Jan 26, 2013 at 6:18 pm
Had a rousing debate on the Kudlow show last night with Larry and Jimmy Pethokoukis (aka Jimmy P) haranguing me about makers/takers. Jimmy went on a rant about all the fakers on the Social Security Disability rolls, prompting me to inject some facts from my CBPP colleague Kathy Ruffing about the factors actually responsible for most of the increase in the DI rolls. I said I’d post the info, so here it is.
[Kathy’s paper, here, provides an excellent overview of all the key issues, with extensive evidence.]
As Kathy points out, the number on the DI rolls has doubled since 1995 while the working-aged population has only grown by about a fifth. Sounds bad, right?
Not necessarily. What if the population was aging, with a larger share in their high-disability years, while more women were working and thus eligible for the program? In fact, about half of the increase since 1990 is due to those factors as shown in the figure below, comparing the rates of the insured population on DI, unadjusted and adjusted for age and gender.
As the figure shows, the demographics-constant rolls grow about half as fast as the actual growth, so about half of the increase is what you’d expect given the fact that a more working-female, aging population would be expected to put upward pressure on the rolls.
Ruffing also points out that the increase in the eligibility age for Social Security from 65 to 66 over this period has also played a role over these years, as once DI recipients hit the retirement eligibility age, they transfer onto the retirement program.
I’ve always thought the key test of the Jimmy P et al claim—that lots of people were abusing the DI rolls when they could be working—is the extent to which the DI rolls are countercyclical, meaning they go up when the economy goes down. If so, since there’s no obvious legit reason for DI rolls to go up in a downturn, that would support the critics.
What Kathy finds here, as shown in the figure below, is quite interesting: applications look at least mildly cyclical, lining up roughly with the unemployment rate. But awards, which is what matters here, look less so, though if you squint you can see some upturn in the early 90s and the recent recessions.
So while these data show some growth in the DI rolls that may reflect folks getting DI who ought not to, much of the increase appears to be explainable by known, legitimate factors. Neither is there much cyclicality to the rolls, suggest that “takers/fakers” are exploiting the program.
In fact, as I emphasized in the segment, more than 90% of entitlement dollars go to people who are either elderly, disabled, or working. In other words, the makers/takers frame is factually wrong not to mention mean-spirited and divisive.
I admit that my ears aren’t exactly non-partisan, but that frame just sounds really nasty to me, as I suspect it does to most people. So I guess if I were Machiavellian, I’d urge Larry and Jimmy to stick with it. But as I’m not, I’d urge them and others to give it up.
Update: Ms. Ruffing also takes an informative look at the geography of DI, ruffly speaking.
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