Help the Disabled Back to Work

There's plenty of work to go around.

Photographer: Meg Roussos/Bloomberg

Since the late 1990s, the number of working-age Americans receiving disability payments from Social Security has doubled, to more than 8 million. The mounting costs of the program, running at almost $150 billion a year, are about to exhaust the fund that supports it. Something will have to be done, and soon -- but what?

Republicans in Congress have ruled out the simplest and most traditional fix, which would be to channel funds from the main Social Security fund. They're calling for reform instead, and they're right. Better still, they have some good ideas about how this reform should be done. 

Entitlement

The main defect in the system is that it pushes too many people into nonemployment and then conspires to keep them there. Eligibility criteria were eased in the 1980s, leading to a dramatic increase in claims for conditions such as back pain and depression. Benefits, once granted, are withdrawn if earnings resume and exceed a low cap -- creating an incentive to stay out of work. Yet the benefits aren't overly generous. Many recipients live close to or below the poverty line.

It's the worst of all worlds: a system that pulls too many people out of the labor market, at great cost to taxpayers, and then keeps them poor.

It's worth stressing that outright abuse isn't the main problem. Where it exists, of course, efforts should be made to weed it out. More important is the way the system's incentives press on people with limited choices. Reform should try to widen those choices. Above all, the aim should be to encourage people to return to work if they can.  

Before leaving office last year, former Republican Senator Tom Coburn of Oklahoma introduced legislation with that goal. His bill called for intervention programs to spot and help people when injury or illness first threatens their livelihood. Medical and therapeutic technology has improved dramatically over the past two decades, but those advances aren't always available to everyone, especially those in low-skill, low-wage professions. Offering medical help, rehabilitation or other benefits can encourage workers to stay employed.

Coburn's measure also proposed to withdraw disability payments less abruptly for those who can still work, even if it's in a lower-wage job or only part time. In effect, their wages would be topped up with payments akin to the earned income tax credit.  The most pernicious incentive in the current system is the "cash cliff" that halts benefits to those who earn any meaningful income. When people try to support themselves, they deserve to be encouraged, not punished.

Republican Senator Orrin Hatch of Utah, the new Finance Committee chairman, has supported this approach to reforming disability insurance. Democrats have resisted the idea, arguing that it's wrong to save money at the expense of the disabled. In fact, the Coburn-Hatch approach to promoting employment would aim to save money, if at all, more by raising revenues (thanks to taxes on higher employment) than by cutting benefits.

Putting the program on a more secure fiscal footing would still be necessary. But the case for this kind of reform isn't mainly financial. It's that helping recipients to help themselves makes sense. If the imminent financial crunch can be used as a chance to repair a broken system and make a lot of people better off, there's no call to object.

To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net.