Social Security: OASI and DI

A brief response to a comment from yesterday’s post. When CBO projects the point at which the Social Security trust fund will be “exhausted” that means there are no more securities to redeem to pay benefits that are now greater than payroll taxes flowing into Social Security, and under current law when this occurs benefits must equal taxes flowing in. Thus,  if we do absolutely nothing, there will be an ~ 25% benefit cut in about 20 years (shown as 2033 in table below, 3rd column OASDI, last row). As an aside, while this would be a big cut, it also means that people saying “Social Security won’t be there at all when you retire” don’t understand the program’s finances. I don’t suggest doing nothing and allowing such a cut, but ~75% of benefits is a lot greater than 0% of benefits, obviously.

However, something must be done to Social Security (2012 Trustees report from which above table taken) within the next few years, because the trust fund that back stops the Disability Insurance portion of the program will be exhausted in 2016 (DI column above, last row). Again, this doesn’t mean there will be nothing, but there will occur an automatic benefit cut within the next few years sans action. When CBO provides a date of 2033 for OASDI trust fund exhaustion, they are assuming that Congress and the President will pass a law that will allow the co-mingling of the OASI (old age, survivor) with the DI (disability) trust funds, thus allowing Disability benefits to not be cut around 2016. It has long been assumed they would act in this way, but it is my understanding that it will take legislative action for this to occur.

cross posted at samefacts

About Don Taylor
Associate Professor of Public Policy at Duke University and author of Balancing the Budget is a Progressive Priority. On twitter @donaldhtaylorjr

One Response to Social Security: OASI and DI

  1. Pingback: Bowles-Simpson 2.0 « freeforall

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 157 other followers

%d bloggers like this: