[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]








 HEARING ON MAINTAINING THE DISABILITY INSURANCE TRUST FUND'S SOLVENCY

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           February 25, 2015

                               __________

                            SERIAL 114-SS01

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                     PAUL RYAN, Wisconsin, Chairman


SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan,
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
DEVIN NUNES, California              JIM MCDERMOTT, Washington
PATRICK J. TIBERI, Ohio              JOHN LEWIS, Georgia
DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
CHARLES W. BOUSTANY, JR., Louisiana  XAVIER BECERRA, California
PETER J. ROSKAM, Illinois            LLOYD DOGGETT, Texas
TOM PRICE, Georgia                   MIKE THOMPSON, California
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois               RON KIND, Wisconsin
LYNN JENKINS, Kansas                 BILL PASCRELL, JR., New Jersey
ERIK PAULSEN, Minnesota              JOSEPH CROWLEY, New York
KENNY MARCHANT, Texas                DANNY DAVIS, Illinois
DIANE BLACK, Tennessee               LINDA SANCHEZ, California
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
JIM RENACCI, Ohio
PAT MEEHAN, Pennsylvania
KRISTI NOEM, South Dakota
GEORGE HOLDING, North Carolina
JASON SMITH, Missouri

                       Joyce Myer, Staff Director

         Janice Mays, Minority Chief Counsel and Staff Director

                                 ______

                    SUBCOMMITTEE ON SOCIAL SECURITY

                      SAM JOHNSON, Texas, Chairman

                       

                                      
JIM RENACCI, Ohio                    XAVIER BECERRA, California,
VERN BUCHANAN, Florida               LLOYD DOGGETT, Texas
AARON SCHOCK, Illinois               JOHN B. LARSON, Connecticut
TOM REED, New York                   EARL BLUMENAUER, Oregon
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania

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                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 25, 2015 announcing the hearing.............     2

                               WITNESSES

Charles P. Blahous III Ph.D. Public Trustee, Social Security and 
  Medicare Boards of Trustees....................................    17
Witness Statement................................................    20
Ed Lorenzen Senior Advisor, Committee for a Responsible Federal 
  Budget.........................................................    29
Witness Statement................................................    33
Webster Phillips Senior Legislative Representative, National 
  Committee to Preserve Social Security and Medicare.............    33
Witness Statement................................................    48

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       MAINTAINING THE DISABILITY INSURANCE TRUST FUND'S SOLVENCY

                              ----------                              


                      WEDNESDAY, FEBRUARY 25, 2015

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to other business, at 2:03 
p.m., in Room B-318, Rayburn House Office Building, the 
Honorable Sam Johnson [Chairman of the Subcommittee] presiding.
    [The advisory announcing the hearing follows:]

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ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
Tuesday, June 30, 2015
No. SS-01

                 Chairman Johnson Announces Hearing on

                the Financial Risk of Returning to Work

    U.S. Congressman Sam Johnson (R-TX), Chairman of the House 
Committee on Ways and Means Social Security Subcommittee announced 
today that the Subcommittee will hold a hearing on the Social Security 
Administration's (SSA) management of earnings reports from disability 
beneficiaries trying to go back to work. The SSA faces difficulties 
processing earnings reports and adjusting benefits in a timely fashion, 
in part due to the complexity of the work incentives in the Disability 
Insurance program. These difficulties can cause large overpayments for 
disability beneficiaries trying to return to work. The hearing will 
take place on Tuesday, June 16, 2015 in B-318 Rayburn House Building, 
beginning at 2:00 p.m.
      
    Upon the announcement, Chairman Johnson made the following comment:
      
    ``There are two problems for the American taxpayer when Social 
Security can't manage earnings reports: first, dollars go out that 
shouldn't; second, individuals who want to work are discouraged from 
doing so. It's time Congress takes a look at what drives overpayments. 
The American people want, need, and deserve nothing less.''
      
    A list of witnesses will follow. Oral testimony at this hearing 
will be from invited witnesses only. However, any individual or 
organization may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Tuesday, June 30, 2015. For questions, or 
if you encounter technical problems, please call (202) 225-3625 or 
(202) 225-2610
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any materials submitted for the printed record, 
and any written comments in response to a request for written comments 
must conform to the guidelines listed below. Any submission not in 
compliance with these guidelines will not be printed, but will be 
maintained in the Committee files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be submitted in 
a single document via email, provided in Word format and must not 
exceed a total of 10 pages. Witnesses and submit

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ters are advised that the Committee relies on electronic submissions 
for printing the official hearing record.
      
    2. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. The name, 
company, address, telephone, and fax numbers of each witness must be 
included in the body of the email. Please exclude any personal 
identifiable information in the attached submission.
      
    3. Failure to follow the formatting requirements may result in the 
exclusion of a submission. All submissions for the record are final.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above
      
    Note: All Committee advisories and news releases are available at 
http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. Thank you. This hearing will come to 
order and I'd like to welcome our Members today.
    Since becoming chairman of the Social Security 
Subcommittee, I have had 14 hearings on the disability program, 
including the one today, which is about maintaining Disability 
Insurance Trust Fund's solvency, and before continuing, I see 
we have many individuals from the disability community in the 
audience today. I would like to welcome you all and thank you 
for coming. You know better than most that this program is not 
without its problems, and in fact, less than two years from 
today, the Disability Insurance program will not have enough 
money to pay full benefits.
    Now, as a subcommittee, we've looked at this program from 
nearly every angle and I think it's fair to say this program 
can and must work better for people with disabilities, as well 
as for the hard-working American taxpayer.
    A few weeks ago, Representative Cathy McMorris Rodgers and 
Chairman Paul Ryan met with members of the disability 
community, including one of our witnesses today, Mr. Phillips. 
I wasn't able to make that meeting, but I agree strongly with 
what my colleagues said. We need to have a conversation, a 
fact-based conversation, on how to make the program work 
better.
    During that meeting, the idea of a commitment to you all, 
the disability community, came up. As a follow-up to that 
meeting, Chairman Ryan and I want to extend my hand to you all 
and offer the following commitment that I ask my colleagues on 
both sides of the aisle to join me in.
    One, ensuring benefits continue to be paid to individuals 
with disabilities and their family members that rely on them; 
two, preventing a 20 percent across the board benefit cut; 
three, making the Disability Insurance program work better; 
and, four, promoting opportunity for those trying to return to 
work.
    That's a common sense commitment to all Americans, and I 
know the devil's in the details, but I hope all my colleagues 
on this Subcommittee, and especially the ranking member, can 
join me.
    Over the coming months, we're going to have plenty more 
conversations about the disability program and as we have these 
con

[[Page 4]]

versations, it's my hope that they will not be hijacked by 
political point scoring. The American people expect us to work 
together.
    Today we're going to hear from our witnesses about the 
options to make sure benefits continue to be paid. They will 
discuss how Congress has addressed Social Security's finances 
in the past and how Social Security's finances then compare to 
today.
    Many people have said that we have reallocated the payroll 
tax 11 times. While it's true Congress has shifted the payroll 
taxes between the two Social Security Trust Funds, it's 
happened only six times. Moreover, Congress has typically made 
changes to improve Social Security. Recently, Acting 
Commissioner Colvin argued for more research into the 
disability program before making any changes. Well, guess what? 
That was the same argument in 1994 as well, the last time a 
reallocation took place.
    Now, some like to say the President's proposal to 
reallocate some of the payroll tax that goes for the retirement 
program toward the disability program is no big deal. Well, I 
would argue it is a big deal. The Administration just wants to 
kick the can down the road and offers no ideas on how to make 
the program work better. That's not right. Americans who have 
paid in to Social Security and are currently receiving 
benefits, as well as today's younger workers, deserve better.
    This Congress should and must act to make sure that 
Disability Insurance benefits continue to be paid in 2016 and 
beyond to those who rely on them, and in doing so, we ought to 
make this program work better for those who depend on it.
    I thank our witnesses ahead of time for being here today 
and look forward to hearing your testimony. I really do 
appreciate you.
    I now recognize Ranking Member Mr. Becerra for his opening 
statement.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Mr. Chairman, there is but one Social Security. One single 
Social Security system provides birth to death protection for 
American workers and their families.
    Just like the 168 million other Americans, I pay into 
Social Security with every paycheck. My paycheck doesn't have a 
line that says Disability Insurance and a line that says 
retirement or survivorship benefit insurance when I pay my 
contributions in to Social Security. It has one line for Social 
Security contributions, FICA, FICA/Social Security. My Social 
Security contributions, just like those of every other American 
worker, pay for one Social Security system that protects my 
family and me, along with all other workers and their families, 
when we need it. You can't break Social Security up into 
separate pieces.
    When we begin our working lives, none of us knows what kind 
of insurance from Social Security we'll need or at what stage 
in our lives we'll need it. Some workers die young, leaving 
family to use the survivors' benefits portion of Social 
Security. About one in four of today's 20 year olds will become 
disabled before reaching retirement age and therefore, will 
need the disability portion of Social Security.
    We also know that the risk of serious work-ending 
disability will rise significantly as Americans age. Americans 
are twice as likely to qualify for Social Security benefits 
because of--excuse me.

[[Page 5]]

They're twice as likely to qualify for Social Security benefits 
because of a disability at age 50 as they are at age 40 and 
they're four times more likely to qualify at age 60.
    These three Social Security protections--disability, 
retirement, and survivors' benefits--make up a seamless whole, 
but it seems that some in Congress are trying to segregate 
Social Security into separate parts, a retirement plan, life 
insurance, and a disability protection, but Social Security 
can't be ripped apart.
    The 11 million Americans currently receiving Social 
Security Disability Insurance benefits paid for their benefits 
with hard work and now they rely on them, just like the other 
48 million Americans who receive Social Security as well. They 
earned this Disability Insurance protection by paying into it 
every month. This isn't welfare. They earned it with every 
paycheck. Their benefits average about $1,100 a month, but for 
these folks, it's a lifeline.
    More than half of disabled workers receiving Social 
Security would live in poverty without their earned benefits, 
despite years of hard work before they became disabled, and 
don't forget, as we've learned in many prior subcommittee 
hearings, it is very hard to qualify for Social Security on the 
basis of a disability. The eligibility rules are very strict 
and only 4 of every 10 applicants are found to have impairments 
which are severe enough to qualify for Disability Insurance 
under Social Security.
    Historically, Congress has treated Social Security's Trust 
Funds as one unified reserve. Isn't that the way everyone in 
America sees it, as one system? Congress has from time to time 
fine-tuned the Social Security contributions, going into the 
Trust Fund to ensure that they are equally able to pay 
Americans the benefits they've earned, whether disability, 
survivor benefits or retirement.
    Congress has never before used an accounting shortfall in 
one part of the system to prevent earned benefits from being 
paid to those who earned them elsewhere. The allocation of 
workers' Social Security contributions has been fine-tuned by 
Congress for decades, 11 times to date, but it seems like this 
time, some are trying to rip out Social Security's earned 
disability protection and make it something separate or claim 
it is taking resources away from seniors.
    This is a manufactured crisis and I urge folks to take a 
look at some of the--at the chart that's on the screens right 
now. Social Security has $2.8 trillion available in its Trust 
Fund to pay full earned benefits to all recipients. The 11 
million people who are facing a 20 percent benefit cut helped 
build up that surplus with their contributions; however, rather 
than reassuring all Americans that Congress will let Social 
Security use its worker-funded reserves to pay 100 percent of 
earned benefits, this year it appears that my colleagues on the 
Republican side have adopted an unprecedented new rule that 
programs in a 20 percent benefit cut for 11 million Americans 
receiving Social Security Disability benefits.
    Americans of all ages and walks of life overwhelmingly 
support Social Security.
    Mr. Chairman, I have a--I have here statements from AARP 
and the Alliance for Retired Americans who represent millions 
of American seniors, from Paralyzed Veterans of America, who 
represent disabled veterans, and from 48 other groups 
representing disabled Americans. All of them ask Congress to 
let Social Security use its

[[Page 6]]

reserves to prevent benefit cuts and they express concern about 
using earned Social Security benefits as a bargaining chip.
    Mr. Chairman, I ask you now to consent to include these 
statements in the record.
    Chairman JOHNSON. Without objection.
    [The submission of the Honorable Xavier Becerra follows:]

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    Mr. BECERRA. Over the long term, Mr. Chairman, Social 
Security does face a challenge, but it's a manageable one, one 
I look forward to addressing on a bipartisan basis, keeping in 
mind the vital role Social Security plays in every American's 
life, but the first step is to let Social Security use its own 
money, the money workers

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have contributed, to pay Americans the full benefits they need 
and that they have earned.
    And with that, Mr. Chairman, I look forward to the 
testimony of our witnesses.
    Chairman JOHNSON. Thank you.
    That was a nice statement. I happen not to agree with you, 
you know that.
    [Laughter]
    Mr. BECERRA. I think I was aware of that, Mr. Chairman.
    Chairman JOHNSON. As is customary, any member is welcome to 
submit a statement for the hearing record. Before we move on to 
our testimony today, I want to remind our witnesses to please 
limit your oral statements to five minutes. However, without 
objection, all of the written testimony will be made part of 
the hearing record.
    We have one witness panel today. Seated at the table are 
Charles Blahous, Ph.D., Public Trustee, Social Security and 
Medicare Board of Trustees; Ed Lorenzen, Senior Advisor, 
Committee for a Responsible Federal Budget; Webster Phillips, 
Senior Legislative Representative, National Committee to 
Preserve Social Security and Medicare.
    And with that, Dr. Blahous, welcome, and thank you for 
appearing this afternoon. You may proceed.

  STATEMENT OF CHARLES BLAHOUS, PH.D., PUBLIC TRUSTEE, SOCIAL 
            SECURITY AND MEDICARE BOARD OF TRUSTEES

    Mr. BLAHOUS. Thank you, Mr. Chairman, Mr. Ranking Member, 
all the Members of the Subcommittee. It is, as always, an honor 
to appear before the subcommittee, in this case to discuss the 
financing challenges facing Social Security's Disability 
Insurance Trust Fund.
    If I could, I'd like to issue a brief disclaimer before I 
begin the main points from my written testimony. As trustees, 
there are certain things that we deal with and certain things 
that we don't tend to. Generally, as trustees, we make big 
picture financial projections for the Trust Funds as a whole. 
We don't typically analyze alternatives to current law or the 
policy details of the programs. So I can offer the trustees' 
projections and some of the history of those projections and 
statements, but there are no trustees' positions with respect 
to policy alternatives.
    The first point that I would like to make is simply that 
under our current projections, we are anticipating a financing 
shortfall in the Disability Insurance Trust Fund, a substantial 
one, and one that is now nearly immediate. In our last report, 
we projected that the Fund's reserves would be depleted in the 
fourth quarter of 2016, at which point the program would only 
have sufficient revenues to make about 81 percent of scheduled 
benefit payments, and obviously that date could move a few 
weeks in either direction, but as we closer to it, it's clear 
that it's coming very quickly.
    Second point is that--and the member statements have 
already alluded to this--there are certainly issues that are 
unique to Disability Insurance that many are concerned with, 
but the biggest problem that the Disability Insurance Trust 
Fund faces is simply that the entirety of Social Security is 
out of financial balance, and,

[[Page 18]]

in fact, the actuarial balance in the other Social Security 
Trust Fund, the Old-Age and Survivors Fund, is actually 
somewhat later in both absolute and relative terms, and this is 
relevant today because it means that if Social Security were in 
actuarial balance today as a whole, we wouldn't need to have a 
larger share of the payroll tax going to the Disability 
Insurance Trust Fund.
    The main reason that DI is hitting the wall before the Old-
Age and Survivors Fund is that the boomers are moving through 
they have moved through their ages of peak disability incidence 
before they reach retirement age, and so those pressures are in 
the process of shifting from the DI Trust Fund to the OASI 
Trust Fund.
    And the third point I'd make is simply that delay in 
dealing with the larger financing problem is dangerous and this 
is a point that the trustees' reports have made for the last 
several years. We always include various illustrations to make 
this point in each report, but, basically, if we were to take 
the path of least resistance and just sort of shuffle the 
accounts around until 2033 and try to act then, it would be too 
late. By that point, there would be no practical likelihood of 
being able to fix the shortfall. So anything that has the 
effect of further delaying the necessary financing corrections 
is inimical to the interest of the program and its 
participants.
    One example that we give in last year's report is that if 
you imagine a solution enacted today where we hold current 
beneficiaries harmless and ask how much would you have to 
reduce scheduled benefits for people newly coming into the 
system in order to balance the system's finances and the answer 
is about 21 percent, which is unpleasant but mathematically 
doable, but if you tried to do the same thing in 2033, at that 
point even a 100 percent reduction in benefits for people newly 
coming onto the rolls would be insufficient to right program 
finances. So, at that point, it's really too late to fix the 
shortfall, and so early action is definitely important.
    The last point that I would make is simply that it would be 
a fairly significant break with past practice to have a tax 
rate reallocation between the Trust Funds without some type of 
action improving Social Security's overall financing outlook.
    Now, obviously, as lawmakers, you're well within your 
rights to act however you choose, according to whatever 
rationale you choose, whether it's in keeping with past 
practice or not, but I think it's important to be aware of not 
only the adverse substantive implications of further delaying 
financing corrections, but also just some of the history of how 
we got here.
    Generally speaking, there have been a number of tax rate 
reallocations throughout Social Security's history. Pre-1972 
they tended to be accompanying other benefit increases that 
were being legislated and the tax rate reallocations reflected 
the changed expectations of benefits, and then in '77 and 1983, 
there were tax rate reallocations to reflect the financing 
corrections that had been enacted in the program as a whole.
    What happened in 1994, and I realize I'm running out of 
time, but in 1994 we had something happen that was fairly 
unusual. We had a situation where the disability costs had been 
rising in the late 1980s and early 1990s and there was a view 
that there wasn't

[[Page 19]]

sufficient information to inform a comprehensive solution at 
that time. So the trustees came before Congress and basically 
said we recommend a two-pronged approach. In the near term, 
reallocate the taxes in order to meet the trustees' short-term 
solvency test, and also follow-up with more comprehensive 
reform. And after the taxes were reallocated, the next 
trustees' message reiterated, ``While the Congress acted this 
past year to restore the short-term financial balance, this 
necessary action should be viewed as only providing time and 
opportunity to design and implement substantive reforms that 
can lead to long-term financial stability,'' et cetera. ``We 
hope, et cetera, that the Congress will take action over the 
next few years to make this program financially stable over the 
long term.''
    Now, we know that the second half of that didn't happen and 
now it's 2015 and we're very close to the wall, and it's clear 
that at this point, there's not enough time to have substantive 
reforms that would avert Trust Fund reserve depletion without 
some source of additional revenues to the Disability Insurance 
Trust Fund. So it seems we're going to have that as at least 
part of our answer, but what I think both the history and the 
current projections tell us is that generally speaking, Social 
Security finances have been sustained to date because lawmakers 
have stepped up and made some difficult choices. They've raised 
revenues or slowed cost growth stats whenever they've been 
confronted with a projection of imminent Trust Fund depletion.
    To break with that precedent and to shift funds between the 
Trust Funds without similar financing improvements could render 
it more difficult to repair Social Security finances in the 
future.
    Thank you.
    Chairman JOHNSON. Thank you.
    You know, do you have a solution?
    [Laughter]
    Mr. BLAHOUS. Well, two-part answer. One is the trustees as 
a group do not have a position on what's the optimal solution, 
and, the stat trustees put forth what's called a Section 709 
letter that lays out the range of options in terms of an all 
tax solution, an all benefit restraint solution and 
combinations between.
    You know, all six trustees probably have their own personal 
views and I'd be happy to respond particularly just to how I 
would approach the problem, but the trustees as a group do not 
have a position.
    Chairman JOHNSON. Are they all different?
    Mr. BLAHOUS. I think there's probably more common ground 
than is usually supposed. I think there's actually a tremendous 
amount of common ground between I think different trustees as 
to how they'd approach the problem.
    Chairman JOHNSON. Well, that's good to know. Thank you for 
your testimony.
    [The prepared statement of Mr. Charles Blahous:]

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    Chairman JOHNSON. Mr. Lorenzen, welcome. Please proceed.

   STATEMENT OF ED LORENZEN, SENIOR ADVISOR, COMMITTEE FOR A 
                   RESPONSIBLE FEDERAL BUDGET

    Mr. LORENZEN. Thank you.
    Chairman Johnson and Ranking Member Becerra and Members of 
the Subcommittee, I appreciate the invitation to appear before 
you today.
    I have been involved in Social Security issues as a 
congressional staff member and in the nonprofit sector for over 
20 years. On a personal note, I had experiences with Social 
Security as I had the responsibility for managing my parents' 
finances for several months after my mother was gravely injured 
in an automobile accident with only the very modest Social 
Security support from my

[[Page 30]]

stepfather's retirement benefit and my mother's disability 
benefit providing their income.
    I've also come to know many people in the disability 
community through my mother's work as a disability rights 
activist and my involvement with groups for people with spinal 
cord injuries. These experiences have given me a deep 
understanding of the importance of the SSDI program and its 
modest benefit levels.
    The Community for a Responsible Federal Budget has launched 
the McCrery-Pomeroy SSDI Solutions Initiative to identify 
potential improvements to the DI program. However, my testimony 
today does not reflect the views in the McCrery-Pomeroy 
Initiative or the co-chairs who have not taken a position on 
reallocation.
    I will briefly summarize a few conclusions from my review 
of prior reallocations.
    First, prior reallocations have typically been accompanied 
by reforms to improve overall solvency. The requirements in the 
Johnson Rule is more consistent with past reallocations than 
the current proposals for clean reallocation.
    Second, prior reallocations generally rebounds payroll 
taxes to align revenues with the relative cost of each program 
and shifted revenues from the Trust Fund in a stronger 
actuarial condition. Neither would be the case with a 
reallocation enacted today.
    Third, clean reallocations, which were intended to avoid 
imminent Trust Fund depletion and buy time for Congress to 
enact legislation to improve solvency, resulted in no action 
until the Trust Fund was facing depletion again. That is a risk 
we cannot afford to take again given that the entire Social 
Security Trust Fund is facing depletion in less than two 
decades.
    Finally, depletion of the SSDI Trust Fund should be an 
impetus for comprehensive Social Security reform that addresses 
solvency of both OASI and DI programs. Failing that, any 
reallocation should be for a limited period of time and 
accompanied by modest changes improving overall Trust Fund 
solvency and improving the DI program, along with a process 
that will facilitate further action on comprehensive reform.
    Congress has enacted reallocation legislation on six 
occasions. As Dr. Blahous has said, the first two were part of 
legislation increasing benefits when the overall program had a 
surplus and reallocation was necessary to cover the costs of 
increased benefits in the DI program. That's very different 
than the situation we have today.
    The reallocations in 1977 and '83 were parts of major 
Social Security reforms that reduced OASDI shortfalls. There 
were two reallocations in 1980 and 1994 that were closer to 
clean reallocation being discussed now, but with key 
differences. The 1980 legislation was a temporary reallocation, 
benefiting the OASI Trust Fund for two years and was preceded a 
few months by reforms to the DI program, which improved DI 
Trust Fund solvency.
    The 1994 legislation included modest changes in Social 
Security, but was framed as buying time for more significant 
reforms, and as Dr. Blahous noted, the 1994 reallocation was 
designed by the trustees to ensure that the DI Trust Fund met 
the test of short range financial adequacy, which resulted in 
the Trust Fund being extended for a little over 20 years.

[[Page 31]]

    However, the anticipated 2016 DI Trust Fund depletion does 
not mean that further reallocation wasn't anticipated in 1994. 
In fact, when the trustees initially recommended the 
reallocation, they warned against further reallocation, 
writing, ``Further reallocation could raise concerns about the 
financial viability of the OASI program.''
    Although the President's proposal for reallocation that 
extends the life of the DI Trust Fund for nearly two decades is 
in many ways similar to the 1994 legislation, the current 
context is very different. In 1994, OASI depletion was 
projected to be 40 years away, whereas now we only have 20 
years, leaving much less time to take action without severe 
disruption for beneficiaries and taxpayers.
    A key rationale for the 1994 reallocation does not apply 
today. The early '90s' shortfall in the DI Trust Fund was 
unexpected and due to factors that were not understood. In 
contrast, the current projections of DI Trust Fund have been 
anticipated for some time.
    Because Congress failed to heed the warnings of trustees 
after 1994, some reallocation to the DI Trust Fund will be 
necessary. There are no realistic options to provide sufficient 
savings in time to prevent depletion by 2016. Nonetheless, one 
of the lessons we have learned is that a reallocation with no 
reforms will remove pressure on policymakers and increase the 
chances that we won't act until we face the crisis of imminent 
Trust Fund depletion again.
    If we delay action for another 20 years, we won't be able 
to solve the problem with reallocation. The only options will 
be extremely steep increases in taxes, deep and immediate 
reduction of benefits or general revenue transfers to the 
combined Trust Fund.
    Ideally, DI Trust Fund depletion should be viewed as a 
warning about the financial problems facing the entire Social 
Security program and provide the impetus for comprehensive 
Social Security reform. Addressing depletion of the DI Trust 
Fund in the context of comprehensive Social Security reform 
would provide policymakers with a much broader range of options 
on both benefits and revenue side to improve the solvency of 
both the DI and OASI program, which, as I said, faces a larger 
long-term shortfall.
    However, agreement on comprehensive Social Security reform 
may not be possible before Congress needs to act. Absent 
comprehensive reform, policymakers should enact a smaller 
reallocation or interfund borrowing to delay depletion by a few 
years and modest reforms improving Social Security solvency and 
improving the DI program, along with a mechanism to ensure 
further action on Social Security solvency, such as the 
Delaney-Cole Social Security Commission Act.
    A smaller reallocation extending the DI Trust Fund for a 
shorter period of time would keep pressure on to address the 
underlying shortfalls in the Social Security system, just like 
the temporary reallocation in 1980 and the subsequent limited 
interfund borrowing authority did before the 1983 reforms, in 
contrast to the 1994 reallocation that was followed by 20 years 
of inaction.
    In conclusion, policymakers should not enact a clean 
reallocation to delay depletion of the DI Trust Fund without 
taking steps to address the shortfalls facing Social Security 
and enact improvements in the DI program. The Committee for a 
Responsible Federal Budg

[[Page 32]]

et stands ready to help the subcommittee and your colleagues in 
Congress and the Administration to deal with these issues.
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    Chairman JOHNSON. Thank you.
    I don't know if we can ever figure out how to solve the 
shortfall, but you all are here to help. Especially if people 
are on Social Security that don't deserve to be on there, 
disability in particular.
    Mr. Phillips, you're recognized.

[[Page 43]]

       STATEMENT OF WEBSTER PHILLIPS, SENIOR LEGISLATIVE 
REPRESENTATIVE, NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY 
                          AND MEDICARE

    Mr. PHILLIPS. Thank you, Chairman Johnson and Ranking 
Member Becerra and Members of the Committee. On behalf of the 
members of the National Committee to Preserve Social Security 
and Medicare, I want to thank you for holding this hearing. I'm 
honored to be here before the committee today.
    I started attending hearings in this room in 1987 when I 
was a new hire at the Office of Legislation at the Social 
Security Administration. I've formed a reverent attitude toward 
this commission's--the committee's deliberations and it's the 
first time I've sat at this table and it is indeed a great 
honor.
    First, a few words about our organization. Our members come 
from all walks of life and every political persuasion. What 
unites them is their passion for protecting and strengthening 
Social Security and Medicare, not just for themselves, but for 
their children and grandchildren. Our members see Social 
Security as an intergenerational compact that protects all 
members of the family. To them, it is a single, integrated 
system of benefits that provides protection from birth to 
death. It is a system where all of its parts are equally 
important.
    Before addressing the financial issues confronting the 
Disability Insurance program, I would first like to briefly 
describe the nature of the program. First and foremost, 
Disability Insurance coverage is an earned right. Workers 
become insured by paying into the system just as they do for 
retirement and survivors' benefits. Like everyone else, their 
taxes accumulate in the Social Security Trust Funds, which 
currently have a balance of about $2.8 trillion.
    Social Security Disability is the largest income support 
program for disabled Americans providing monthly cash benefits 
to workers who sustain severe, long-term disabilities. The 
rules for qualifying are stringent and the people who do 
qualify have serious health conditions that leave them unable 
to work in any substantial degree. In fact, one in five women 
and one in six women dies within five years of being approved 
for benefits.
    The disability program currently pays benefits to 11 
million disabled workers and their families. Beneficiaries 
include more than a million military veterans, 4.4 million 
women, 1.8 million African Americans, and 1 million Hispanic 
Americans. Benefits paid by disability are modest, but vitally 
important to the workers and families who receive them. The 
average benefit of $1,980 for the disabled worker is just 
$2,300 above the federal poverty line. The importance of these 
benefits is illustrated by the fact that one in three disabled 
Americans depend on disability benefits as their sole source of 
income.
    The need to strength the financing of the Disability 
Insurance program is not a surprise. As far back as 1995, the 
Social Security actuaries have projected that the Disability 
Trust Fund would face a funding shortfall in 2016. The reasons 
for this have been well known and are primarily demographic in 
nature and are expected to stabilize in years to come. Among 
them are the growth in the working age population, the aging of 
the Baby Boom generation, women's increased participation in 
the labor force and also their in

[[Page 44]]

creased incidents of disability so that it now nearly matches 
that of men, and the increase in the retirement age that was 
enacted in 1983, and essentially, I think, perhaps not fully 
appreciated is what it would do to the disability program.
    As the 2016 deadline to avoid default approaches, its 
looming presence would become an increasingly heavy burden on 
the minds of the millions of disabled Americans who constitute 
some of the most vulnerable members of our society. Congress 
should act now to ease that burden by rebalancing the revenue 
flow into the DI Trust Fund so that it remains able to pay all 
benefits it owes to disabled beneficiaries and to do so on 
time. This rebalancing has been done numerous times since the 
DI Trust Fund was established in 1956 and can be done today 
without compromising the ability of the overall program to pay 
benefits for nearly the next 20 years.
    Now is the time for all Members of Congress to step up and 
show their commitment to Social Security and the millions of 
Americans who receive disability benefits from the vitally 
important program.
    Concludes my comments and I'll be happy to answer any 
questions.
    Chairman JOHNSON. Thank you for your testimony. I 
appreciate it. I appreciate all of you talking to us today.
    As customary, for each round of questions, I'll limit my 
time to five minutes and ask my colleagues also to your limit 
your time to five minutes as well.
    In response to the disability program going broke next 
year, President Obama proposed in his budget to reallocate the 
Social Security payroll tax for five years.
    Dr. Blahous, briefly, in layman terms, talk to us in 
English. What does that mean?
    Mr. BLAHOUS. Well, the trustees don't usually speak in 
layman's English, but I'll try.
    [Laughter]
    Chairman JOHNSON. I know that.
    Mr. BLAHOUS. The--workers pay a 12.4 percent payroll tax 
and it is distributed between the Old-Age and Survivors Trust 
Fund and the Disability Insurance Trust Fund and by law, we can 
only pay benefits for each--in each category from the 
respective Trust Fund, and right now, of that 12.4 percent tax, 
10.6 goes to the Old-Age and Survivors Trust Fund and the other 
1.8 goes to the Disability Insurance Trust Fund, and basically 
what the Administration has proposed is just to change that 
allocation so that for the next five years, from 2016 through 
2020, another 0.9 points, 2.7--in total 2.7 points, would go to 
the Disability Insurance Trust Fund and less would go to the 
Old-Age and Survivors Trust Fund.
    Chairman JOHNSON. In actual dollars, what does that mean?
    Mr. BLAHOUS. It's about $330 billion over five years, 
plus----
    Chairman JOHNSON. Million?
    Mr. BLAHOUS [continuing]. Of course it would compound 
interest in the Trust Fund, the $330 billion over the first 
five.
    Chairman JOHNSON. Billion, okay. And over that five-year 
program, how much does the disability program need to have to 
pay full benefits?
    Mr. BLAHOUS. Over that five-year period?

[[Page 45]]

    Chairman JOHNSON. Yeah.
    Mr. BLAHOUS. I mean how much are we short?
    Chairman JOHNSON. Yeah.
    Mr. BLAHOUS. We're basically--it's probably about $130 
billion over that five years.
    Chairman JOHNSON. A shortage?
    Mr. BLAHOUS. That's right. Those are the--right, those are 
the shortfalls in the DI Trust Fund over those five years.
    Chairman JOHNSON. Well, meanwhile, doesn't shifting money 
hurt the retirement program? Is it in trouble?
    Mr. BLAHOUS. Well, the Old-Age and Survivors Trust Fund 
definitely faces a shortfall and has a substantial imbalance 
that needs to be corrected, yes.
    Chairman JOHNSON. So if I have this right, over the next 
five years, the President wants to take 330 billion from the 
retirement program that's going broke and give it to the 
disability program, which will be broke next year if we don't 
do anything.
    What's the cash flow deficit that the retirement program is 
then facing?
    Mr. BLAHOUS. Over those five years?
    Chairman JOHNSON. Yeah.
    Mr. BLAHOUS. It's in the ballpark of $300 billion over 
those five years, a little over $300 billion, $330----
    Chairman JOHNSON. So how do we cover that?
    Mr. BLAHOUS. Well, that'll be--that would be a period of 
time that the Old-Age and Survivors Trust Fund is drawing on 
its Trust Fund reserves, which are redeemed from the general 
fund.
    Chairman JOHNSON. So the President's plan basically doubles 
the retirement program's shortfall in order to give disability 
more money. Is that correct?
    Mr. BLAHOUS. Yes. Yes.
    Chairman JOHNSON. Mr. Lorenzen, the President's proposed 
stand-alone reallocation, which violates the House rule that I 
champion, and now how many reallocations has Congress voted on 
and of those, how many of those have been done without reform?
    Mr. LORENZEN. As I stated in my testimony, Congress has 
enacted legislation reallocating payroll taxes six times. 
Several of those had reallocations occurring in several stages 
or had the reallocation reversed. So there have been 11 
different years in which there was a reallocation, but that was 
of 6 bills--bills that were actually passed by Congress.
    Chairman JOHNSON. Well, you keep saying 11. He did too and 
we only voted six times.
    Mr. LORENZEN. Six, yes. I'm saying that a couple of them--
for example, the 1994 reallocation did the reallocation over 
three steps. The most recent 2000--but Congress approved 
reallocation six times.
    Chairman JOHNSON. Okay.
    Mr. LORENZEN. And of those six, the first two happened when 
the Trust Fund was running a surplus. The entire Trust Fund was 
running a surplus and paid for higher benefits. Since the Trust 
Fund's been running shortfalls, all of the reallocations have 
either been part of reform legislation or in anticipation of 
future reforms. For example, the 1980 was--only about--a short 
period of time.

[[Page 46]]

The 1994, reallocation would be to some extent the outlier in 
extending solvency for many years without reforms.
    Chairman JOHNSON. The President's proposal would align the 
solvency dates of the retirement and disability program to 
2033; is that correct?
    Mr. LORENZEN. Yes.
    Chairman JOHNSON. And is that fair to say, that that's 
unprecedented absent full reform?
    Mr. LORENZEN. Correct, the only two times that reallocation 
has brought the two Trust Funds aligned were after 1977 and 
1983 when they were part of comprehensive Social Security 
reform. They extended both Trust Funds.
    Chairman JOHNSON. Do you think that those who are concerned 
about the disability program's looming insolvency are 
manufacturing a crisis?
    Mr. LORENZEN. No. The 19 percent reduction in benefit and 
the depletion of the Trust Fund is definitely a crisis. The 
fact that we've known this is coming for 20 years doesn't make 
it any less of a crisis. It means that we have seen a crisis 
coming and failed to act and that's not a reason to continuing 
delaying acting.
    And the depletion of the DI Trust Fund is, in many ways, a 
warning of even greater crisis facing the Social Security 
system as a whole, that it could be--the depletion of the DI 
Trust Fund could be viewed a warning buoy warning of the tidal 
wave coming to the Old-Age program, and that, as Dr. Blahous, 
pointed out, if we don't act about the looming crisis facing 
the Old-Age program, that the--that'll be a much greater crisis 
with much more severe consequences.
    Chairman JOHNSON. Well, isn't that just kicking the can 
down the road?
    Mr. LORENZEN. And if we don't use the warnings of this DI 
depletion to recognize the problems facing the Old-Age program, 
that's going to create a greater crisis and that's to the 
extent that the problem--the DI Trust Fund has been depleted 
because of demographic pressures, those same pressures are 
going to be--are now creating problems for the Old-Age program.
    Chairman JOHNSON. Well, like the President said, I think 
we're at the end of the road and don't need to kick it down 
there any further. We have to signal seriousness in this by 
making sure some of the hard decisions that are made under our 
watch today, that they are not someone else's in the future.
    In your opinion, as a public trustee, Dr. Blahous, would 
you agree we can't afford to wait to find solutions?
    Mr. BLAHOUS. I do agree and the trustees have stated as a 
group that the earliest possible action would be desirable and 
obviously you, as lawmakers, need to figure out how much you 
can agree on and how much can be enacted. Some is better than 
none. All is better than some. I don't know what the universe 
of the possible is, but certainly the----
    Chairman JOHNSON. Yeah, like we can ever agree on anything. 
I don't know.
    Mr. BLAHOUS. But the more we can do, the better.
    Chairman JOHNSON. Mr. Becerra, you're recognized.
    Mr. BECERRA. Thank you, Mr. Chairman.

[[Page 47]]

    And actually I think we can agree because I think we all 
agree there is a challenge at Social Security.
    Chairman JOHNSON. You and I can.
    Mr. BECERRA. I think we could, yes, and I would urge us, 
Mr. Chairman, to sit down at some point quietly if we could 
with some of the experts, the trustees and others to have a 
good conversation among ourselves as members on the 
subcommittee and then see if we could come up with something 
together to make sure that Social Security for the long term is 
not just strong and vibrant, but that it is something that 
people can have confidence in.
    So I think we can do that. My concern is though that when 
you impose these artificial rules in our House, in the House of 
Representatives, that force a 20 percent cut to benefits, that 
is like holding a gun over the head of 11 million workers who 
became disabled and say, ``Unless Congress does its job, 11 
million people are going to see their benefits cut by 20 
percent,'' when you have got $2.8 trillion in the reserves of 
the Social Security system that they paid for.
    There is where I think it becomes difficult to have a good 
conversation if we are doing this in a panic mode because we 
have got an artificial gun to the head of 11 million folks, 
Americans, who unfortunately became disabled after they were 
working and are looking to get their earned benefits.
    Thank you all for your testimony.
    [The prepared statement of Mr. Webster Phillips follows:]

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    Chairman JOHNSON. Mr. Phillips, let me ask you a question 
since you deal with a lot of seniors and a lot of folks who are 
disabled and on the disability insurance benefit under Social 
Security. You mentioned that about a million veterans in 
America today qualify for disability insurance benefits under 
Social Security. Many of them served their country.

[[Page 53]]

In fact, many of them have a disability as a result of their 
service to our country and receive these benefits.
    How would they be affected if this rule in the House that 
requires there to be a 20 percent benefit cut to their 
disability insurance benefits; how would they be affected if 
this Congress did not come up with a solution and had to live 
with that rule?
    Mr. PHILLIPS. Well, the cuts----
    Mr. BECERRA. You need your microphone on.
    Mr. PHILLIPS. That is a very good question, and thank you 
for the prompt.
    The dilemma that you would confront is that a veteran, no 
matter how grievously wounded in combat or otherwise injured or 
disabled, would face the same reduction in benefits that the 
ten million non-veterans would receive.
    A 20 percent reduction in benefit for the average worker 
would really be a hard hit. Currently the average benefit is 
$13,980 a year. If you take that down by 20 percent, that 
becomes $11,184 a year, and the poverty level in the United 
States for a single individual currently is $11,670. So you 
would, in essence, be taking the average disabled individual 
veteran, otherwise, down and put them into poverty.
    Mr. BECERRA. Let me ask you this other question. You 
probably know quite a few Americans who were workers, became 
disabled or are on the disability insurance program through 
Social Security. I want to make sure it is clear to workers who 
become disabled and, therefore, get disability benefits under 
Social Security. Did they pay into the Social Security system 
the way folks who are getting it for retirement paid in?
    Mr. PHILLIPS. Yes. The benefits can be paid only if you are 
insured to receive them. The way the Social Security disability 
insured status works is it is easier for younger workers to 
qualify for benefits. Because of their youth, they have not had 
the opportunity yet to participate as fully in the workforce as 
they would if they had not become disabled.
    But, yes, everybody who gets benefits has to meet the 
insured status. They have to have paid in enough to qualify.
    Mr. BECERRA. And do disabled workers have to reapply once 
they reach retirement age, 66 or so years of age? Say you 
became disabled on the job when you were in your 50s and you 
qualified for disability insurance under Social Security. You 
reach the age of 66. Do you have to now reapply to see if you 
can get your Social Security retirement benefits?
    Mr. PHILLIPS. No. The transition is seamless. The only 
people I believe who are really aware of it are the actuaries 
and the people in the Treasury Department who debit the Old Age 
and Survivors Insurance Trust Fund for the benefits paid after 
the person reaches full retirement as opposed to the disability 
insurance.
    Mr. BECERRA. So you go from one to the other because it is 
one system, the Social Security system.
    Mr. PHILLIPS. It is an invisible transition. There is no 
notice. There is no effect on the benefit amount. The 
accountants simply make a change as to which fund is being 
debited.
    Mr. BECERRA. Final question, gentlemen, any of the three of 
you. Are you aware of a proposal in Congress today that would 
re

[[Page 54]]

solve the need to do a reallocation of fine tuning of the two 
accounts so that you can avoid the 20 percent cut?
    Mr. BLAHOUS. I am not. I am persuaded we are in a position 
where no matter what we do we are going to have to have some 
inflow of funds into the DI Trust Fund.
    Mr. BECERRA. Okay.
    Mr. LORENZEN. I would agree with that. I think there are 
changes that you can be made in the DI program with program 
integrity such as you propose or continued savings reviews that 
could achieve some savings, but not nearly enough to avoid 
depletion, and some reallocation is going to be necessary.
    Mr. PHILLIPS. I have to agree with both of them, yes.
    Mr. BECERRA. Well, thank you for offering your testimony, 
and we will take your admonition.
    And I think, Mr. Chairman, we have an opportunity, I think, 
maybe to figure out how we can sit down and see if we can come 
up with something, but short of that I do not think we should 
put in jeopardy the benefits that people have earned who are 
now disabled.
    So with that I yield back.
    Chairman JOHNSON. We need a fix.
    We have a vote called, three exactly. Are you all able to 
stay here while we go vote and come back?
    Mr. PHILLIPS. Yes, sir.
    Chairman JOHNSON. Thank you very much.
    We stand in recess.
    [Recess.]
    Chairman JOHNSON. We are back in session. I will just call 
the meeting back in session.
    Mr. Renacci, would you care to comment?
    Mr. RENACCI. Thank you, Mr. Chairman. Thank you for holding 
this hearing.
    I want to thank the witnesses for being here.
    I want to reiterate, Mr. Chairman, your statements. The 
Social Security Disability Program provides an essential income 
safety net. We all know that it will be unable to pay full 
benefits in 2016. I think we want to make sure that it is 
solvent.
    No one is in favor of across-the-board cuts, and we are 
committed to making sure that does not happen. But no matter 
how you slice and dice the numbers, Social Security is really 
on an unsustainable path. This should be of serious concern to 
my colleagues and the American taxpayers.
    Each year the program trustees determine the shortfall 
between expected revenue and costs over the next 75 years. This 
shortfall is trillion of dollars in promises that the 
government cannot keep.
    It is also important to note that the shortfall is not 
reflected in the financial statements published annually by the 
IRS.
    Mr. Chairman, for the record, I would like to submit the 
graph that is on the board, if there is no objection.
    Chairman JOHNSON. Without objection.
    [The submission of the Honorable Jim Renacci follows:]

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    Mr. RENACCI. It is interesting because many times down here 
in Washington we talk about surpluses or we talk about the 
assets that we have. We sometimes forget that we also have 
liabilities on a true balance sheet, and my concerns would be 
and I want to

[[Page 58]]

make sure that all of my colleagues notice that since 2009 to 
2014, the unfunded liabilities have doubled.
    So even though Mr. Becerra said that we have $2.8 trillion 
in surplus, when you take the true balance sheet and show $10.6 
trillion in unfunded liabilities, you have a net deficit of 
$7.8 trillion.
    Mr. Blahous, would you agree with those numbers?
    Mr. BLAHOUS. Actually that $10.6 trillion deficit counts 
the value of the Trust Fund. So if you were to take the cash 
deficits over the next 75 years, they would actually be about 
$13.4 trillion, but we count the $2.8 trillion Trust Fund 
against that to arrive at the $10.6 trillion figure.
    Mr. RENACCI. So it is even worse than 7.8 percent, and I 
think that is one thing that we have to start looking at in 
Washington. I know nobody up here wants to see the fund be 
insolvent, and I think everybody wants to make sure that the 
fund is around for the future. We want to make sure it is 
around for not only disability, but also for retirement, and I 
think it is very important that as we look at this fund we 
consider that.
    Now, we are talking about shifting from the retirement to 
disability. Mr. Blahous, would the unfunded liabilities still 
continue to be there?
    I mean, we have a trend here where unfunded liabilities are 
going up. So if we just shift, would the trend continue to go 
up?
    Mr. BLAHOUS. It would. That is a combined figure for the 
two Trust Funds, both the Old Age Survivors and the Disability 
Trust Funds. So that total figure would not be changed by the 
fact of a transfer.
    Mr. RENACCI. Right. So I think we can all agree that if we 
continue down this path and we talk about shifting funds or 
moving funds from one fund to the other, we are still talking 
about in its entirety a Social Security fund that is, as you 
just said, $10.6 trillion unfunded going forward; is that 
correct?
    Mr. BLAHOUS. That is correct.
    Mr. RENACCI. So I do not have the projections going 
forward. I had the pleasure or maybe displeasure of working in 
the business community for 30-plus years before I came to 
Congress. If I had a balance sheet that showed an unfunded 
liability growing at this pace, this would be extremely 
alarming to me. I am assuming it I alarming to the Board of 
Trustees.
    Mr. BLAHOUS. We are very concerned about it, yes.
    Mr. RENACCI. Okay. So I think the answer has to be not 
shifting because if we are shifting we are not doing anything. 
The unfunded liabilities are continuing. We have to come up 
with a plan as to how we can fix this program.
    One thing I have noticed, the recent growth in the number 
of DI beneficiaries has been explained, but not all of it. I 
mean, as I heard in some of the testimony, some of the growth 
is population, aging, more women working enough to be eligible, 
and increasing applications from unemployed workers.
    However, a cause of a portion of this growth remains 
unclear. What actions are being taken to get all of those 
answers and find out what all of the issues are?
    Mr. BLAHOUS. There is actually some very good information 
that has come out of the Social Security Chief Actuary's 
Office. There

[[Page 59]]

is some testimony that was put together in 2013 that I actually 
drew heavily from in preparing my own testimony.
    It basically breaks down the costs, the drivers of 
disability costs, into different categories, and it assigns 
percentages to each one. The percent that comes from just the 
growth of the working age population, the percent that comes 
from the aging of the working age population, the percent that 
comes from the increased insured status of women, and the 
percent that comes in increases in awards within the insured 
population.
    So they all play a role. I would say I am speaking very 
crudely here, but it is about two-thirds demographics and about 
one-third expansions in award incidence per insured member of 
the population.
    Mr. RENACCI. Thank you.
    Thank you, Mr. Chairman. I am running out of time.
    Chairman JOHNSON. Thank you.
    Mr. Doggett, you are recognized.
    Mr. DOGGETT. Thank you, Mr. Chairman.
    If I understood the answers that each of you gave to Mr. 
Becerra earlier, it is not a question of whether there needs to 
be a reallocation of funds to Disability Insurance Program. It 
is a question of how much and under what conditions.
    Is that a fair summary for each of you?
    Mr. BLAHOUS. I would say yes.
    Mr. LORENZEN. Yes. I think it is a question of does it 
delay action or does it move the ball forward in solvency for 
the entire program.
    Mr. PHILLIPS. You are right, sir. Nobody has settled on any 
package of alternatives that would obviate the need for 
reallocation.
    Mr. DOGGETT. Well, thank you very much, and thank you for 
all of your testimony.
    I believe that there are some dangers to our Social 
Security system, to all of it, but that those dangers have less 
to do with the fact that we have an aging population which puts 
more demands on the system and will require some changes than 
it does from the dangers that are posed within this Congress 
and from some of the ideological groups that have never 
accepted the idea of social insurance as a program in which all 
of society participates. Everyone has a stake, and then should 
you have the misfortune of disability or the likelihood of 
retirement, that that system is there and you can count on it. 
It will be there no matter your circumstance. You will be able 
to rely upon it.
    I believe that there is unanimity that some reallocation 
will be necessary as we have done 11 times in the past, or six 
to be more precise from Congress; 11 total times in the past, 
and that is what must be done here, and it is a question of 
under what circumstances.
    The rule that was adopted on short notice at the beginning 
of this Congress on a totally partisan basis certainly has been 
a cause of concern. I agree with the commitment that the 
chairman made at the beginning of the hearing, but I am 
concerned about what that means to achieve that commitment in 
terms of the rule that was adopted.
    I do not think that when we make a contribution to Social 
Security we are dividing in our minds, or any American is, the 
dif

[[Page 60]]

ference between old age and disability and survivors. We are 
contributing toward a package, and the fact that some of this 
package of contributions may have to be reallocated in order to 
assure the solvency of the disability portion of the fund is 
something that is, I believe, a reasonable step, and what the 
President has called for is a reasonable step.
    There may be a need for some changes, some reasonable 
changes, at the same time, but the reallocation is necessary. 
As several of you have pointed out, when someone receives 
disability, a significant number of those who are receiving 
disability have already achieved age 50. They will soon be 
switching to the retirement system or will be relying on the 
retirement system, and they do not have to reapply in order to 
get retirement.
    I think that there have been some indications within this 
Committee over the last two years that there were some problems 
with fraud in the disability system, and I think there are some 
problems, and we need to ferret those out. It is one of the 
reasons, Mr. Becerra, that I know we came together under your 
leadership to introduce the Fraud and Error Prevention Act 
during the last session, and we will be reintroducing something 
similar.
    To the extent that there are examples of fraud and better 
ways to police that, it is in the interest of everyone, 
taxpayer and beneficiary, that we get at those problems. But we 
ought not to use the abuse of the system by some to lead to a 
limitation on vital benefits that so many people who receive 
Social Security disability rely upon.
    Similarly, I think it is important that we preserve a 
system, a reasonable system, that allows those who have a 
disability claim, given the complexities of the Act, to be able 
to rely on legal counsel to represent them under appropriate 
circumstances. To the extent that there is, again, any abuse of 
the system or the way judges operate in that system, let us 
ferret them out and get to them, but preserving the right of 
individuals to get access to a disability check and to have 
effective advocacy within that complex system is an important 
one for us to preserve.
    I hope we can move forward on reintroduction and a markup 
of the Social Security Fraud and Error Prevention Act as soon 
as possible.
    I yield back. Thank you.
    Chairman JOHNSON. Thank you.
    The number is six times that we have.
    Mr. DOGGETT. Here, but I guess 11 total reallocations.
    Chairman JOHNSON. Six.
    Mr. DOGGETT. Well, is it not, Mr. Chairman, 11 total 
reallocations of which Congress has voted, according to the 
witnesses, six times? Other reallocations?
    Chairman JOHNSON. Okay. Thank you.
    Mr. KELLY.
    Mr. KELLY. I thank the chairman.
    While you gentlemen are here, I also like Mr. Renacci came 
out of the private sector. You made comments earlier about 
where the revenue comes from for Social Security, and the 
figures you used were, I believe, you said that it is 12.4 
percent. Explain how that breaks down though.

[[Page 61]]

    Mr. BLAHOUS. How it breaks down in terms of which Trust 
Fund it goes to?
    Mr. KELLY. Well, no. Who puts the money in?
    Mr. BLAHOUS. It comes from the compensation of workers.
    Mr. KELLY. But in addition, the 12.4 percent is made up, 
6.2 percent from the employer, 6.2 percent from the associate.
    Mr. BLAHOUS. Right.
    Mr. KELLY. So it is not exactly the worker who is putting 
in 12.4 percent of his or her income.
    Mr. BLAHOUS. Right. I will say that 6.2 percent is directly 
paid by the employee; 6.2 percent is paid by the employer. 
Economists generally view the entire 12.4 percent as coming out 
of the available compensation.
    Mr. KELLY. And they cap though at what point? At what point 
does the contribution stop?
    Mr. BLAHOUS. It is about $113,000.
    Mr. KELLY. You are talking about the total.
    Mr. BLAHOUS. Yes, 113,000 in wages for the year.
    Mr. KELLY. In actual dollars that go into the fund though.
    Mr. BLAHOUS. Well, no. That is the wages that are subject 
to the tax.
    Mr. KELLY. Right, right, but the wages that go in does not 
equate to what actually goes into the fund. It's is 12.2 
percent of that number. So it is capped.
    Mr. BLAHOUS. That is right.
    Mr. KELLY. Okay. And I think that is part of the problem, 
because we have a growing deficit, and we look at it. So I just 
wanted to make sure that I understood because I think Mr. 
Renacci hit on the balance sheet. What we are talking about 
today, and I think for most people that I have talked to back 
home in Western Pennsylvania, most young people say, ``Look. I 
put money in out of every pay, but I am never going to see that 
money.''
    And my question, I guess, is it comes down to we go all the 
way back to 1994, and we said, okay, we will do something now 
to make sure because the sustainability and the solvency of 
this program is absolutely important to the people that we 
represent.
    So in 1994, we recognized that. What changes did we make 
between 1994 and today to address that situation?
    Mr. BLAHOUS. Really almost none.
    Mr. KELLY. Nothing.
    Mr. BLAHOUS. And I would say pursuant to your point, we are 
up against the wall now, and there is the threat of a 19 
percent sudden benefit reduction facing the disabled. I think 
part of what we are trying to say in our testimony is that we 
do not want to be in the same situation again in 2033 where if 
we just delay and move funds around, then in 2033 we are going 
to be in the situation where everything is going to be----
    Mr. KELLY. I share that opinion with you, but I have only 
been here four years. I have never seen this body do anything 
that addresses long-term debt. We talk about it, and then we do 
something temporarily. We put a Band-Aid over something that 
needs major surgery, and then we say we papered over a 
structural problem. It will be all right until it breaks again.

[[Page 62]]

    It is broken now. The money that is going into the Social 
Security fund right now today, being provided by working people 
and their employers, is the money that is being used to fund. 
There really is not a large buildup of cash in this program. It 
is a cash flow situation.
    But everything that we look at, there should be sirens and 
red lights flashing and everything else, but I get the feeling 
that somehow if we can just get past this crisis, we will be 
all right because tomorrow the sun is going to come out. So all 
we have to do is get through the storm tonight. Then tomorrow 
we will get up and we will go to work. The sun will be out, and 
everything is going to be fine.
    But the reality of all this is Washington's inability to 
face long-term problems is what continues to drive our debt 
through the ceiling. I mean, I see us getting to the point 
where the only payments we can make are interest payments on 
our debt. We will never be able to address the principal.
    Every one of these programs is unsustainable under its 
current structure, and so I am trying to understand. While we 
all agree with that, so where is the substantive change? Where 
is the structural change? Where is the ability not only to 
recognize that you are on the Titanic and the iceberg is right 
in front of you as opposed to ``do not worry. We can probably 
get through it tonight and tomorrow we will be on even seas 
again''?
    I just do not understand that. I have been here and this is 
almost five years. Honestly, coming from the private sector, if 
this were happening in my business, what I would be doing is 
advertising that this business is for sale because it is no 
longer sustainable, the model I am on, and structurally I 
cannot exist.
    Is there anything you see happening that is going to 
sustain it? We have got to make sure we are able to keep 
promises to people that we have already made and they feel they 
have paid into. And the reality of it is they paid some into, 
but the return on it because of the numbers, the actuaries say, 
okay, fine, up to a certain point, but people are living a lot 
longer. So that debt keeps growing and that commitment keeps 
growing.
    What would you suggest right now today? I mean, we have to 
have serious structural changes to this and not just talk about 
a temporary transfer of cash to make payments.
    Mr. LORENZEN. We definitely need to make structural changes 
both on the benefits and revenue side. We need to look at the 
program comprehensively for a solution. Unfortunately, what we 
have seen with Social Security and with other issues generally 
is that action happens when there is a crisis and action 
forcing event.
    In contrast, in 1980 we did a reallocation that only 
extended the Trust Fund for a limited period of time, and there 
was still a deadline out there and the pressure for action, and 
then there was inter-fund borrowing. That led to the 1983 
reforms which did extend solvency because there was that 
deadline and that pressure as opposed to 1994 when we did a 
reallocation that extended the Trust Fund for 20 years and 
there was no action.
    I think there is no shortage of ideas, and we know what the 
options are in terms of looking at the revenue side or changes 
in the benefits and retirement age and cost saving adjustments 
and other

[[Page 63]]

changes, and that there is a policy decision to be made about 
what the proper mix of actions needs to be taken, but it needs 
to be taken sooner than later, and unfortunately absent the 
pressures, it is unlikely that that is going to happen until it 
is too late.
    Mr. KELLY. Well, policy is always trumped by politics, and 
it is a shame. But we know it is coming. We know it is already 
here, and we have had our head in the sand for far too long.
    This is a very serious thing. If we are going to keep 
promises, we have to make structural changes.
    Thank you. I appreciate it.
    Thank you, Chairman.
    Chairman JOHNSON. Well, you heard him. What is your 
solution?
    Mr. LORENZEN. Well, I think that we need to look at a 
combination, and I think there is a wide range. I did work on 
the Simpson-Bowles Commission, which I thought had a balance, 
but I think there is, you know, a good range. There needs to be 
some combination of looking at reducing benefits for middle and 
higher income workers, increasing the eligibility age with an 
increase in----
    Chairman JOHNSON. What is your number one solution?
    Mr. LORENZEN. I do not think there is any one single one. I 
think it needs to be a combination looking at it together, 
looking at both on the benefits side and the----
    Chairman JOHNSON. You would be lucky if you get concurrence 
throughout this Committee, much less the Congress.
    Thank you.
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    I would like to take up maybe where my friend from Butler 
left off. First of all, I do not feel comfortable with the 
indictment. Over the course of the last 20 years, Republicans 
in the House have been in charge 16, 17 of the 21 years. I do 
not want to have a broad brush indictment for them not doing 
anything since 1994.
    I am embarrassed that when we were in charge for four years 
that we did not move forward. I do not think it is that hard. 
The rhetoric about somehow this is a system that is bankrupt 
and is not going to be there for our young people I think is 
bogus.
    The system if we do not do anything will pay 75 percent of 
the benefits. The sooner we act, the less disruptive it will 
be. All of our witnesses agree, notwithstanding the rule that 
you have passed, that there will be a reallocation. We will 
waive that point of order, and there will be a reallocation. 
You witness has said that; our witness has said that.
    I really would like us to be able to focus in on what we do 
going forward. What is the cause? We have had identified that 
there was a major demographic shift. We have got more women now 
working, and that was perceived. We have got geezer Baby 
Boomers like me who are in our prime disability years, some of 
us more than others, and something that does not get enough 
attention is that we also back in 1983 where there was 
bipartisan action, we raised the retirement age.
    So there are a lot of people now who are on it for two more 
years that did not happen. So we have really made a significant 
demographic shift. I think all of us ought to go visit our 
Social Security

[[Page 64]]

offices. Talk to the people who work there. Look in the waiting 
room.
    Those of you who have done it, it is an eye opening 
experience. There is no doubt in my mind that there are a few 
people who are gaming the system, and I want us to be able as a 
committee to focus on how we fix that. I would just say 
respectfully that I do not think the way we fix that is cutting 
the Social Security Administration by 5,000 people when the 
work load is going up, which happened recently, and I think we 
need to reflect on that and talk to the people who are working 
in those offices about what it means because there are some 
complex issues in terms of dealing with people with disability. 
It is not easy.
    Now, I want to deal with what the big issue is, and that is 
we have put off as a Congress, both parties have put off diving 
in to make the hard decisions. I do not think the decisions are 
that hard.
    When we last were as a Congress dealing with Social 
Security, I spent a lot of time with people in my community 
talking about what the situation was, acknowledging that we 
could not go on for 30 or 40 years. I do not want my kids to be 
facing a 25 percent reduction.
    But as I talked to people they understand that there are 
about a half a dozen things that are going to happen. We are 
going to cut benefits. We are going to raise taxes. We are 
going to broaden the base. We might do something in terms of 
another benefit cut in terms of what is the inflation rate, and 
maybe we do something for well off recipients who are treated 
differently than others, but it is six or seven things.
    That has not changed in two years, five years, ten years, 
20 years.
    You know, Mr. Chairman, one of the things I would like to 
explore with the committee, maybe we could declare National Fix 
Social Security Day. I am serious, and it would be maybe the 
day that Lily got the first Social Security check, and we get 
ready for it.
    I actually drafted legislation in this regard, and I 
thought I had a Republican co-sponsor who thought differently 
of it because of some other thing going on, but I think if we 
had a National Fix Social Security Day where we had every 
Rotary Club, every church group, every social studies class, 
every college economics class sit down for an afternoon with 
some of the terrific Web sites that you can get and a piece of 
butcher paper and design their own fixes; I think we would be 
shocked at how much consensus there is.
    Everybody is going to pinch a little bit. Nobody is going 
to get everything they want out of that, but Congress makes it 
harder than it needs to be, and I appreciate the focus here, 
that this is just a blip. We will do some reallocation. We will 
waive the point of order, and maybe we will do something about 
some of the cheaters, but the elephant in the room, we have got 
about 20 years and that $2 trillion surplus that we planned on 
is going to be exhausted, and we will have to act.
    And I would like us to try and do something that involves 
the public in that action. I think it is not as hard as it 
would be, and I would love for us to take a shot at it.
    Thank you for your courtesy.
    Chairman JOHNSON. Thank you.

[[Page 65]]

    I think we probably can take a shot at it, especially with 
all of these guys.
    Mr. Buchanan, is he here? He left. How about Mr. Young?
    Mr. YOUNG. Thank you, Mr. Chairman. Much appreciated.
    And I thank all of our panelists for being here today.
    You know, I think our mindset here should be, in this 
introductory kickoff meeting of the Social Security 
Subcommittee, we should be focused on structural changes, on 
fixing the problem, not the reallocation of funds. I think all 
of us have said from the outset there ought to be reassurance 
among beneficiaries of this program that all of us are 
committed to solving this problem and ensuring that the 
Disability Trust Fund remains sufficiently solvent to pay out 
benefits that are much needed by a lot of American. So we are 
all committed to that.
    Let us not be distracted, however, by this diversion of 
funds argument. Let us focus intently on ways to not only make 
the DI Trust Fund solvent because it is going bankrupt in two 
years, but to make the larger program solvent using some of the 
instrument and tools that my good colleague, Mr. Blumenauer 
just alluded to.
    So I do think we can work in a bipartisan way. I really do. 
I think we have an opportunity, a rare opportunity to do 
something big on this Subcommittee. That is why I came to 
Washington, D.C., and you know, let us resist the temptation to 
demagogue. Let us resist the temptation to question motives. 
Let us figure out what the real tools and solutions are here.
    Dr. Blahous, you said the relative health of the Retirement 
Trust Fund, Old Age and Survivors Insurance, is much worse than 
the Disability Trust Fund; is that correct?
    Mr. BLAHOUS. It faces the larger actuarial imbalance of the 
two funds, yes.
    Mr. YOUNG. Mr. Lorenzen, to your knowledge has Congress as 
a matter of historical fact ever shifted funds away from the 
Trust Fund in worse financial shape to the one in better 
financial shape?
    Mr. LORENZEN. No, that has never happened before. It has 
always been from the Trust Fund either in a surplus or facing a 
much smaller deficit.
    Mr. YOUNG. So as has been pointed out, we do not have to 
follow historical precedent on this Committee. We have a 
prerogative to do something unique, something creative.
    I think that would be a bad creative, an irresponsible 
creative solution as legislators. I think we can have a 
respectful dialogue about that, but there is no precedent of 
doing so.
    Dr. Blahous, for the past several years the trustees have 
urged action soon to address the entire Social Security 
Program's finances. Please explain. I feel a sense of urgency 
here. Some of it is visceral. Some of it is mathematic. Some of 
it is informed by conversations I have had that are options for 
reform become more limited the longer we wait, and it I the 
latter portion I think would be most instructive for whomever 
might be either participating in or observing these hearings if 
you could speak to that matter directly: how our options become 
more limited over time.
    Mr. BLAHOUS. Sure. If I could take two approaches to that.
    Mr. YOUNG. Yes, sir.

[[Page 66]]

    Mr. BLAHOUS. The first is that there are certain 
illustrations that we put in the trustees report each year, and 
we have added them to the report in the last few years 
precisely to dramatize this point, which is that our options 
become more difficult the more that we delay.
    And one of them I referred to earlier in my testimony, 
which is that if you assume you want to hold current 
beneficiaries harmless, and I think for the most part people on 
both sides of the aisle do want to, and if you just assume 
purely for the sake of illustration that you are holding tax 
revenues constant and you ask what would be the size of the 
benefit restraint you would have to impose on new beneficiaries 
to get the system in balance; if you enacted that type of 
solution today you would have to cut those benefits by about 21 
percent.
    If you tried the same thing in 2033, even 100 percent 
benefit elimination for people newly coming onto the rolls 
would be insufficient to repair program finances.
    So whole categories of options basically come off the table 
if you delay to the point where we're nearing Trust Fund 
depletion. So that's one tack that I would take.
    The other is simply from the standpoint of political 
realism. In 1983, those reforms came very close to not 
happening. They were intensely difficult to enact, and the 
program came within a few months of hitting that insolvency 
point. It was very difficult. They had to do a six-month delay 
in the COLA. They had to raise the retirement age. They had to 
accelerate an increase in the payroll tax. They had to bring 
all of the newly hired federal employees into the system. They 
had to expose Social Security benefits to taxation for the 
first time. It almost did not happen.
    The shortfall today is already about twice as big as it was 
then. It is substantially bigger the way that we report it in 
the trustees report, but we analyze it a little differently 
today than we did in 1983. If we used the same methods, we 
would have to inflict about twice as much pain today.
    Mr. YOUNG. So let us see if you can do this yes or no. The 
longer we wait in your estimation, in your moral calculus, do 
we end up hurting people more if we wait longer to enact 
structural changes to these programs?
    Mr. BLAHOUS. Not only do we end up hurting people more the 
more we postpone change. I think we render it less likely we 
can get a solution that retains the historical financing 
structure of the program. I think we are in that much danger 
already.
    Mr. YOUNG. Thank you all.
    I yield back.
    Chairman JOHNSON. Thank you.
    Mr. Schock, you are recognized.
    Mr. SCHOCK. Well, thank you. I think a lot of important 
facts have gotten out there, and I think job one of fixing any 
problem is identifying the problem and the cause of the 
problem.
    I, too, would join with Mr. Blumenauer and say the time is 
now for some action, and the sooner we take action the less 
bloody and nasty it has got to be, and particularly for my 
generation and generations to come.

[[Page 67]]

    And so I would love to work with you. Obviously the 
President put together a commission that came up with something 
that Republicans and Democrats had a compromise on. Simpson-
Bowles made reforms to Social Security, never made it to the 
floor, but I think there are definitely some areas of common 
ground that have already been identified that I would hope we 
could work together on.
    So I sincerely hope that beyond this meeting today we can 
maybe start meeting and come up with something.
    I mentioned earlier that the overall Social Security Trust 
Fund is about to become insolvent, and when it does, it would 
be about a 25 percent cut roughly to current recipients. The 
quicker one though is disability, and I am wondering if we do 
not do anything and the solution is using the revenue stream 
currently that is used to fund them, what would the payroll 
taxes for the disability fund have to go to to meet the current 
needs of those on disability
    Mr. BLAHOUS. If we were just doing a change in the 
disability tax rate to put it back in 75-year actuarial 
balance, well, I know the average. The actuarial deficit in the 
Disability Insurance Trust Fund is 0.33 percent of taxable 
payroll. So in theory you could do, you know, a 0.4 percent 
payroll tax increase, and that would put DI in actuarial 
balance.
    I am not sure if that solves your cash flow problem though 
because the annual deficits are bigger than that in the near 
term. So it's one of the--one of the strange artifacts of 
Disability Insurance and Old Age Insurance flows, our 
projections are that the disability deficits are actually at a 
relative high point now, and they are going to go down a little 
bit as the Boomers move onto the OASI Trust Fund.
    So you would have to have a substantially larger payroll 
tax increase in the near term just to keep disability afloat, 
and I am reaching off the top of my head, but maybe 0.6, 0.7 
percentage points is a guess. I do know the dollar amount. It 
is about $205 billion in additional taxes you need from 2015 to 
2023 to go into DI to maintain that balance ratio of 20 percent 
or more.
    Mr. SCHOCK. Well, again, I applaud the chairman for having 
this hearing, and the work you are doing on the Disability 
Trust Fund because obviously that is the here and now, quickest 
one that we have got to deal with, but on the broader issue, I 
hope that we can move on a comprehensive fix, a long-term fix 
to the underlying Social Security fund.
    I would hate to see a future generation's Social Security 
dollars that they have paid in swept to pay for the unfunded 
liability in the Social Security Disability Fund, which it 
appears is where we are headed if we do not do something more 
responsible.
    I yield back. Thank you.
    Chairman JOHNSON. Thank you.
    I agree, and, Mr. Reed, you are recognized.
    Mr. REED. Well, thank you very much, Mr. Chairman.
    If we are going to be sincere about fixing this problem, I 
think we need to change the rhetoric of this Subcommittee. When 
I hear the ranking member, my good friend from California, say 
that it is the rule change that is going to cause people that 
are in a disability state to suffer a 20 percent reduction in 
their benefit, that

[[Page 68]]

is just blatantly false, and I would ask the gentleman from 
California if he is sincere in solving this problem to 
recognize that it is not a rule change. It is the insolvency of 
the Disability Trust Fund.
    The rule change only deals with the allocation adjustment 
of the payroll tax that is proposed to be a solution, but am I 
correct that that has not been enacted? That is going to take a 
legislative action to do.
    So my colleagues on the other side of the aisle are 
assuming that this body will do something legislatively. I 
learned in life early on you never assume. You hope for the 
best. You prepare for the worst.
    So this rule change that we have advocated for on our side 
has in my opinion put this issue out there, out there with 
enough runway to have an open and honest debate about how to 
solve this Disability Trust Fund insolvency issue. And we can 
do it, and we can start with agreement, to my good friend from 
California, that we need to work together to protect the 
disability recipient.
    But we can also do it better than what they have done 
before. I am a new member here, coming in 2010. I do not accept 
the status quo. I do not accept the argument from the panelist 
that this is the way we have done it so this is the way we 
should do it going forward.
    We came here as a new generation of leaders to implement 
solutions, and one of the things that I object to is the 
assumption that we have to use the retirees' money out of their 
trust to bail this out.
    So I put a question to each of you. Are there any other 
funds available to tap into to do an allocation to the 
Disability Trust Fund other than the Social Security Retiree 
Trust Fund?
    Mr. BLAHOUS. Just speaking as a trustee, remember I am a 
trustee not only for the Disability Insurance Trust Fund, but 
also for the Old Age and Survivors Trust Fund. So from my 
vantage point from where I sit, the last place I would want you 
to take it from is the Old Age and Survivors Trust Fund because 
I am the trustee of that Trust Fund as well. Now----
    Mr. REED. It is going to put further pressure on that.
    Mr. BLAHOUS. It is going to put further pressure on that. 
Now, having said that, I would say I have philosophical 
concerns about tapping general fund revenues to support Social 
Security because I think that is a very dangerous line to cross 
as well. Basically once you start subsidizing the program from 
general revenues, I think that----
    Mr. REED. How about in 1981 when they used the Hospital 
Insurance Trust Fund, which appears to be projected to be 
solvent until 2030?
    And you, Mr. Phillips, are from an organization that wants 
to preserve Social Security and Medicare. So I guess you do not 
have a problem with raiding the Hospital Insurance Trust Fund 
from Medicare to bail this out. Because you do not care where 
it comes from, just so it is taken care if is how I read your 
testimony.
    Mr. PHILLIPS. As a point in fact you could not take any 
money out of the Hospital Fund.

[[Page 69]]

    Mr. REED. So in 1981 they did not have legislative 
authority to do that? It was illegal?
    Mr. PHILLIPS. It expired. The authority no longer exists 
for inter-fund borrowing.
    Mr. REED. So if we take legislative action and do it?
    Mr. PHILLIPS. If you wanted to do it, you need to enact 
legislation to make that----
    Mr. REED. Yes. So you have a problem with raiding Medicare 
in order to balance the Disability Trust Fund?
    Mr. PHILLIPS. Oh, yes, we have----
    Mr. REED. I understand your testimony. This is the point. 
This is the point. We need to do better. We need to do better, 
and while we have this opportunity here, I am very interested 
in ways that we can improve the program because what we are 
doing to people on disability on the Trust Fund is often we are 
trapping them in this Disability Trust Fund because it is an 
all or nothing situation.
    We can do better than that. I have been with disabled 
folks, looked them in the eye, and I look them in the eye today 
and I will say, ``We are going to take care if this. We are 
going to make sure you get that benefit that you need and that 
you rely upon, but we are going to do better, and we are not 
going to get you trapped in the disability Trust Fund. If you 
want to get back to work, we are going to stand with you. We 
are going to improve that program, and we are going to allow 
you to have the greatest maximum capability of your life.''
    And that is what half of the Federal Government does, the 
American with Disabilities Act. The whole purpose is to get the 
people in the disability community into mainstream, back to 
work. Why would we have a Disability Trust Fund that says, ``Do 
you know what? If you go back to work, you are going to lose 
your benefit.'' Why? We can do better than that.
    So this is the start of the conversation. Thank goodness we 
changed the rule because if we did not change the rule, do you 
know what would have happened? Exactly what my colleagues on 
the other side want to do: hell bent on spending that retiree 
fund money to bail this out and we wait a year and a half and 
then do it at the last minute.
    We are going to have the conversation now, and the new 
leaders up here are going to lead that charge with our chairman 
to make sure that we do a better job for our disability 
community than what we have been doing up to this point in 
time.
    With that I yield back.
    Chairman JOHNSON. Thank you.
    Mrs. Black, do you care to comment?
    Mrs. BLACK. I do. Thank you, Mr. Chairman. I really 
appreciate your allowing me to be a visitor on this Committee. 
Although I have previously been a committee member, I 
appreciate your allowing me to be here, and I have a real 
interest in this.
    I do want to say my colleague from Oregon who made a 
comment that we should visit our Social Security Disability 
Offices and actually work through the program, I highly 
recommend that. I have done that. I have gone into my local 
agency as if I were applying. I have also gone to the Office of 
Determination and all the way to

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the ALJ, and it is a very eye-opening experiment, and I would 
suggest that everybody on this Committee actually do that.
    But let me go to a couple of things here, and I may repeat 
some of the things that have already been said by my 
colleagues, but one of them is the terminology that is used. It 
really concerns me that we use words like ``rebalancing'' and 
``reallocation'' because that really means something different 
to me. It means robbing Peter to pay Paul.
    And, Mr. Phillips, I was interested in your written 
testimony and also your testimony that you gave us just a 
little bit ago that say the projected DI shortfall can be 
easily, easily eliminated by rebalancing the flow. That simply 
means you take from one fund in order to put into another fund, 
and that is what I have been brought up to understand is 
robbing Peter to pay Paul.
    So if we take from the OASI, eventually that will go 
bankrupt, and then where do we take from? We take from the 
general fund. We are already about $500 billion we are 
borrowing each year in that. So that is really not a solution.
    I am interested that most of the talk has been the way to 
solve this is it could be an all tax solution where we increase 
the tax maybe or we reduce the benefits, maybe do a little bit 
of work as my colleague from Texas said on looking at fraud.
    But what I want to go to is something that I saw during my 
visit and heard from those who work in this industry, is that 
we have not done a good job with job reclassification, and that 
goes to the point that my colleague from New York has just 
talked about, about getting people back to work. Because at 
least from my experience of what I saw when I went to these 
different steps and also what we have heard testimony from 
others who have come here is that we are not doing a good job 
in making sure that when someone comes in to apply for 
disability that what we are trying to do is to get them back 
into the work force.
    I think this is more than just a financial, but this is 
also a quality of life. And so I do not know whether one of you 
would like to talk about that, if that is a piece that you have 
seen and you would like to address, but I think this is a very 
critical piece that does not get talked about very often.
    We talk about reallocations and rebalancing, but the true 
reform, as my colleague from New York has talked about, is 
really what needs to be done, not just for the benefit of the 
financial piece of it, but the benefit for the individual and 
the quality of life.
    So would one of you like to address that issue?
    Mr. LORENZEN. I can speak to that. That is definitely an 
area that needs to be explored for reforms. We found from the 
Ticket to Work Program, while we should continue once people 
get onto the DI rolls trying to find them to get back to work, 
that the really most effective strategies are early 
intervention strategies that help provide support to people who 
are disabled to remain in the workforce and other interventions 
before they go onto the rolls of trying to keep them in the 
workforce.
    Those things may not actually produce much in the way of 
financial savings, but if an individual is able to stay in the 
workforce, it is beneficial to that individual, and it is 
beneficial to society as

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a whole. It may produce new savings over the long term, but it 
also may involve some more costs in the near term.
    I think the President's budget has some initiatives that 
look at trying to do that, but I think we need to be looking at 
that much more aggressively, trying to find before people go on 
the rolls what can we do to keep people in the workforce, which 
I think most people would want to do if they can.
    Mrs. BLACK. I do. Mr. Blahous, do you want to weigh in on 
that?
    Mr. BLAHOUS. Well, I do. Labor force attachment is a pet 
issue of mine not only in the Disability Fund but also with the 
Retirement Trust Fund. I think there are just fundamental 
problems with the design of the system, moving people out of 
consistent attachment to the workforce, people who would 
otherwise want to be and choose to be, but in some ways the 
system not only on the disability side, but the retirement side 
pushes them where they do not want to be.
    And I would just accentuate some of the points that have 
been made here. We have to have legislation of one kind or 
another. The threat of a 19 percent benefit cut is not because 
of a House rule or anything else. That is what is happening 
under current law. We have to have legislation to avert that.
    So there is an opportunity here not only to avert that 19 
percent benefit reduction, but also to put things on a course 
where the system is in better shape and it is serving people 
better in the years ahead.
    So I would say rather than looking at the existing rules as 
a barrier to getting something done, I would look at the 
process as an opportunity to both shore up the health of 
disability, protect people who are on disability, make 
improvements to the way that the program functions so that we 
are not facing even bigger problems a couple of years from now.
    Mrs. BLACK. And I know my time has expired, and thank you, 
Mr. Chairman, but I would ask any of the panelists who have 
ideas about how we might be able to look at that particular 
piece and how we might be able to write some legislation to 
resolve that.
    Because I do believe if you can get people back into the 
workforce, not only does it make a better quality of life, but 
you have got to say if somebody gets on Social Security 
disability at the age of 25 and they live to be 75 and there is 
50 years of Social Security disability, that would save us 
money. But I am more concerned about making sure that people 
have quality of life.
    And so thank you very much for your testimony. Thank you. I 
yield back, Mr. Chairman.
    Chairman JOHNSON. Thank you.
    Mr. Becerra, do you have a comment?
    Mr. BECERRA. Mr. Chairman, thank you very much.
    I just wanted to respond to my friend, Mr. Reed, from New 
York briefly and say that I respect if we have a different way 
of looking at that. There is no problem with that. That is what 
this country is about.
    And I think the most important thing that Mr. Reed said is 
he thinks that, and I agree with this, that we can come 
together and figure out a way to do this regardless of how we 
characterize these things.

[[Page 72]]

    At the end of the day I think all of us want to make sure 
that Americans who paid into the system want to go ahead and 
get their benefits whether disabled or retired. And so I think 
probably the best thing that has come out of this hearing is 
that I think pretty much every one of us at this table has said 
let us figure out a way to sit down and do this.
    Mr. REED. Will the gentleman yield?
    Mr. BECERRA. Absolutely.
    Mr. REED. I will give you my public commitment, as you have 
given your public commitment to me, to work in a bipartisan 
basis to accomplish good reforms for the disabled and the 
recipients of these benefits. So I appreciate that sentiment, 
and I look forward to working with the gentleman from 
California on that.
    Mr. BECERRA. I look at that as an opportunity for all of us 
to work together.
    So, Mr. Chairman, I just want to say I think it is a good 
start, a good hearing to be able to move forward, and I think 
the spirit here is to try to figure out a way to work 
bipartisanly on this, and I hope we are able to do that.
    With that, I yield back, and I thank you for giving me a 
moment to speak.
    Chairman JOHNSON. Thank you.
    I appreciate you all waiting for us while we went and voted 
twice, and you would be interested to know that Mr. Boehner 
kind of read the Riot Act to everybody because our voting took 
so long.
    Thank you to all our witnesses for your testimony, and 
thank you to the members who attended today.
    This is an important time for the Disability Insurance 
Program, and I am committed to making sure the benefits 
millions of Americans and their families count on are there for 
them, while also making the program work better, and we look 
forward to you all helping us do that.
    We cannot keep kicking the can down the road. The American 
people want, need and deserve a solution.
    With that, the committee stands adjourned. Thank you all 
for being here.
    [Whereupon, at 4:50 p.m., the Subcommittee was adjourned.]
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