Transcript: Q&A w/ Rep. Diane Black on the CBO’s 2014 budget & economic outlook

Partial transcript of Q&A with Rep. Diane Black (R-Tennessee) on the Congressional Budget Office’s (CBO) 2014 federal budget and economic outlook. The House Budget Committee hearing was held on Feb. 5, 2014:

Rep. Diane Black (R-Tennessee):
…I want to go to a topic that’s not been talked about. We’ve talked about our deficit and the growing deficit and where we might be in the future if we don’t address that.

But the Social Security disability trust fund is a real problem for us.

And just to go back and look at the background so we can put some context into this, since 1970 the real inflation-adjusted disability insurance expenditure has risen from $18 billion to $140 billion in 2013.

Now, a portion of this increase is due to two things, and we’ve heard that through testimonies before the Aging Population, which we all know, and then also the entrance of women into the workforce. We’ve heard that.

But if you look at these two factors, they really only account for 6% on the aging side and 17% increase on the entrance of women for these increase in disability insurance case loads. At the same time, individuals are self-reporting an increase in their health, that it’s improving.

So, we see approximately 20 people per 1,000 have received DI benefits in 1970 as compared to now about 80 people per 1,000 today.

So, the latest projection from your CBO estimate is that Social Security disability insurance will go bankrupt in 2018. So by the end of 2017, no more dollars. 2018 we’re bankrupt.

Notwithstanding the aging population and the women entering the workforce, can you tell me why the spending has grown so rapidly in this program?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congresswoman. I don’t have the specific numbers at hand. But as you know, we’ve written two reports for the Congress on disability insurance trying to document and to explain the sources of growth and to offer you and your colleagues some specific alternatives for changing the disability program if you would like to go that route.

In addition to the factors that you mentioned – the aging of the population and the rising participation of women in the labor force and thus making them eligible then for disability insurance benefits if they become disabled – there’ve also been important changes in the rules for entering the disability program legislated by the Congress over the past few decades that have pushed up the number of people receiving DI benefits, and the state of the economy matters as well. And as we wrote in our report, one thing that’s happened in the past several years as people have lost jobs and not be able to find new jobs, those people who have disabilities who might otherwise be able to find a job that could accommodate their disabilities have instead in some cases chosen to enter the disability insurance program.

So there’s a wide array of factors but I don’t have at hand the relative importance of those factors.

Rep. Diane Black (R-Tennessee):
…What happens when this goes bankrupt? How will this affect the beneficiaries?

Douglas Elmendorf, Director of the Congressional Budget Office:
Well, Congresswoman, if the trust fund runs out of money, then we think that there no legal authority to pay benefits until more money comes in. As you know, the last time that the disability trust fund was on the cusp of this problem, the Congress shifted the money from the old age and survivors’ insurance trust fund into the disability trust fund and avoided that outcome. But if nothing were done, then I’d believe that the legal authority only exists to pay money that is in the trust fund and that would require then a substantial reduction in benefits to fall down the level of the ongoing incoming receipts.

Rep. Diane Black (R-Tennessee):
…There would have to be legislative action in order for those that are the recipients to actually gain the benefits?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congresswoman. And again, we think this would happen in 2017 that the trust fund would run out of money to pay the benefits promised under current law.

Rep. Diane Black (R-Tennessee):
…In your reports, do you reference the consequences of the rampant fraud that we’re seeing and the abuse in the program?

Douglas Elmendorf, Director of the Congressional Budget Office:
So we talked about that, Congresswoman, and I think the issue for the Congress is trying to find the policy levers to change that, and I think there are some and we do talk about them in our reports.

Rep. Diane Black (R-Tennessee):
…What effect of the reduced labor force participation will have on the economy?

Douglas Elmendorf, Director of the Congressional Budget Office:
It is the central factor in slowing economic growth. After we get out of this current downturn but later in this decade and beyond, the principal reason why we think the economic growth will be less than it was for most of my lifetime will be a slower rate of growth of the labor force.


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