Sunday, July 12, 2015

Number Disabled Workers have Declined

Paul Krugman:

"Isn’t there an epidemic of people declaring themselves disabled? Actually, no. You have to bear in mind the reality that people don’t stay perfectly healthy until they reach 65, or 70, or whatever age plutocrats think they should work until. As all of us pre-seniors can attest, things start to go wrong with increasing frequency all along the life cycle; sometimes they can be managed, but often they can’t, especially for manual workers. And if you look at age-adjusted disability rates, they have been flat or even declining. [He shows chart and links to the Economic Policy Institute.]

Via the Economic Policy Institute: Are Disability Rates Increasing?

"The evidence shows that while “raw” or unadjusted incidence (the number of new awards per thousand insured persons) increased as the large baby boomer cohort aged into the peak disability years before retirement, age-adjusted incidence hasn’t trended upward over the past 20 years, though it increased during periods of high unemployment.

However, incidence has fallen in the wake of the Great Recession and as older baby boomers become eligible for Social Security retirement benefits, including disabled boomers who automatically transition to retirement benefits as they reach the normal retirement age ...

As researchers at the Center on Budget and Policy Priorities have laid out in detail, much of a growth in enrollment is mostly due to demographic and other identifiable factors that have nothing to do with people "gaming the system ...

The fact that incidence rises somewhat during periods of high unemployment is normal, since the inability to engage in “substantial gainful activity” (currently defined as earning $1,090 or more per month in most cases) is a key eligibility requirement. Mechanically, the share of workers in poor health who are no longer gainfully employed increases in recessions, growing the pool of potential applicants even though [per SSA] denial rates also increase in recessions.

The Economic Policy Institute concludes per a NBER study: "Disability benefits are not being used as a substitute for unemployment benefits."

And since their numbers peaked, SSDI awards for "disabled workers" have drastically dropped since 2010 — when we had 1,052,551 "awards" out of 2,935,798 "claims". Four years later in 2014 we had 810,973 awards out of 2,521,459 claims (so both awards and claims are headed down).

And because "terminations" cancel out "awards", [per SSA] we actually have LESS "disabled workers" who are now receiving SSDI benefits than we did last year.

  • As of Sept 2014 -- 8,958,415 (when the total number of disabled workers receiving SSDI benefits last peaked.)
  • As of June 2015 -- 8,937,961 (meaning, over the last ten months there are now 20,454 LESS disabled workers who receive a monthly SSDI check.)

In another EPI post (Do Disability Benefits Reduce Work Effort?) they note that SSA examiners are turning down too many marginal disability applicants, not too few — and that nearly 11 percent of applicants were denied but should probably have been accepted — seven times the number who were accepted but should probably have been denied.

Arthur Delaney at the Huffington Post also notes: "It's not easy to get benefits: from 2001 through 2010, only 45 percent of disability applications resulted in awards, with a chunk of those awards materializing only after an appeals process that can take years."

And for those who are concerned about "waste, fraud and abuse" in the disability program: Two different government reports show only 0.4% fraud in the program — far less than any other government program — and much less that's found in the defense industry.

And of that 0.4%, only 0.065% of the annual budget is lost to disability over-payments — probably far less than employee theft or corporate embezzle in the private sector.

Now compare that to the $1 trillion U.S. corporations spent on stock-buybacks last year, or the $2 trillion they have hoarded in offshore banks, or the billions they saved dodging taxes every year, or the billions they spend every year in mergers and acquisitions rather than raising workers' wages — THAT'S PEANUTS!

The millions these CEOs earn (usually in capital gains income derived from stock option grants, whose stock prices are manipulated via stock-buybacks) are not taxed for Social Security. Eliminate the "cap" and start taxing capital gains for Social Security and we can not only properly finance the Social Security trust funds, but we can also EXPAND the program so that recipients won't have to live in poverty when they become disabled or retire.

How Social Security Got Screwed (before there was even Social Security)

The Revenue Act of 1921 (near the end of the first Gilded Age) was the first Republican tax reduction following their landslide victory in the 1920 federal elections. The new Secretary of the Treasury Andrew Mellon (of the bank) argued that significant tax reduction was necessary in order to spur economic expansion and restore prosperity. (Just like the GOP of today.)

Mellon had obtained the repeal of the wartime excess profits tax (which was imposed to fund America's involvement in WWI), and the top marginal rate on individuals fell from 73 to 58 percent by 1922.

This was when the preferential treatment for capital gains was first introduced at a rate of 12.5% (Mellon had hoped for even more significant tax reduction) — and 7 years later we had the stock market crash and the onset of the Great Depression.

  • The 70s: Jimmy Carter lowered the capital gains tax rate from its all-time high of 40% to 28%
  • The 80s: Ronald Reagan lowered them to 20% — but later raised them back to 28% (to help fund his "Star Wars" program)
  • The 90s: Bill Clinton lowered them from 28% to 20%

In 2003 George W. Bush lowered the tax rate on capital gains from 20% to 15% — and 5 years later we had the stock market crash and the onset of the Great Recession.

As of January 2013, President Obama allowed the temporary Bush tax cuts to expire (back to 20% under Clinton) when a 3.8% surtax was also added to the capital gains tax rate for upper income earners (via Obamacare to expand Medicaid ) — making the very top capital gains tax rate 23.8%.

At 23.8%, the top capital gains tax rate today is still far below the top marginal rate for regular wages, which is 39.6% — and unlike long-term capital gains (assets held at least one year), wages are taxed for Social Security — but only on incomes up to $118,500 — so even members of Congress don't pay this tax on 100% of their congressional salaries (at $174,000 a year).

By having a capital gains tax rate (at 23.8%) far below the "statutory" corporate tax rate (at 35%), it only encourages the funneling of excess profits into stock-option grants (and dividends) rather than in re-investment into the company and for wage hikes for their employees.

Instead, profits are used for stock-buy-backs (enriching corporate execs, which were once illegal), as well as for funding mergers and acquisitions (creating monopolies, and hurting consumers with less competition).

FURTHER NOTES: The long-term capital gains tax brackets are graduated, and income that crosses out of one bracket falls into the next. Thus, for instance, just as a married couple having $500,000 of ordinary income would cross the 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% ordinary income brackets, so too would that married couple having $500,000 of long-term capital gains span all three capital gains rates, with the first $73,800 in the 0% bracket, the next $383,800 taxed at 15% (up to $457,600 of total income), and only the last $42,400 would be taxed at the top 20% rate. In this situation, the separate 3.8% Medicare surtax would also kick in for the upper capital gains income levels, effectively resulting in four capital gains tax brackets.

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