Safeguarding Disability Benefits as the Debt Ceiling Falls

CENTER FOR POLICY ANALYSIS AND RESEARCH Health Equity

December 2023

Danielle Browne, John R. Lewis Social Justice Fellow

Safeguarding Disability Benefits as the Debt Ceiling Falls

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

Overview Social Security Disability Insurance (SSDI) provides benefits to workers with disabilities —with a monthly average stipend of $1,234—to replace lost income on a restricted 45 hours (about two days) of work per month. According to the National Committee to Preserve Social Security and Medicare, almost two-thirds of beneficiaries rely on Social Security for half of their income, and for 40% of recipients, the payments constitute at least 90% of their income—cementing SSDI as not merely a supplemental benefit but a fundamental pillar of economic stability (NCPSSM, 2023). This fact sheet examines the role of the Executive Branch, Congress, and the community in implementing preventive measures toward economic security.

Introduction On June 3, 2023, President Biden signed the Fiscal Responsibility Act of 2023 into law. The bipartisan legislation immediately suspended the federal debt limit through January 1, 2025, and capped discretionary spending for at least two years (Congress. gov, 2023). Since 2013, Congress has suspended the debt limit only eight times (Berman, N., 2023).

More specifically, the Fiscal Responsibility Act allocates $886 billion for the 2024 fiscal year and $895 billion for 2025. Non-defense spending will be capped at $704 billion and $711 billion, respectively. The Act includes policy changes as well as reforms to the student loan program, the Temporary Assistance to Needy Families (TANF) program, and the Supplemental Nutrition Assistance Program (SNAP). Specifically, the Fiscal Responsibility Act of 2023 ends the current student loan repayment pause 60 days from June 3, 2023—the day it became a law. Regarding TANF, states can now receive credit for caseload reductions based on changes in the number of families receiving assistance.

The Act also updates the reference period to 2015 from 2005, which may incrementally reduce the number of caseloads. With respect to SNAP, the Act increases the age of exemption from work requirements for non-disabled recipients without children from 50 to 55, phased in over three years and ending in 2030. Additionally, the Act contains a mechanism that reduces the discretionary spending caps by one percent if Congress fails to enact all 12 appropriations bills by January of 2024 (Gray, G., 2023).

/2

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

While this new law saves over $200 billion in the first two years, modestly improves a few federal policies, and allows the U.S. Treasury to supersede the debt limit, this solution is only temporary. If no action is taken to prevent the debt limit from being reached when the limit is reinstated, the consequences would far outweigh the effects of any of the Act’s other policy changes. “Extraordinary measures” may have to be employed to not only remain beneath the limit to prevent the debt ceiling from falling but also cover the amounts borrowed during the suspension (Gray, G., 2023).

What is the Debt Ceiling?

The debt ceiling is a legislative limit on the amount of debt that the U.S. Treasury can take on; a measure that was created under the Second Liberty Bond Act of 1917 at the beginning of World War I (Bipartisan Policy Center., 2023; Financial Services Committee., 2016). The debt ceiling has been raised 78 times since 1960 – 49 times under Republican presidents and 29 times under Democratic presidents (Robertson, L., & Kiely, E., 2021).

Every year, the government spends more money than it collects through taxes: the deficit.

According to the U.S. Government Accountability Office, the government borrows money straight from the public by issuing securities like bills, notes, and bonds through the U.S. Treasury to make up for this difference. Additionally, the U.S. government borrows money through intragovernmental debt like social security, healthcare, military retirement, and more (Curry, R., 2020). This money accumulates over time: the debt.

/3

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

Federal government spending can cover everything from Social Security, military, highway construction, and education. That spending can be broken down into two primary categories: Discretionary: requiring formal approval by Congress and the President during the appropriations process each year, in which Congress designates and approves spending for specific purposes. Typically, over half of the discretionary budget is allocated for national defense while the remaining funds the administration of other agencies and programs ranging from housing and transportation to environmental organizations (Bureau of the Fiscal Service., 2023).

Mandatory: mandated by existing law and does not require an annual vote

by Congress. This category includes funding for payments to state and local governments, businesses, as well as programs like Medicare and Social Security. The Social Security Act, last amended in 2019, will determine the level of federal spending until it is amended again (Bureau of the Fiscal Service., 2023).

While the Social Security Act and related laws have fostered several programs meant to provide for the material needs of individuals and families, one such Social Security program meant to protect individuals living with disabilities against illness expenses may be delayed if the debt ceiling falls.

Understanding Social Security Disability Insurance Social Security Disability Insurance (SSDI) is a federal income benefits program that provides financial assistance to Americans with disabilities. According to the Social Security Administration (SSA), benefits are paid to those who are not able to work for a year or longer due to a disability. Payments are provided monthly to those who qualify (Social Security Administration., n.d.). The SSDI program has long been a lifeline for workers with disabilities who find themselves grappling with the challenges of reduced earning capacity. This program, designed to replace lost income, allows recipients to work for a restricted 45 hours a month, approximately equivalent to just two days a month of employment. It’s a vital safety net for 61 million Americans living with a disability, of whom make up 86 percent of the workforce (Social Security Administration., n.d.). To be eligible for SSDI, an individual must have contributed to the program via payroll tax deductions in a job covered by Social Security and have worked recently and long enough to qualify (Social Security Administration., n.d.). In other words, one must prove that they are unable to work and show proof of previous employment.

/4

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

Black Americans and SSDI According to data provided by the Labor Department, the unemployment rate for Black Americans living with disabilities (12.3%) is nearly double that of their white counterparts (6.6%). This disparity greatly contributes to the difficulty Black Americans living with disabilities have receiving SSDI. A 2017 study observed that hiring discrimination against African Americans remains largely unchanged since the late 1980s (Quillian, L., et. al., 2017).

One such study conducted in 1988 also found that Black people living with disabilities had a more challenging time in the appeals process than in filing initial claims. The most significant racial disparities were in Chicago, where Black people had a 10 to 17 percent disadvantage, and in New York, where they had a 15 percent disadvantage, on average.

Significant disparities were found for every year as far back as 1961 for the Disability Insurance program, which began in 1956 (Labaton, S., 1992). However, the study also found that more Black people living with disabilities were reliant upon the SSDI program than their white counterparts (Labaton, S., 1992). Of the 61 million Americans living with disabilities, 2.5 million are African American, according to the U.S. Department of Labor (Cariaga, V., 2023).

Research conducted within the last decade by the National Disability Institute identified African Americans as being the most likely ethnic group to have a disability at 14% of the group population. Those metrics tend to increase with age, with 30% of those aged 61-65 living with disabilities. Other experts have also pointed out that, in addition to Black people having a higher rate of work-related disabilities, they tend to have jobs that are

/5

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

more labor-intensive (Cariaga, V., 2023). For Black women, SSDI is a critical lifeline. Given their longer lifespan and caregiver responsibilities across multiple generations, many Black women have an increased reliance on SSDI and other Social Security programs during retirement. Their lower lifetime earnings — lagging those of white men and women and Black men — make them even more dependent on Social Security (NAACP President Derrick Johnson., 2020).

The SSDI program also acts as a necessary backdrop against structural barriers, like redlining and housing discrimination, by allowing Black families to build generational wealth, save for retirement, and pass financial stability to their kin. Without Social Security, 50.5 percent of Black Americans would be living in poverty. With Social Security, that number is reduced to 18.8 percent (NCPSSM., 2021). In the intricate tapestry of government policy, few threads are as crucial as those that provide a safety net for the most vulnerable.

Catastrophic Consequences While it is important to note that failing to raise the debt ceiling would not bring the government to a screeching halt, failure to increase the debt limit would still have catastrophic economic consequences as it would cause the government to default on its legal obligations – an unprecedented event in American history that would impact the disability community (Congressional Research Service., 2015; 2023).

OTHER POSSIBLE CONSEQUENCES: • Downgrades of U.S. credit ratings; • Increased borrowing costs for businesses and homeowners; • The government being prevented from paying for employees’ salaries and wages; civil service retirement, and other benefits from trust funds; contractual services and supplies, and maturing securities; and • A drop-off in consumer confidence that could send the United States’ and global financial markets into immediate recession – amid ongoing recovery from the economic impact brought on by the COVID-19 pandemic.

/6

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

Weighing the Options To prevent the debt ceiling from falling, Congress can increase the debt limit to allow further federal borrowing. A larger increase in the debt limit would also provide additional time to adjust the federal budget and mitigate its potential effects on the disability community (Congressional Research Service., 2023).

Scholars also argue that Section 4 of the 14th Amendment, the Public Debt Clause, would allow President Biden to authorize the U.S. Treasury to borrow money without regard for the debt ceiling. However, whether the President has the power to circumvent Congress to pay public debts has yet to be legally tested in the courts. Many believe that this would only lead to a Constitutional crisis. Additionally, it is argued that the original meaning of the clause was merely technical language that would prohibit all legal action by the federal government, directly refusing the federal debt (Edelberg, W., & Sheiner, L., 2023).

A 2011 House of Representatives report detailed how the government has run “tabletop exercises” as part of its debt ceiling contingency plans to identify how government payments, including Social Security Benefits could be prioritized. The report claims it is possible that the Treasury Department could continue making payments on time due to the program’s trust fund (Financial Services Committee., 2016).

THE “SOCIAL SECURITY TRUST FUND” COMPRISES TWO SEPARATE FUNDS: • The Old-Age and Survivors Insurance (OASI) Trust Fund: the larger fund which provides benefit payments to retired workers, their spouses, some children, and the survivors of deceased workers (Fichtner, J., & Finke, M., 2020).

• The Disability Insurance (DI) Trust Fund: the smaller fund providing benefits to workers with disabilities, their spouses, and children (Fichtner, J., & Finke, M., 2020).

In the early 1980s, the taxes collected were not enough to cover the benefits of all individuals relying on Social Security programs. Therefore, in 1983, Congress changed the law so taxpayers would pay more than the programs needed to pay all benefits. The surplus was then invested into trust funds like DI and OASI, which would pay the benefits when program expenses exceed payroll tax receipts (Fichtner, J., & Finke, M., 2020).

According to the Social Security Office of Retirement and Disability Policy, the OASI and DI trust fund have long since played a significant role in supporting all who depend on Social Security programs. In 2019, Social Security paid out $1 trillion in benefits, nearly onequarter of the entire $4.4 trillion federal budget. Of that $1 trillion in benefits, 86% came from the OASI trust fund and 14% from the DI trust fund (Fichtner, J., & Finke, M., 2020).

/7

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

As for the community at large—though communities do not have any direct control over the national debt ceiling—several actions can be taken to ensure that the disability community is not overlooked. Supporting local food banks and non-profit organizations that serve the disability community, volunteering, and encouraging other community members to volunteer their time and resources, can allow for continued aid to be available for disabled Americans and their families during economic hardships. Since the debt ceiling falling is an ongoing, sporadic issue, it would be advantageous to engage with elected officials to express concern about the debt limit as well as participate in local discussions to advocate for policies supporting financial stability and community resilience in solidarity with those who depend on the SSDI program. Promoting financial literacy programs to educate people living with disabilities on a better understanding of their finances and how to prepare for economic uncertainties would give them more autonomy in emergency planning. Additionally, staying abreast of local community resources that may provide emergency assistance to the disability community is an effective way to mitigate the harms of reaching the debt limit. Last, making sure that people with disabilities are in contact with a Certified Rehabilitation Counselor (CRC) who is trained to keep them informed about SSDI and other benefits can streamline the process. CRCs can help connect Black Americans living with disabilities to other resources in their communities (U.S. Bureau of Labor Statistics., (2023)).

Conclusion To ensure the economic security and well-being of the 61 million adults with disabilities who depend on SSDI, the President and Congress must proactively implement measures to safeguard the uninterrupted flow of funds for Social Security payments, even in the face of potential budgetary challenges. The path forward should be to uphold the commitment to preserve the integrity of the SSDI program. The government must ensure that those who rely on the SSDI program do not bear the brunt of fiscal constraints and, in doing so, protect the financial well-being of millions and reaffirm the nation’s enduring commitment to compassion and solidarity with the disability community.

/8

CPAR | Safeguarding Disability Benefits as the Debt Ceiling Falls

REFERENCES Berman, N. (2023, June 27). What Happens When The U.S. Hits Its Debt Ceiling?. Council on Foreign Relations. https://www. cfr.org/backgrounder/what-happens-when-us-hits-its-debt-ceiling Bipartisan Policy Center. (2023). The Debt Limit Through the Years. https://bipartisanpolicy.org/debt-limit-through-theyears/ Bureau of the Fiscal Service. (2023). Fiscal Data Explains Federal Spending. Federal Spending | U.S. Treasury Fiscal Data. https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/#the-difference-between-mandatorydiscretionary-and-supplemental-spending Cariaga, V. (2023, October 2). Social Security: 2.5 million Black Americans might qualify for SSDI - how to get it despite obstacles. Yahoo! Finance. https://finance.yahoo.com/news/social-security-2-5-million-151812027.html Congress.gov. (2023). H.R.3746 - 118th Congress (2023-2024): Fiscal Responsibility Act of 2023. https://www.congress.gov/ bill/118th-congress/house-bill/3746 Congressional Research Service. (2015, March 27). Reaching the Debt Limit: Background and Potential Effects on Government Operations. (Report No. R41633). CRS. https://sgp.fas.org/crs/misc/R41633.pdf Congressional Research Service. (2023, September 15). The Debt Limit. (Report No. IF10292). CRS. https://sgp.fas.org/crs/misc/IF10292.pdf Curry, R. (2020, November 17). How Does the U.S. Government Borrow Money?. Market Realist. https://marketrealist.com/p/ how-does-the-us-government-borrow-money/ Edelberg, W., & Sheiner, L. (2023, April 24). How worried should we be if the debt ceiling isn’t lifted? Brookings. https://www. brookings.edu/articles/how-worried-should-we-be-if-the-debt-ceiling-isnt-lifted/ Elving, R. (2021, September 24). Congress is seeking (its own) permission to borrow another trillion or two. NPR. https:// www.npr.org/2021/09/24/1031701538/congress-debt-ceiling-explainer Fichtner, J., & Finke, M. (2020, November 22). The Social Security Trust Funds, Explained. Think Advisor. https://www. thinkadvisor.com/2020/11/22/the-social-security-trust-funds-explained/ Gray, G. (2023, May 29). Highlights of the Fiscal Responsibility Act of 2023. AAF. https://www.americanactionforum.org/ insight/highlights-of-the-fiscal-responsibility-act/ Financial Services Committee. (2016). The Obama Administration’s Debt Ceiling Subterfuge: Subpoenaed Documents Reveal Treasury Misled Public in Attempt To “Maximize Pressure on Congress”. House of Representatives. 114th Congress. https://financialservices.house.gov/uploadedfiles/debt_ceiling_report_final_01292015.pdf Labaton, S. (1992, May 11). Benefits Are Refused More Often to Disabled Blacks, Study Finds. The New York Times, p. 1. https://www.nytimes.com/1992/05/11/us/benefits-are-refused-more-often-to-disabled-blacks-study-finds.html.

NAACP President Derrick Johnson. (2020, August 14). Viewing Social Security Through The Civil Rights Lens. NAACP. National Committee to Preserve Social Security and Medicare. (2021, September). Black Americans and Social Security.

NCPSSM. https://www.ncpssm.org/our-issues/social-security/black-americans-and-social-security/ National Committee to Preserve Social Security and Medicare. (2023, January 19). With Debt Ceiling Breached, GOP Fiscal Extortion Could Hurt Seniors. NCPSSM. https://www.ncpssm.org/documents/news-releases/with-debt-ceiling-breachedgop-fiscal-extortion-could-hurt-seniors/ Quillian, L., et. al. (2017, September 12). Meta-analysis of field experiments shows no change in racial discrimination in hiring over time. Proceedings of the National Academy of Sciences of the United States of America. https://pubmed.ncbi.nlm. nih.gov/28900012/ Robertson, L., & Kiely, E. (2021, September 22). Debt Limit Q&A. FactCheck.org. https://www.factcheck.org/2021/09/debtlimit-qa/ Social Security Administration. (n.d.). Disability Benefits. SSA. https://www.ssa.gov/benefits/disability/ Social Security Administration. (n.d.). Introduction to Social Security. SSA. https://www.ssa.gov/section218training/basic course_3.htm U.S. Bureau of Labor Statistics. (2023, September 6). Rehabilitation Counselors: Occupational Outlook Handbook. https:// www.bls.gov/ooh/community-and-social-service/rehabilitation-counselors.htm

/9

CENTER FOR POLICY ANALYSIS AND RESEARCH Health Equity

For more research visit cbcfinc.org