benefits and 

revenue side to improve the solvency of both the DI and OASI program, which, as I said, faces a larger long-term shortfall. 

However, agreement on comprehensive Social Security reform 

may not be possible before Congress needs to act. Absent comprehensive reform, policymakers should enact a smaller reallocation or interfund borrowing to delay depletion by a few years and 

modest reforms improving Social Security solvency and improving 

the DI program, along with a mechanism to ensure further action 

on Social Security solvency, such as the Delaney-Cole Social Security Commission Act. 

A smaller reallocation extending the DI Trust Fund for a shorter 

period of time would keep pressure on to address the underlying 

shortfalls in the Social Security system, just like the temporary reallocation in 1980 and the subsequent limited interfund borrowing 

authority did before the 1983 reforms, in contrast to the 1994 reallocation that was followed by 20 years of inaction. 

In conclusion, policymakers should not enact a clean reallocation 

to delay depletion of the DI Trust Fund without taking steps to address the shortfalls facing Social Security and enact improvements 

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et stands ready to help the subcommittee and your colleagues in 

Congress and the Administration to deal with these issues. 

[The prepared statement of Mr. Ed Lorenzen follows:] 


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Chairman JOHNSON. Thank you. 

I don’t know if we can ever figure out how to solve the shortfall, 

but you all are here to help. Especially if people are on Social Security that don’t deserve to be on there, disability in particular. 

Mr. Phillips, you’re recognized. 


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STATEMENT OF WEBSTER PHILLIPS, SENIOR LEGISLATIVE 

REPRESENTATIVE, NATIONAL COMMITTEE TO PRESERVE 

SOCIAL SECURITY AND MEDICARE 

Mr. PHILLIPS. Thank you, Chairman Johnson and Ranking 

Member Becerra and Members of the Committee. On behalf of the 

members of the National Committee to Preserve Social Security 

and Medicare, I want to thank you for holding this hearing. I’m 

honored to be here before the committee today. 

I started attending hearings in this room in 1987 when I was a 

new hire at the Office of Legislation at the Social Security Administration. I’ve formed a reverent attitude toward this commission’s—the committee’s deliberations and it’s the first time I’ve sat 

at this table and it is indeed a great honor. 

First, a few words about our organization. Our members come 

from all walks of life and every political persuasion. What unites 

them is their passion for protecting and strengthening Social Security and Medicare, not just for themselves, but for their children 

and grandchildren. Our members see Social Security as an intergenerational compact that protects all members of the family. To 

them, it is a single, integrated system of benefits that provides protection from birth to death. It is a system where all of its parts are 

equally important. 

Before addressing the financial issues confronting the Disability 

Insurance program, I would first like to briefly describe the nature 

of the program. First and foremost, Disability Insurance coverage 

is an earned right. Workers become insured by paying into the system just as they do for retirement and survivors’ benefits. Like everyone else, their taxes accumulate in the Social Security Trust 

Funds, which currently have a balance of about $2.8 trillion. 

Social Security Disability is the largest income support program 

for disabled Americans providing monthly cash benefits to workers 

who sustain severe, long-term disabilities. The rules for qualifying 

are stringent and the people who do qualify have serious health 

conditions that leave them unable to work in any substantial degree. In fact, one in five women and one in six women dies within 

five years of being approved for benefits. 

The disability program currently pays benefits to 11 million disabled workers and their families. Beneficiaries include more than 

a million military veterans, 4.4 million women, 1.8 million African 

Americans, and 1 million Hispanic Americans. Benefits paid by disability are modest, but vitally important to the workers and families who receive them. The average benefit of $1,980 for the disabled worker is just $2,300 above the federal poverty line. The importance of these benefits is illustrated by the fact that one in 

three disabled Americans depend on disability benefits as their sole 

source of income. 

The need to strength the financing of the Disability Insurance 

program is not a surprise. As far back as 1995, the Social Security 

actuaries have projected that the Disability Trust Fund would face 

a funding shortfall in 2016. The reasons for this have been well 

known and are primarily demographic in nature and are expected 

to stabilize in years to come. Among them are the growth in the 

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creased incidents of disability so that it now nearly matches that 

of men, and the increase in the retirement age that was enacted 

in 1983, and essentially, I think, perhaps not fully appreciated is 

what it would do to the disability program. 

As the 2016 deadline to avoid default approaches, its looming 

presence would become an increasingly heavy burden on the minds 

of the millions of disabled Americans who constitute some of the 

most vulnerable members of our society. Congress should act now 

to ease that burden by rebalancing the revenue flow into the DI 

Trust Fund so that it remains able to pay all benefits it owes to 

disabled beneficiaries and to do so on time. This rebalancing has 

been done numerous times since the DI Trust Fund was established in 1956 and can be done today without compromising the 

ability of the overall program to pay benefits for nearly the next 

20 years. 

Now is the time for all Members of Congress to step up and show 

their commitment to Social Security and the millions of Americans 

who receive disability benefits from the vitally important program. 

Concludes my comments and I’ll be happy to answer any questions. 

Chairman JOHNSON. Thank you for your testimony. I appreciate it. I appreciate all of you talking to us today. 

As customary, for each round of questions, I’ll limit my time to 

five minutes and ask my colleagues also to your limit your time to 

five minutes as well. 

In response to the disability program going broke next year, 

President Obama proposed in his budget to reallocate the Social 

Security payroll tax for five years. 

Dr. Blahous, briefly, in layman terms, talk to us in English. 

What does that mean? 

Mr. BLAHOUS. Well, the trustees don’t usually speak in layman’s English, but I’ll try. 

[Laughter] 

Chairman JOHNSON. I know that. 

Mr. BLAHOUS. The—workers pay a 12.4 percent payroll tax and 

it is distributed between the Old-Age and Survivors Trust Fund 

and the Disability Insurance Trust Fund and by law, we can only 

pay benefits for each—in each category from the respective Trust 

Fund, and right now, of that 12.4 percent tax, 10.6 goes to the OldAge and Survivors Trust Fund and the other 1.8 goes to the Disability Insurance Trust Fund, and basically what the Administration has proposed is just to change that allocation so that for the 

next five years, from 2016 through 2020, another 0.9 points, 2.7— 

in total 2.7 points, would go to the Disability Insurance Trust Fund 

and less would go to the Old-Age and Survivors Trust Fund. 

Chairman JOHNSON. In actual dollars, what does that mean? 

Mr. BLAHOUS. It’s about $330 billion over five years, plus—— 

Chairman JOHNSON. Million? 

Mr. BLAHOUS [continuing]. Of course it would compound interest in the Trust Fund, the $330 billion over the first five. 

Chairman JOHNSON. Billion, okay. And over that five-year program, how much does the disability program need to have to pay 

full benefits? 

Mr. BLAHOUS. Over that five-year period? 


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Chairman JOHNSON. Yeah. 

Mr. BLAHOUS. I mean how much are we short? 

Chairman JOHNSON. Yeah. 

Mr. BLAHOUS. We’re basically—it’s probably about $130 billion 

over that five years. 

Chairman JOHNSON. A shortage? 

Mr. BLAHOUS. That’s right. Those are the—right, those are the 

shortfalls in the DI Trust Fund over those five years. 

Chairman JOHNSON. Well, meanwhile, doesn’t shifting money 

hurt the retirement program? Is it in trouble? 

Mr. BLAHOUS. Well, the Old-Age and Survivors Trust Fund 

definitely faces a shortfall and has a substantial imbalance that 

needs to be corrected, yes. 

Chairman JOHNSON. So if I have this right, over the next five 

years, the President wants to take 330 billion from the retirement 

program that’s going broke and give it to the disability program, 

which will be broke next year if we don’t do anything. 

What’s the cash flow deficit that the retirement program is then 

facing? 

Mr. BLAHOUS. Over those five years? 

Chairman JOHNSON. Yeah. 

Mr. BLAHOUS. It’s in the ballpark of $300 billion over those five years, a little over $300 billion, $330—— 

Chairman JOHNSON. So how do we cover that? 

Mr. BLAHOUS. Well, that’ll be—that would be a period of time 

that the Old-Age and Survivors Trust Fund is drawing on its Trust 

Fund reserves, which are redeemed from the general fund. 

Chairman JOHNSON. So the President’s plan basically doubles 

the retirement program’s shortfall in order to give disability more 

money. Is that correct? 

Mr. BLAHOUS. Yes. Yes. 

Chairman JOHNSON. Mr. Lorenzen, the President’s proposed 

stand-alone reallocation, which violates the House rule that I 

champion, and now how many reallocations has Congress voted on 

and of those, how many of those have been done without reform? 

Mr. LORENZEN. As I stated in my testimony, Congress has enacted legislation reallocating payroll taxes six times. Several of 

those had reallocations occurring in several stages or had the reallocation reversed. So there have been 11 different years in which 

there was a reallocation, but that was of 6 bills—bills that were actually passed by Congress. 

Chairman JOHNSON. Well, you keep saying 11. He did too and 

we only voted six times. 

Mr. LORENZEN. Six, yes. I’m saying that a couple of them—for 

example, the 1994 reallocation did the reallocation over three steps. 

The most recent 2000—but Congress approved reallocation six 

times. 

Chairman JOHNSON. Okay. 

Mr. LORENZEN. And of those six, the first two happened when 

the Trust Fund was running a surplus. The entire Trust Fund was 

running a surplus and paid for higher benefits. Since the Trust 

Fund’s been running shortfalls, all of the reallocations have either 

been part of reform legislation or in anticipation of future reforms. 

For example, the 1980 was—only about—a short period of time. 


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The 1994, reallocation would be to some extent the outlier in extending solvency for many years without reforms. 

Chairman JOHNSON. The President’s proposal would align the 

solvency dates of the retirement and disability program to 2033; is 

that correct? 

Mr. LORENZEN. Yes. 

Chairman JOHNSON. And is that fair to say, that that’s unprecedented absent full reform? 

Mr. LORENZEN. Correct, the only two times that reallocation 

has brought the two Trust Funds aligned were after 1977 and 1983 

when they were part of comprehensive Social Security reform. They 

extended both Trust Funds. 

Chairman JOHNSON. Do you think that those who are concerned about the disability program’s looming insolvency are manufacturing a crisis? 

Mr. LORENZEN. No. The 19 percent reduction in benefit and the 

depletion of the Trust Fund is definitely a crisis. The fact that 

we’ve known this is coming for 20 years doesn’t make it any less 

of a crisis. It means that we have seen a crisis coming and failed 

to act and that’s not a reason to continuing delaying acting. 

And the depletion of the DI Trust Fund is, in many ways, a 

warning of even greater crisis facing the Social Security system as 

a whole, that it could be—the depletion of the DI Trust Fund could 

be viewed a warning buoy warning of the tidal wave coming to the 

Old-Age program, and that, as Dr. Blahous, pointed out, if we don’t 

act about the looming crisis facing the Old-Age program, that the— 

that’ll be a much greater crisis with much more severe consequences. 

Chairman JOHNSON. Well, isn’t that just kicking the can down 

the road? 

Mr. LORENZEN. And if we don’t use the warnings of this DI depletion to recognize the problems facing the Old-Age program, 

that’s going to create a greater crisis and that’s to the extent that 

the problem—the DI Trust Fund has been depleted because of demographic pressures, those same pressures are going to be—are 

now creating problems for the Old-Age program. 

Chairman JOHNSON. Well, like the President said, I think we’re 

at the end of the road and don’t need to kick it down there any further. We have to signal seriousness in this by making sure some 

of the hard decisions that are made under our watch today, that 

they are not someone else’s in the future. 

In your opinion, as a public trustee, Dr. Blahous, would you 

agree we can’t afford to wait to find solutions? 

Mr. BLAHOUS. I do agree and the trustees have stated as a 

group that the earliest possible action would be desirable and obviously you, as lawmakers, need to figure out how much you can 

agree on and how much can be enacted. Some is better than none. 

All is better than some. I don’t know what the universe of the possible is, but certainly the—— 

Chairman JOHNSON. Yeah, like we can ever agree on anything. 

I don’t know. 

Mr. BLAHOUS. But the more we can do, the better. 

Chairman JOHNSON. Mr. Becerra, you’re recognized. 

Mr. BECERRA. Thank you, Mr. Chairman. 


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And actually I think we can agree because I think we all agree 

there is a challenge at Social Security. 

Chairman JOHNSON. You and I can. 

Mr. BECERRA. I think we could, yes, and I would urge us, Mr. 

Chairman, to sit down at some point quietly if we could with some 

of the experts, the trustees and others to have a good conversation 

among ourselves as members on the subcommittee and then see if 

we could come up with something together to make sure that Social 

Security for the long term is not just strong and vibrant, but that 

it is something that people can have confidence in. 

So I think we can do that. My concern is though that when you 

impose these artificial rules in our House, in the House of Representatives, that force a 20 percent cut to benefits, that is like 

holding a gun over the head of 11 million workers who became disabled and say, ‘‘Unless Congress does its job, 11 million people are 

going to see their benefits cut by 20 percent,’’ when you have got 

$2.8 trillion in the reserves of the Social Security system that they 

paid for. 

There is where I think it becomes difficult to have a good conversation if we are doing this in a panic mode because we have got 

an artificial gun to the head of 11 million folks, Americans, who 

unfortunately became disabled after they were working and are 

looking to get their earned benefits. 

Thank you all for your testimony. 

[The prepared statement of Mr. Webster Phillips follows:] 


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Chairman JOHNSON. Mr. Phillips, let me ask you a question 

since you deal with a lot of seniors and a lot of folks who are disabled and on the disability insurance benefit under Social Security. 

You mentioned that about a million veterans in America today 

qualify for disability insurance benefits under Social Security. 

Many of them served their country. 


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In fact, many of them have a disability as a result of their service 

to our country and receive these benefits. 

How would they be affected if this rule in the House that requires there to be a 20 percent benefit cut to their disability insurance benefits; how would they be affected if this Congress did not 

come up with a solution and had to live with that rule? 

Mr. PHILLIPS. Well, the cuts—— 

Mr. BECERRA. You need your microphone on. 

Mr. PHILLIPS. That is a very good question, and thank you for 

the prompt. 

The dilemma that you would confront is that a veteran, no matter how grievously wounded in combat or otherwise injured or disabled, would face the same reduction in benefits that the ten million non-veterans would receive. 

A 20 percent reduction in benefit for the average worker would really be a hard hit. Currently the average benefit is $13,980 a 

year. If you take that down by 20 percent, that becomes $11,184 

a year, and the poverty level in the United States for a single individual currently is $11,670. So you would, in essence, be taking the 

average disabled individual veteran, otherwise, down and put them 

into poverty. 

Mr. BECERRA. Let me ask you this other question. You probably 

know quite a few Americans who were workers, became disabled 

or are on the disability insurance program through Social Security. 

I want to make sure it is clear to workers who become disabled 

and, therefore, get disability benefits under Social Security. Did 

they pay into the Social Security system the way folks who are getting it for retirement paid in? 

Mr. PHILLIPS. Yes. The benefits can be paid only if you are insured to receive them. The way the Social Security disability insured status works is it is easier for younger workers to qualify for 

benefits. Because of their youth, they have not had the opportunity 

yet to participate as fully in the workforce as they would if they 

had not become disabled. 

But, yes, everybody who gets benefits has to meet the insured 

status. They have to have paid in enough to qualify. 

Mr. BECERRA. And do disabled workers have to reapply once 

they reach retirement age, 66 or so years of age? Say you became 

disabled on the job when you were in your 50s and you qualified 

for disability insurance under Social Security. You reach the age of 

66. Do you have to now reapply to see if you can get your Social 

Security retirement benefits? 

Mr. PHILLIPS. No. The transition is seamless. The only people 

I believe who are really aware of it are the actuaries and the people in the Treasury Department who debit the Old Age and Survivors Insurance Trust Fund for the benefits paid after the person 

reaches full retirement as opposed to the disability insurance. 

Mr. BECERRA. So you go from one to the other because it is one 

system, the Social Security system. 

Mr. PHILLIPS. It is an invisible transition. There is no notice. 

There is no effect on the benefit amount. The accountants simply 

make a change as to which fund is being debited. 

Mr. BECERRA. Final question, gentlemen, any of the three of 

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solve the need to do a reallocation of fine tuning of the two accounts so that you can avoid the 20 percent cut? 

Mr. BLAHOUS. I am not. I am persuaded we are in a position 

where no matter what we do we are going to have to have some 

inflow of funds into the DI Trust Fund. 

Mr. BECERRA. Okay. 

Mr. LORENZEN. I would agree with that. I think there are 

changes that you can be made in the DI program with program integrity such as you propose or continued savings reviews that could 

achieve some savings, but not nearly enough to avoid depletion, 

and some reallocation is going to be necessary. 

Mr. PHILLIPS. I have to agree with both of them, yes. 

Mr. BECERRA. Well, thank you for offering your testimony, and 

we will take your admonition. 

And I think, Mr. Chairman, we have an opportunity, I think, 

maybe to figure out how we can sit down and see if we can come 

up with something, but short of that I do not think we should put 

in jeopardy the benefits that people have earned who are now disabled. 

So with that I yield back. 

Chairman JOHNSON. We need a fix. 

We have a vote called, three exactly. Are you all able to stay here 

while we go vote and come back? 

Mr. PHILLIPS. Yes, sir. 

Chairman JOHNSON. Thank you very much. 

We stand in recess. 

[Recess.] 

Chairman JOHNSON. We are back in session. I will just call the 

meeting back in session. 

Mr. Renacci, would you care to comment? 

Mr. RENACCI. Thank you, Mr. Chairman. Thank you for holding 

this hearing. 

I want to thank the witnesses for being here. 

I want to reiterate, Mr. Chairman, your statements. The Social 

Security Disability Program provides an essential income safety 

net. We all know that it will be unable to pay full benefits in 2016. 

I think we want to make sure that it is solvent. 

No one is in favor of across-the-board cuts, and we are committed 

to making sure that does not happen. But no matter how you slice 

and dice the numbers, Social Security is really on an unsustainable 

path. This should be of serious concern to my colleagues and the 

American taxpayers. 

Each year the program trustees determine the shortfall between 

expected revenue and costs over the next 75 years. This shortfall 

is trillion of dollars in promises that the government cannot keep. 

It is also important to note that the shortfall is not reflected in 

the financial statements published annually by the IRS. 

Mr. Chairman, for the record, I would like to submit the graph 

that is on the board, if there is no objection. 

Chairman JOHNSON. Without objection. 

[The submission of the Honorable Jim Renacci follows:] 


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Mr. RENACCI. It is interesting because many times down here 

in Washington we talk about surpluses or we talk about the assets 

that we have. We sometimes forget that we also have liabilities on 

a true balance sheet, and my concerns would be and I want to 


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make sure that all of my colleagues notice that since 2009 to 2014, 

the unfunded liabilities have doubled. 

So even though Mr. Becerra said that we have $2.8 trillion in surplus, when you take the true balance sheet and show $10.6 trillion in unfunded liabilities, you have a net deficit of $7.8 trillion. 

Mr. Blahous, would you agree with those numbers? 

Mr. BLAHOUS. Actually that $10.6 trillion deficit counts the 

value of the Trust Fund. So if you were to take the cash deficits 

over the next 75 years, they would actually be about $13.4 trillion, 

but we count the $2.8 trillion Trust Fund against that to arrive at 

the $10.6 trillion figure. 

Mr. RENACCI. So it is even worse than 7.8 percent, and I think 

that is one thing that we have to start looking at in Washington. 

I know nobody up here wants to see the fund be insolvent, and I 

think everybody wants to make sure that the fund is around for 

the future. We want to make sure it is around for not only disability, but also for retirement, and I think it is very important 

that as we look at this fund we consider that. 

Now, we are talking about shifting from the retirement to disability. Mr. Blahous, would the unfunded liabilities still continue to 

be there? 

I mean, we have a trend here where unfunded liabilities are 

going up. So if we just shift, would the trend continue to go up? 

Mr. BLAHOUS. It would. That is a combined figure for the two 

Trust Funds, both the Old Age Survivors and the Disability Trust 

Funds. So that total figure would not be changed by the fact of a 

transfer. 

Mr. RENACCI. Right. So I think we can all agree that if we continue down this path and we talk about shifting funds or moving 

funds from one fund to the other, we are still talking about in its 

entirety a Social Security fund that is, as you just said, $10.6 trillion unfunded going forward; is that correct? 

Mr. BLAHOUS. That is correct. 

Mr. RENACCI. So I do not have the projections going forward. 

I had the pleasure or maybe displeasure of working in the business 

community for 30-plus years before I came to Congress. If I had a 

balance sheet that showed an unfunded liability growing at this 

pace, this would be extremely alarming to me. I am assuming it I 

alarming to the Board of Trustees. 

Mr. BLAHOUS. We are very concerned about it, yes. 

Mr. RENACCI. Okay. So I think the answer has to be not shifting because if we are shifting we are not doing anything. The unfunded liabilities are continuing. We have to come up with a plan 

as to how we can fix this program. 

One thing I have noticed, the recent growth in the number of DI 

beneficiaries has been explained, but not all of it. I mean, as I 

heard in some of the testimony, some of the growth is population, 

aging, more women working enough to be eligible, and increasing 

applications from unemployed workers. 

However, a cause of a portion of this growth remains unclear. 

What actions are being taken to get all of those answers and find 

out what all of the issues are? 

Mr. BLAHOUS. There is actually some very good information 

that has come out of the Social Security Chief Actuary’s Office. 

There 


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is some testimony that was put together in 2013 that I actually 

drew heavily from in preparing my own testimony. 

It basically breaks down the costs, the drivers of disability costs, 

into different categories, and it assigns percentages to each one. 

The percent that comes from just the growth of the working age 

population, the percent that comes from the aging of the working 

age population, the percent that comes from the increased insured 

status of women, and the percent that comes in increases in 

awards within the insured population. 

So they all play a role. I would say I am speaking very crudely 

here, but it is about two-thirds demographics and about one-third 

expansions in award incidence per insured member of the population. 

Mr. RENACCI. Thank you. 

Thank you, Mr. Chairman. I am running out of time. 

Chairman JOHNSON. Thank you. 

Mr. Doggett, you are recognized. 

Mr. DOGGETT. Thank you, Mr. Chairman. 

If I understood the answers that each of you gave to Mr. Becerra 

earlier, it is not a question of whether there needs to be a reallocation of funds to Disability Insurance Program. It is a question of 

how much and under what conditions. 

Is that a fair summary for each of you? 

Mr. BLAHOUS. I would say yes. 

Mr. LORENZEN. Yes. I think it is a question of does it delay action or does it move the ball forward in solvency for the entire program. 

Mr. PHILLIPS. You are right, sir. Nobody has settled on any 

package of alternatives that would obviate the need for reallocation. 

Mr. DOGGETT. Well, thank you very much, and thank you for 

all of your testimony. 

I believe that there are some dangers to our Social Security system, to all of it, but that those dangers have less to do with the 

fact that we have an aging population which puts more demands 

on the system and will require some changes than it does from the 

dangers that are posed within this Congress and from some of the 

ideological groups that have never accepted the idea of social insurance as a program in which all of society participates. Everyone 

has a stake, and then should you have the misfortune of disability 

or the likelihood of retirement, that that system is there and you 

can count on it. It will be there no matter your circumstance. You 

will be able to rely upon it. 

I believe that there is unanimity that some reallocation will be 

necessary as we have done 11 times in the past, or six to be more 

precise from Congress; 11 total times in the past, and that is what 

must be done here, and it is a question of under what circumstances. 

The rule that was adopted on short notice at the beginning of 

this Congress on a totally partisan basis certainly has been a cause 

of concern. I agree with the commitment that the chairman made 

at the beginning of the hearing, but I am concerned about what 

that means to achieve that commitment in terms of the rule that 

was adopted. 

I do not think that when we make a contribution to Social Security we are dividing in our minds, or any American is, the difVerDate Mar 15 2010 21:15 Nov 22, 2016 Jkt 021288 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 I:\WAYS\IN\21288\21288.XXX 21288

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ference between old age and disability and survivors. We are contributing toward a package, and the fact that some of this package 

of contributions may have to be reallocated in order to assure the 

solvency of the disability portion of the fund is something that is, 

I believe, a reasonable step, and what the President has called for 

is a reasonable step. 

There may be a need for some changes, some reasonable changes, 

at the same time, but the reallocation is necessary. As several of 

you have pointed out, when someone receives disability, a significant number of those who are receiving disability have already 

achieved age 50. They will soon be switching to the retirement system or will be relying on the retirement system, and they do not 

have to reapply in order to get retirement. 

I think that there have been some indications within this Committee over the last two years that there were some problems with 

fraud in the disability system, and I think there are some problems, and we need to ferret those out. It is one of the reasons, Mr. 

Becerra, that I know we came together under your leadership to introduce the Fraud and Error Prevention Act during the last session, and we will be reintroducing something similar. 

To the extent that there are examples of fraud and better ways 

to police that, it is in the interest of everyone, taxpayer and beneficiary, that we get at those problems. But we ought not to use the 

abuse of the system by some to lead to a limitation on vital benefits 

that so many people who receive Social Security disability rely 

upon. 

Similarly, I think it is important that we preserve a system, a 

reasonable system, that allows those who have a disability claim, 

given the complexities of the Act, to be able to rely on legal counsel 

to represent them under appropriate circumstances. To the extent 

that there is, again, any abuse of the system or the way judges operate in that system, let us ferret them out and get to them, but 

preserving the right of individuals to get access to a disability 

check and to have effective advocacy within that complex system 

is an important one for us to preserve. 

I hope we can move forward on reintroduction and a markup of 

the Social Security Fraud and Error Prevention Act as soon as possible. 

I yield back. Thank you. 

Chairman JOHNSON. Thank you. 

The number is six times that we have. 

Mr. DOGGETT. Here, but I guess 11 total reallocations. 

Chairman JOHNSON. Six. 

Mr. DOGGETT. Well, is it not, Mr. Chairman, 11 total reallocations of which Congress has voted, according to the witnesses, six 

times? Other reallocations? 

Chairman JOHNSON. Okay. Thank you. 

Mr. KELLY. 

Mr. KELLY. I thank the chairman. 

While you gentlemen are here, I also like Mr. Renacci came out 

of the private sector. You made comments earlier about where the 

revenue comes from for Social Security, and the figures you used 

were, I believe, you said that it is 12.4 percent. Explain how that 

breaks down though. 


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Mr. BLAHOUS. How it breaks down in terms of which Trust 

Fund it goes to? 

Mr. KELLY. Well, no. Who puts the money in? 

Mr. BLAHOUS. It comes from the compensation of workers. 

Mr. KELLY. But in addition, the 12.4 percent is made up, 6.2 

percent from the employer, 6.2 percent from the associate. 

Mr. BLAHOUS. Right. 

Mr. KELLY. So it is not exactly the worker who is putting in 

12.4 percent of his or her income. 

Mr. BLAHOUS. Right. I will say that 6.2 percent is directly paid 

by the employee; 6.2 percent is paid by the employer. Economists 

generally view the entire 12.4 percent as coming out of the available compensation. 

Mr. KELLY. And they cap though at what point? At what point 

does the contribution stop? 

Mr. BLAHOUS. It is about $113,000. 

Mr. KELLY. You are talking about the total. 

Mr. BLAHOUS. Yes, 113,000 in wages for the year. 

Mr. KELLY. In actual dollars that go into the fund though. 

Mr. BLAHOUS. Well, no. That is the wages that are subject to 

the tax. 

Mr. KELLY. Right, right, but the wages that go in does not 

equate to what actually goes into the fund. It’s is 12.2 percent of 

that number. So it is capped. 

Mr. BLAHOUS. That is right. 

Mr. KELLY. Okay. And I think that is part of the problem, because we have a growing deficit, and we look at it. So I just wanted 

to make sure that I understood because I think Mr. Renacci hit on 

the balance sheet. What we are talking about today, and I think 

for most people that I have talked to back home in Western Pennsylvania, most young people say, ‘‘Look. I put money in out of every 

pay, but I am never going to see that money.’’ 

And my question, I guess, is it comes down to we go all the way 

back to 1994, and we said, okay, we will do something now to make 

sure because the sustainability and the solvency of this program is 

absolutely important to the people that we represent. 

So in 1994, we recognized that. What changes did we make between 1994 and today to address that situation? 

Mr. BLAHOUS. Really almost none. 

Mr. KELLY. Nothing. 

Mr. BLAHOUS. And I would say pursuant to your point, we are 

up against the wall now, and there is the threat of a 19 percent 

sudden benefit reduction facing the disabled. I think part of what 

we are trying to say in our testimony is that we do not want to 

be in the same situation again in 2033 where if we just delay and 

move funds around, then in 2033 we are going to be in the situation where everything is going to be—— 

Mr. KELLY. I share that opinion with you, but I have only been 

here four years. I have never seen this body do anything that addresses long-term debt. We talk about it, and then we do something 

temporarily. We put a Band-Aid over something that needs major 

surgery, and then we say we papered over a structural problem. It 

will be all right until it breaks again. 


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It is broken now. The money that is going into the Social Security fund right now today, being provided by working people and 

their employers, is the money that is being used to fund. There 

really is not a large buildup of cash in this program. It is a cash 

flow situation. 

But everything that we look at, there should be sirens and red 

lights flashing and everything else, but I get the feeling that somehow if we can just get past this crisis, we will be all right because 

tomorrow the sun is going to come out. So all we have to do is get 

through the storm tonight. Then tomorrow we will get up and we 

will go to work. The sun will be out, and everything is going to be 

fine. 

But the reality of all this is Washington’s inability to face longterm problems is what continues to drive our debt through the ceiling. I mean, I see us getting to the point where the only payments 

we can make are interest payments on our debt. We will never be 

able to address the principal. 

Every one of these programs is unsustainable under its current 

structure, and so I am trying to understand. While we all agree 

with that, so where is the substantive change? Where is the structural change? Where is the ability not only to recognize that you 

are on the Titanic and the iceberg is right in front of you as opposed to ‘‘do not worry. We can probably get through it tonight and 

tomorrow we will be on even seas again’’? 

I just do not understand that. I have been here and this is almost five years. Honestly, coming from the private sector, if this 

were happening in my business, what I would be doing is advertising that this business is for sale because it is no longer sustainable, the model I am on, and structurally I cannot exist. 

Is there anything you see happening that is going to sustain it? 

We have got to make sure we are able to keep promises to people 

that we have already made and they feel they have paid into. And 

the reality of it is they paid some into, but the return on it because 

of the numbers, the actuaries say, okay, fine, up to a certain point, 

but people are living a lot longer. So that debt keeps growing and 

that commitment keeps growing. 

What would you suggest right now today? I mean, we have to 

have serious structural changes to this and not just talk about a 

temporary transfer of cash to make payments. 

Mr. LORENZEN. We definitely need to make structural changes 

both on the benefits and revenue side. We need to look at the program comprehensively for a solution. Unfortunately, what we have 

seen with Social Security and with other issues generally is that 

action happens when there is a crisis and action forcing event. 

In contrast, in 1980 we did a reallocation that only extended the 

Trust Fund for a limited period of time, and there was still a deadline out there and the pressure for action, and then there was 

inter-fund borrowing. That led to the 1983 reforms which did extend solvency because there was that deadline and that pressure 

as opposed to 1994 when we did a reallocation that extended the 

Trust Fund for 20 years and there was no action. 

I think there is no shortage of ideas, and we know what the options are in terms of looking at the revenue side or changes in the 

benefits and retirement age and cost saving adjustments and other 


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changes, and that there is a policy decision to be made about what 

the proper mix of actions needs to be taken, but it needs to be 

taken sooner than later, and unfortunately absent the pressures, it 

is unlikely that that is going to happen until it is too late. 

Mr. KELLY. Well, policy is always trumped by politics, and it is 

a shame. But we know it is coming. We know it is already here, 

and we have had our head in the sand for far too long. 

This is a very serious thing. If we are going to keep promises, 

we have to make structural changes. 

Thank you. I appreciate it. 

Thank you, Chairman. 

Chairman JOHNSON. Well, you heard him. What is your solution? 

Mr. LORENZEN. Well, I think that we need to look at a combination, and I think there is a wide range. I did work on the 

Simpson-Bowles Commission, which I thought had a balance, but 

I think there is, you know, a good range. There needs to be some 

combination of looking at reducing benefits for middle and higher 

income workers, increasing the eligibility age with an increase 

in—— 

Chairman JOHNSON. What is your number one solution? 

Mr. LORENZEN. I do not think there is any one single one. I 

think it needs to be a combination looking at it together, looking 

at both on the benefits side and the—— 

Chairman JOHNSON. You would be lucky if you get concurrence 

throughout this Committee, much less the Congress. 

Thank you. 

Mr. BLUMENAUER. Thank you, Mr. Chairman. 

I would like to take up maybe where my friend from Butler left 

off. First of all, I do not feel comfortable with the indictment. Over 

the course of the last 20 years, Republicans in the House have been 

in charge 16, 17 of the 21 years. I do not want to have a broad 

brush indictment for them not doing anything since 1994. 

I am embarrassed that when we were in charge for four years 

that we did not move forward. I do not think it is that hard. The 

rhetoric about somehow this is a system that is bankrupt and is 

not going to be there for our young people I think is bogus. 

The system if we do not do anything will pay 75 percent of the 

benefits. The sooner we act, the less disruptive it will be. All of our 

witnesses agree, notwithstanding the rule that you have passed, 

that there will be a reallocation. We will waive that point of order, 

and there will be a reallocation. You witness has said that; our witness has said that. 

I really would like us to be able to focus in on what we do going 

forward. What is the cause? We have had identified that there was 

a major demographic shift. We have got more women now working, 

and that was perceived. We have got geezer Baby Boomers like me 

who are in our prime disability years, some of us more than others, 

and something that does not get enough attention is that we also 

back in 1983 where there was bipartisan action, we raised the retirement age. 

So there are a lot of people now who are on it for two more years 

that did not happen. So we have really made a significant demographic shift. I think all of us ought to go visit our Social Security 


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offices. Talk to the people who work there. Look in the waiting 

room. 

Those of you who have done it, it is an eye opening experience. 

There is no doubt in my mind that there are a few people who are 

gaming the system, and I want us to be able as a committee to 

focus on how we fix that. I would just say respectfully that I do 

not think the way we fix that is cutting the Social Security Administration by 5,000 people when the work load is going up, which 

happened recently, and I think we need to reflect on that and talk 

to the people who are working in those offices about what it means 

because there are some complex issues in terms of dealing with 

people with disability. It is not easy. 

Now, I want to deal with what the big issue is, and that is we 

have put off as a Congress, both parties have put off diving in to 

make the hard decisions. I do not think the decisions are that hard. 

When we last were as a Congress dealing with Social Security, 

I spent a lot of time with people in my community talking about 

what the situation was, acknowledging that we could not go on for 

30 or 40 years. I do not want my kids to be facing a 25 percent 

reduction. 

But as I talked to people they understand that there are about 

a half a dozen things that are going to happen. We are going to 

cut benefits. We are going to raise taxes. We are going to broaden 

the base. We might do something in terms of another benefit cut 

in terms of what is the inflation rate, and maybe we do something 

for well off recipients who are treated differently than others, but 

it is six or seven things. 

That has not changed in two years, five years, ten years, 20 

years. 

You know, Mr. Chairman, one of the things I would like to explore with the committee, maybe we could declare National Fix Social Security Day. I am serious, and it would be maybe the day that 

Lily got the first Social Security check, and we get ready for it. 

I actually drafted legislation in this regard, and I thought I had 

a Republican co-sponsor who thought differently of it because of 

some other thing going on, but I think if we had a National Fix 

Social Security Day where we had every Rotary Club, every church 

group, every social studies class, every college economics class sit 

down for an afternoon with some of the terrific Web sites that you 

can get and a piece of butcher paper and design their own fixes; 

I think we would be shocked at how much consensus there is. 

Everybody is going to pinch a little bit. Nobody is going to get 

everything they want out of that, but Congress makes it harder 

than it needs to be, and I appreciate the focus here, that this is 

just a blip. We will do some reallocation. We will waive the point 

of order, and maybe we will do something about some of the cheaters, but the elephant in the room, we have got about 20 years and 

that $2 trillion surplus that we planned on is going to be exhausted, and we will have to act. 

And I would like us to try and do something that involves the 

public in that action. I think it is not as hard as it would be, and 

I would love for us to take a shot at it. 

Thank you for your courtesy. 

Chairman JOHNSON. Thank you. 


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I think we probably can take a shot at it, especially with all of 

these guys. 

Mr. Buchanan, is he here? He left. How about Mr. Young? 

Mr. YOUNG. Thank you, Mr. Chairman. Much appreciated. 

And I thank all of our panelists for being here today. 

You know, I think our mindset here should be, in this introductory kickoff meeting of the Social Security Subcommittee, we 

should be focused on structural changes, on fixing the problem, not 

the reallocation of funds. I think all of us have said from the outset 

there ought to be reassurance among beneficiaries of this program 

that all of us are committed to solving this problem and ensuring 

that the Disability Trust Fund remains sufficiently solvent to pay 

out benefits that are much needed by a lot of American. So we are 

all committed to that. 

Let us not be distracted, however, by this diversion of funds argument. Let us focus intently on ways to not only make the DI 

Trust Fund solvent because it is going bankrupt in two years, but 

to make the larger program solvent using some of the instrument 

and tools that my good colleague, Mr. Blumenauer just alluded to. 

So I do think we can work in a bipartisan way. I really do. I 

think we have an opportunity, a rare opportunity to do something 

big on this Subcommittee. That is why I came to Washington, D.C., 

and you know, let us resist the temptation to demagogue. Let us 

resist the temptation to question motives. Let us figure out what 

the real tools and solutions are here. 

Dr. Blahous, you said the relative health of the Retirement Trust 

Fund, Old Age and Survivors Insurance, is much worse than the 

Disability Trust Fund; is that correct? 

Mr. BLAHOUS. It faces the larger actuarial imbalance of the two 

funds, yes. 

Mr. YOUNG. Mr. Lorenzen, to your knowledge has Congress as 

a matter of historical fact ever shifted funds away from the Trust 

Fund in worse financial shape to the one in better financial shape? 

Mr. LORENZEN. No, that has never happened before. It has always been from the Trust Fund either in a surplus or facing a 

much smaller deficit. 

Mr. YOUNG. So as has been pointed out, we do not have to follow historical precedent on this Committee. We have a prerogative 

to do something unique, something creative. 

I think that would be a bad creative, an irresponsible creative solution as legislators. I think we can have a respectful dialogue 

about that, but there is no precedent of doing so. 

Dr. Blahous, for the past several years the trustees have urged 

action soon to address the entire Social Security Program’s finances. Please explain. I feel a sense of urgency here. Some of it 

is visceral. Some of it is mathematic. Some of it is informed by conversations I have had that are options for reform become more limited the longer we wait, and it I the latter portion I think would 

be most instructive for whomever might be either participating in 

or observing these hearings if you could speak to that matter directly: how our options become more limited over time. 

Mr. BLAHOUS. Sure. If I could take two approaches to that. 

Mr. YOUNG. Yes, sir. 


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Mr. BLAHOUS. The first is that there are certain illustrations 

that we put in the trustees report each year, and we have added 

them to the report in the last few years precisely to dramatize this 

point, which is that our options become more difficult the more 

that we delay. 

And one of them I referred to earlier in my testimony, which is 

that if you assume you want to hold current beneficiaries harmless, 

and I think for the most part people on both sides of the aisle do 

want to, and if you just assume purely for the sake of illustration 

that you are holding tax revenues constant and you ask what 

would be the size of the benefit restraint you would have to impose 

on new beneficiaries to get the system in balance; if you enacted 

that type of solution today you would have to cut those benefits by 

about 21 percent. 

If you tried the same thing in 2033, even 100 percent benefit 

elimination for people newly coming onto the rolls would be insufficient to repair program finances. 

So whole categories of options basically come off the table if you 

delay to the point where we’re nearing Trust Fund depletion. So 

that’s one tack that I would take. 

The other is simply from the standpoint of political realism. In 

1983, those reforms came very close to not happening. They were 

intensely difficult to enact, and the program came within a few 

months of hitting that insolvency point. It was very difficult. They 

had to do a six-month delay in the COLA. They had to raise the 

retirement age. They had to accelerate an increase in the payroll 

tax. They had to bring all of the newly hired federal employees into 

the system. They had to expose Social Security benefits to taxation 

for the first time. It almost did not happen. 

The shortfall today is already about twice as big as it was then. 

It is substantially bigger the way that we report it in the trustees 

report, but we analyze it a little differently today than we did in 

1983. If we used the same methods, we would have to inflict about 

twice as much pain today. 

Mr. YOUNG. So let us see if you can do this yes or no. The 

longer we wait in your estimation, in your moral calculus, do we 

end up hurting people more if we wait longer to enact structural 

changes to these programs? 

Mr. BLAHOUS. Not only do we end up hurting people more the 

more we postpone change. I think we render it less likely we can 

get a solution that retains the historical financing structure of the 

program. I think we are in that much danger already. 

Mr. YOUNG. Thank you all. 

I yield back. 

Chairman JOHNSON. Thank you. 

Mr. Schock, you are recognized. 

Mr. SCHOCK. Well, thank you. I think a lot of important facts 

have gotten out there, and I think job one of fixing any problem 

is identifying the problem and the cause of the problem. 

I, too, would join with Mr. Blumenauer and say the time is now 

for some action, and the sooner we take action the less bloody and 

nasty it has got to be, and particularly for my generation and generations to come. 


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And so I would love to work with you. Obviously the President 

put together a commission that came up with something that Republicans and Democrats had a compromise on. Simpson-Bowles 

made reforms to Social Security, never made it to the floor, but I 

think there are definitely some areas of common ground that have 

already been identified that I would hope we could work together 

on. 

So I sincerely hope that beyond this meeting today we can maybe 

start meeting and come up with something. 

I mentioned earlier that the overall Social Security Trust Fund 

is about to become insolvent, and when it does, it would be about 

a 25 percent cut roughly to current recipients. The quicker one 

though is disability, and I am wondering if we do not do anything 

and the solution is using the revenue stream currently that is used 

to fund them, what would the payroll taxes for the disability fund 

have to go to to meet the current needs of those on disability 

Mr. BLAHOUS. If we were just doing a change in the disability 

tax rate to put it back in 75-year actuarial balance, well, I know 

the average. The actuarial deficit in the Disability Insurance Trust 

Fund is 0.33 percent of taxable payroll. So in theory you could do, 

you know, a 0.4 percent payroll tax increase, and that would put 

DI in actuarial balance. 

I am not sure if that solves your cash flow problem though because the annual deficits are bigger than that in the near term. So 

it’s one of the—one of the strange artifacts of Disability Insurance 

and Old Age Insurance flows, our projections are that the disability 

deficits are actually at a relative high point now, and they are 

going to go down a little bit as the Boomers move onto the OASI 

Trust Fund. 

So you would have to have a substantially larger payroll tax increase in the near term just to keep disability afloat, and I am 

reaching off the top of my head, but maybe 0.6, 0.7 percentage 

points is a guess. I do know the dollar amount. It is about $205 

billion in additional taxes you need from 2015 to 2023 to go into 

DI to maintain that balance ratio of 20 percent or more. 

Mr. SCHOCK. Well, again, I applaud the chairman for having 

this hearing, and the work you are doing on the Disability Trust 

Fund because obviously that is the here and now, quickest one that 

we have got to deal with, but on the broader issue, I hope that we 

can move on a comprehensive fix, a long-term fix to the underlying 

Social Security fund. 

I would hate to see a future generation’s Social Security dollars 

that they have paid in swept to pay for the unfunded liability in 

the Social Security Disability Fund, which it appears is where we 

are headed if we do not do something more responsible. 

I yield back. Thank you. 

Chairman JOHNSON. Thank you. 

I agree, and, Mr. Reed, you are recognized. 

Mr. REED. Well, thank you very much, Mr. Chairman. 

If we are going to be sincere about fixing this problem, I think 

we need to change the rhetoric of this Subcommittee. When I hear 

the ranking member, my good friend from California, say that it is 

the rule change that is going to cause people that are in a disability state to suffer a 20 percent reduction in their benefit, that 


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is just blatantly false, and I would ask the gentleman from California if he is sincere in solving this problem to recognize that it 

is not a rule change. It is the insolvency of the Disability Trust 

Fund. 

The rule change only deals with the allocation adjustment of the 

payroll tax that is proposed to be a solution, but am I correct that 

that has not been enacted? That is going to take a legislative action 

to do. 

So my colleagues on the other side of the aisle are assuming that 

this body will do something legislatively. I learned in life early on 

you never assume. You hope for the best. You prepare for the 

worst. 

So this rule change that we have advocated for on our side has 

in my opinion put this issue out there, out there with enough runway to have an open and honest debate about how to solve this 

Disability Trust Fund insolvency issue. And we can do it, and we 

can start with agreement, to my good friend from California, that 

we need to work together to protect the disability recipient. 

But we can also do it better than what they have done before. 

I am a new member here, coming in 2010. I do not accept the status quo. I do not accept the argument from the panelist that this 

is the way we have done it so this is the way we should do it going 

forward. 

We came here as a new generation of leaders to implement solutions, and one of the things that I object to is the assumption that 

we have to use the retirees’ money out of their trust to bail this 

out. 

So I put a question to each of you. Are there any other funds 

available to tap into to do an allocation to the Disability Trust 

Fund other than the Social Security Retiree Trust Fund? 

Mr. BLAHOUS. Just speaking as a trustee, remember I am a 

trustee not only for the Disability Insurance Trust Fund, but also 

for the Old Age and Survivors Trust Fund. So from my vantage 

point from where I sit, the last place I would want you to take it 

from is the Old Age and Survivors Trust Fund because I am the 

trustee of that Trust Fund as well. Now—— 

Mr. REED. It is going to put further pressure on that. 

Mr. BLAHOUS. It is going to put further pressure on that. Now, 

having said that, I would say I have philosophical concerns about 

tapping general fund revenues to support Social Security because 

I think that is a very dangerous line to cross as well. Basically once 

you start subsidizing the program from general revenues, I think 

that—— 

Mr. REED. How about in 1981 when they used the Hospital Insurance Trust Fund, which appears to be projected to be solvent 

until 2030? 

And you, Mr. Phillips, are from an organization that wants to 

preserve Social Security and Medicare. So I guess you do not have 

a problem with raiding the Hospital Insurance Trust Fund from 

Medicare to bail this out. Because you do not care where it comes 

from, just so it is taken care if is how I read your testimony. 

Mr. PHILLIPS. As a point in fact you could not take any money 

out of the Hospital Fund. 


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Mr. REED. So in 1981 they did not have legislative authority to 

do that? It was illegal? 

Mr. PHILLIPS. It expired. The authority no longer exists for 

inter-fund borrowing. 

Mr. REED. So if we take legislative action and do it? 

Mr. PHILLIPS. If you wanted to do it, you need to enact legislation to make that—— 

Mr. REED. Yes. So you have a problem with raiding Medicare 

in order to balance the Disability Trust Fund? 

Mr. PHILLIPS. Oh, yes, we have—— 

Mr. REED. I understand your testimony. This is the point. This 

is the point. We need to do better. We need to do better, and while 

we have this opportunity here, I am very interested in ways that 

we can improve the program because what we are doing to people 

on disability on the Trust Fund is often we are trapping them in 

this Disability Trust Fund because it is an all or nothing situation. 

We can do better than that. I have been with disabled folks, 

looked them in the eye, and I look them in the eye today and I will 

say, ‘‘We are going to take care if this. We are going to make sure 

you get that benefit that you need and that you rely upon, but we 

are going to do better, and we are not going to get you trapped in 

the disability Trust Fund. If you want to get back to work, we are 

going to stand with you. We are going to improve that program, 

and we are going to allow you to have the greatest maximum capability of your life.’’ 

And that is what half of the Federal Government does, the American with Disabilities Act. The whole purpose is to get the people 

in the disability community into mainstream, back to work. Why 

would we have a Disability Trust Fund that says, ‘‘Do you know 

what? If you go back to work, you are going to lose your benefit.’’ 

Why? We can do better than that. 

So this is the start of the conversation. Thank goodness we 

changed the rule because if we did not change the rule, do you 

know what would have happened? Exactly what my colleagues on 

the other side want to do: hell bent on spending that retiree fund 

money to bail this out and we wait a year and a half and then do 

it at the last minute. 

We are going to have the conversation now, and the new leaders 

up here are going to lead that charge with our chairman to make 

sure that we do a better job for our disability community than 

what we have been doing up to this point in time. 

With that I yield back. 

Chairman JOHNSON. Thank you. 

Mrs. Black, do you care to comment? 

Mrs. BLACK. I do. Thank you, Mr. Chairman. I really appreciate 

your allowing me to be a visitor on this Committee. Although I 

have previously been a committee member, I appreciate your allowing me to be here, and I have a real interest in this. 

I do want to say my colleague from Oregon who made a comment 

that we should visit our Social Security Disability Offices and actually work through the program, I highly recommend that. I have 

done that. I have gone into my local agency as if I were applying. 

I have also gone to the Office of Determination and all the way to 


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the ALJ, and it is a very eye-opening experiment, and I would suggest that everybody on this Committee actually do that. 

But let me go to a couple of things here, and I may repeat some 

of the things that have already been said by my colleagues, but one 

of them is the terminology that is used. It really concerns me that 

we use words like ‘‘rebalancing’’ and ‘‘reallocation’’ because that 

really means something different to me. It means robbing Peter to 

pay Paul. 

And, Mr. Phillips, I was interested in your written testimony and 

also your testimony that you gave us just a little bit ago that say 

the projected DI shortfall can be easily, easily eliminated by rebalancing the flow. That simply means you take from one fund in 

order to put into another fund, and that is what I have been 

brought up to understand is robbing Peter to pay Paul. 

So if we take from the OASI, eventually that will go bankrupt, 

and then where do we take from? We take from the general fund. 

We are already about $500 billion we are borrowing each year in 

that. So that is really not a solution. 

I am interested that most of the talk has been the way to solve 

this is it could be an all tax solution where we increase the tax 

maybe or we reduce the benefits, maybe do a little bit of work as 

my colleague from Texas said on looking at fraud. 

But what I want to go to is something that I saw during my visit 

and heard from those who work in this industry, is that we have 

not done a good job with job reclassification, and that goes to the 

point that my colleague from New York has just talked about, 

about getting people back to work. Because at least from my experience of what I saw when I went to these different steps and also 

what we have heard testimony from others who have come here is 

that we are not doing a good job in making sure that when someone comes in to apply for disability that what we are trying to do 

is to get them back into the work force. 

I think this is more than just a financial, but this is also a quality of life. And so I do not know whether one of you would like to 

talk about that, if that is a piece that you have seen and you would 

like to address, but I think this is a very critical piece that does 

not get talked about very often. 

We talk about reallocations and rebalancing, but the true reform, 

as my colleague from New York has talked about, is really what 

needs to be done, not just for the benefit of the financial piece of 

it, but the benefit for the individual and the quality of life. 

So would one of you like to address that issue? 

Mr. LORENZEN. I can speak to that. That is definitely an area 

that needs to be explored for reforms. We found from the Ticket to 

Work Program, while we should continue once people get onto the 

DI rolls trying to find them to get back to work, that the really 

most effective strategies are early intervention strategies that help 

provide support to people who are disabled to remain in the workforce and other interventions before they go onto the rolls of trying 

to keep them in the workforce. 

Those things may not actually produce much in the way of financial savings, but if an individual is able to stay in the workforce, 

it is beneficial to that individual, and it is beneficial to society as 


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a whole. It may produce new savings over the long term, but it also 

may involve some more costs in the near term. 

I think the President’s budget has some initiatives that look at 

trying to do that, but I think we need to be looking at that much 

more aggressively, trying to find before people go on the rolls what 

can we do to keep people in the workforce, which I think most people would want to do if they can. 

Mrs. BLACK. I do. Mr. Blahous, do you want to weigh in on 

that? 

Mr. BLAHOUS. Well, I do. Labor force attachment is a pet issue 

of mine not only in the Disability Fund but also with the Retirement Trust Fund. I think there are just fundamental problems 

with the design of the system, moving people out of consistent attachment to the workforce, people who would otherwise want to be 

and choose to be, but in some ways the system not only on the disability side, but the retirement side pushes them where they do not 

want to be. 

And I would just accentuate some of the points that have been 

made here. We have to have legislation of one kind or another. The 

threat of a 19 percent benefit cut is not because of a House rule 

or anything else. That is what is happening under current law. We 

have to have legislation to avert that. 

So there is an opportunity here not only to avert that 19 percent 

benefit reduction, but also to put things on a course where the system is in better shape and it is serving people better in the years 

ahead. 

So I would say rather than looking at the existing rules as a barrier to getting something done, I would look at the process as an 

opportunity to both shore up the health of disability, protect people 

who are on disability, make improvements to the way that the program functions so that we are not facing even bigger problems a 

couple of years from now. 

Mrs. BLACK. And I know my time has expired, and thank you, 

Mr. Chairman, but I would ask any of the panelists who have ideas 

about how we might be able to look at that particular piece and 

how we might be able to write some legislation to resolve that. 

Because I do believe if you can get people back into the workforce, not only does it make a better quality of life, but you have 

got to say if somebody gets on Social Security disability at the age 

of 25 and they live to be 75 and there is 50 years of Social Security 

disability, that would save us money. But I am more concerned 

about making sure that people have quality of life. 

And so thank you very much for your testimony. Thank you. I 

yield back, Mr. Chairman. 

Chairman JOHNSON. Thank you. 

Mr. Becerra, do you have a comment? 

Mr. BECERRA. Mr. Chairman, thank you very much. 

I just wanted to respond to my friend, Mr. Reed, from New York 

briefly and say that I respect if we have a different way of looking 

at that. There is no problem with that. That is what this country 

is about. 

And I think the most important thing that Mr. Reed said is he 

thinks that, and I agree with this, that we can come together and 

figure out a way to do this regardless of how we characterize these 

things. 


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At the end of the day I think all of us want to make sure that 

Americans who paid into the system want to go ahead and get 

their benefits whether disabled or retired. And so I think probably 

the best thing that has come out of this hearing is that I think 

pretty much every one of us at this table has said let us figure out 

a way to sit down and do this. 

Mr. REED. Will the gentleman yield? 

Mr. BECERRA. Absolutely. 

Mr. REED. I will give you my public commitment, as you have 

given your public commitment to me, to work in a bipartisan basis 

to accomplish good reforms for the disabled and the recipients of 

these benefits. So I appreciate that sentiment, and I look forward 

to working with the gentleman from California on that. 

Mr. BECERRA. I look at that as an opportunity for all of us to 

work together. 

So, Mr. Chairman, I just want to say I think it is a good start, 

a good hearing to be able to move forward, and I think the spirit 

here is to try to figure out a way to work bipartisanly on this, and 

I hope we are able to do that. 

With that, I yield back, and I thank you for giving me a moment 

to speak. 

Chairman JOHNSON. Thank you. 

I appreciate you all waiting for us while we went and voted 

twice, and you would be interested to know that Mr. Boehner kind 

of read the Riot Act to everybody because our voting took so long. 

Thank you to all our witnesses for your testimony, and thank 

you to the members who attended today. 

This is an important time for the Disability Insurance Program, 

and I am committed to making sure the benefits millions of Americans and their families count on are there for them, while also 

making the program work better, and we look forward to you all 

helping us do that. 

We cannot keep kicking the can down the road. The American 

people want, need and deserve a solution. 

With that, the committee stands adjourned. Thank you all for 

being here. 

[Whereupon, at 4:50 p.m., the Subcommittee was adjourned.] 

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