[Editor's note: This is the second and final part of a discussion on threats real and imagined to the Social Security retirement program and Social Security Disability Insurance (SSDI). Part 1 is here.]

Writing for “Your Money” in the July 30 edition of The New York Times, Tara Siegel Barnard says the mounting national debt will exert increasing pressure on lawmakers to reduce and that Social Security may well be one program they will tap for reductions.

“The program,” Barnard writes, “which has its own dedicated stream of income, is projected to pay out more this year than it is taking in, but that is a function of the weak economy. Social Security will, according to the last annual report from its trustees, be able to pay full benefits through 2037. Then, if there are no changes in the program in the meantime, the taxes collected will be enough to pay out only about 75 percent of benefits through 2083.

“So while Social Security’s finances are stable in the short term, most experts agree that the program needs to be bolstered for the long term. Among the proposals circulating is one from Representative John Boehner of Ohio, the House Republican leader, who recently suggested raising the retirement age to 70 for people at least 20 years from retirement.

“Other options include increasing Social Security payroll taxes, subjecting more income to the tax, reducing initial benefit payments or cutting cost-of-living increases (which would affect current retirees).”

In short, Barnard’s assessment comes closer to that of MoveOn.org and its Top 5 Social Security Myths than with the position (from Part 1) of the Poughkeepsie Journal, which says “Social Security could run out of money in about 17 years.”  Barnard quotes the trustees as saying the fund can pay full benefits until 2017; MoveOn says “the next quarter century.” Close enough.

Then, with different perspectives, Barnard and MoveOn basically agree that after that, Social Security can still meet about 75 per cent of its obligations–and that’s with no changes.

From that point, Barnard takes a different tack, postulating various scenarios in which a hypothetical couple is forced to save more and more (that is, cut spending) just to afloat for their retirement years. For the conclusion, Barnard quotes a financial planner consulted for the column:

“One financial planner, who has dual citizenship in the United States and Greece, said he was not taking chances. ‘Having seen what happened in Greece, I feel even more strongly today that I should not count on any Social Security for me and my younger clients,’ said the planner, George Papadopoulos, 43, of Novi, Mich. ‘I will continue to tell clients not to highly rely on Social Security and think of any money coming their way as gravy.’ ”

It’s a good column, peppered with thoughtful points and sobering consideration. But, taken together with MoveON.org’s Top 5 Myths, it doesn’t sound as though we need to panic about the retirement aspect of the Social Security fund.

The Social Security Disability Insurance (SSDI) fund, however, is in trouble. And fixing it requires way more than Band-Aid legislation in the next few years. In short, the fund is financed mostly by a 1.8 per cent payroll tax and at current rates will be in serious trouble in only five years. And by 2018, a short three years later, it will be broke, according to a recent study by the Congressional Budget Office (CBO), which makes a brief available here.

A July 27 report at DOTmedNews says the main reason for the projected shortfall will be increases in the number of recipients, but that the financial crisis also will be a contributing factor. “Between 1970 and 2009, the program increased from 2.7 million to 9.7 million people.

“The reasons for the growth in beneficiaries include aging of the population; changes in laws that reversed previous restrictive policies in obtaining benefits; the growth of women in the workplace; and changes in overall health of the population. The last reason is not clearly defined, but may relate to some conditions no longer having the same mortality rate, such as HIV/AIDS. Another factor for the growth seems to be lack of job opportunities due to the current economic crisis.”

Indeed, from the brief itself, the CBO writes: “Between 1970 and 2009, the number of people receiving
DI benefits more than tripled, from 2.7 million to 9.7 million.  That jump, which significantly outpaced the increase in the working-age population during that period, is attributable to several changes—in characteristics of that population, in federal policy, and in opportunities for employment.”

Of course, the elephant in the room here is the Baby Boomers and attendant rise of women in the workforce. And those numbers aren’t diminishing anytime, soon.

However, one item that seems to get overlooked is administrative costs. The CBO is quick to point out other remedies: reduce outlays (read “cut benefits”); increase the payroll tax allotment; find other sources of federal funds; even one suggestion about modifying the regs on acceptable work limits.

Yet, look at the rise in internal costs that accompanied the more-than-tripling of beneficiaries: “In addition, during those years, the average inflation-adjusted cost per person receiving DI benefits rose from about $6,900 to about $12,800 (in 2010 dollars). As a result, inflation-adjusted expenditures for the DI program, including administrative costs, increased nearly sevenfold between 1970 and 2009, climbing from $18 billion to $124 billion (in 2010 dollars).”

The brief includes a summary that opens the door for discussion about ways to fix the program, and we’ll revisit this topic from time to time in future installments. But the takeaway here is abundantly clear: We have time to ensure that Social Security retirement benefits are properly funded, thereby easing fears of the younger generation that they will be shortchanged.

But the time to address the coming shortfall in SDDI funding is upon us, today,