Wednesday, August 24, 2011
We have been seeing news reports that claim that the disability fund will be insolvent by 2017, while the general fund will be insolvent by 2027. This is highly misleading. First, the amount allocated to disability is corrected regularly. The last time they allocated, they underestimated the amount of disability that would be currently paid. But second, the fund is not a piggy bank. "Insolvent" means that at that point the money coming in from FICA taxes will no longer exceed the amount being paid out. If that happens, the government can run another deficit, or the problem can be easily fixed by raising the retirement age, raising taxes, limiting benefits in other ways like means-testing, etc. We face far bigger problems with Medicare costs.