Mar 09 2011

Shelby: We Must Get Serious About Entitlement Reform

U.S. Senator Richard Shelby, ranking Republican on the Senate Appropriations Subcommittee on Labor, Health and Human Services and Education, today made the following statement at a Committee hearing to examine the fiscal year 2012 Social Security Administration’s budget request.

Excerpts of Shelby’s statement are immediately below in bold, followed by the full text of his prepared remarks:

“The greatest obstacle to our nation’s fiscal stability is ignoring our increasing entitlement obligations.  Simply put, there is no way to control our debt without getting serious about entitlement reform…

…There are currently 50 million Social Security beneficiaries, and their numbers are increasing faster than the numbers of taxpayers.  The number of workers per retiree has fallen – from 42 to 1 in 1940 to about 3 to 1 today.  Social Security is unbalanced because contributions are insufficient to provide the promised benefits...

…We need to ensure that fraud and abuse of the system are rooted out; those who take advantage of the system ruin it for those who are genuinely in need.  In a program where there are no fines and virtually no prosecution for those who attempt to fraudulently collect benefits, we need to examine ways to deter fraudulent applicants.”

 

OPENING STATEMENT OF SENATOR RICHARD C. SHELBY

Senate Appropriations Subcommittee on Labor, Health and Human Services and Education

March 9, 2011

Mr. Chairman, thank you for calling this hearing to examine the fiscal year 2012 Social Security Administration’s budget request.  I look forward to hearing the panels’ testimony and their views on this critical program.

The greatest obstacle to our nation’s fiscal stability is ignoring our increasing entitlement obligations.  Simply put, there is no way to control our debt without getting serious about entitlement reform.  While we can argue about how to reform Social Security, we cannot argue about whether it should be reformed. 

In 2010, for the first time in the history of the Social Security program, the system paid out more in benefits that it received in payroll taxes.  This is a critical threshold that was not expected to be reached until at least 2016.  Social Security is now at the tipping point – the first step of a long, slow march to insolvency.

According to the Social Security Board of Trustees, the Social Security trust fund surplus will be completely exhausted by 2040.  At that juncture, Social Security will have to rely solely on revenue from the payroll tax, which will not be sufficient to pay all the promised benefits. 

There are currently 50 million Social Security beneficiaries, and their numbers are increasing faster than the number of taxpayers.  The number of workers per retiree has fallen – from 42 to 1 in 1940 to about 3 to 1 today.  Social Security is unbalanced because contributions are insufficient to provide the promised benefits.  It is a classic Ponzi scheme with new contributions used to pay off earlier “investors.”

We must also recognize that the Social Security Disability Insurance (SSDI) program contributes more than its share to Social Security’s looming insolvency.  During the economic recession, the unemployment rate soared, as did applications to the SSDI program. 

The number of individuals receiving SSDI benefits has jumped more than ten percent in the last two recessionary years.  The increase will accelerate the exhaustion of the SSDI reserves by 2018 and was recently described by the Congressional Budget Office as “not financially sustainable.” 

While the SSDI program faces the same fundamental issue as the retirement program – there are fewer workers to pay for an ever increasing population receiving benefits – its questionable structure adds complexity.  What was supposed to be a narrowly tailored program to help individuals who could no longer work grew into a gigantic budgetary burden that looks more like an unemployment program. 

What makes the problem worse is that, unlike the federal unemployment program, there is no time limit for how long an individual can receive SSDI.  More significantly, among those receiving SSDI benefits, the incentive to return to work is very low.  In fact, revealing one’s ability to go back to the workforce could result in a permanent loss of SSDI benefits.  The strong work disincentives under SSDI results in workers never seeking gainful employment at the risk of losing future benefits.

Clearly, Congress must face the potential fiscal collapse of the Social Security system in the near future. 

However, today’s hearing focuses on the near-term issues facing the program and the only aspects of the $817 billion fiscal year 2012 budget the Appropriations Committee has control over – $12.5 billion that funds administration costs and the Office of the Inspector General.

The fiscal year 2012 budget requests an additional $1 billion over the fiscal year 2010 budget to reduce the daunting 744,130 disability claims and 722,872 hearings case backlog.  On top of the significant backlog, the processing time for disability claims is 112 days and the wait time for a Social Security appeals hearing is 371 days. 

Interestingly, two-thirds of those who appeal a Social Security decision win their case on appeal.  While I understand the disability process is complex, it is also highly subjective.  With an appeal overturn rate so high, why are so many people winning on appeal?  Instead, shouldn’t they win at the beginning? 

As the Social Security Administration continues to tackle backlogs in their caseload, it is important that funding to pursue Continuing Disability Reviews remains strong.  SSDI benefits are not and should not be benefits for life.  Only those who continue to qualify for benefits should receive them. 

We need to ensure that fraud and abuse of the system are rooted out; those who take advantage of the system ruin it for those who are genuinely in need.  In a program where there are no fines and virtually no prosecution for those who attempt to fraudulently collect benefits, we need to examine ways to deter fraudulent applicants.

The administration of Social Security, while only a small percentage of the entire system, is a vital component to the success and fiscal stability of the overall program.  This, however, does not mean that it can operate without stringent oversight from this subcommittee.  We need to ensure that money is being spent wisely and in the best interest of the US taxpayer. 

I look forward to working with the panel and the Chairman to craft a fiscal year 2012 bill that does so.

Thank you, Mr. Chairman.