Back in 2015, the trust fund for the Social Security Disability Insurance Trust Fund was in deep trouble, scheduled to run out of money by 2016. A short-term legislative fix brought a few years more solvency for the trust fund, by moving some of the payroll tax for other Social Security benefits over to the disability trust fund, but the situation continued to look dire. For some of my previous takes on the situation, see this from 2016, this from 2013, or this from 2011. Or see this three-paper symposium on disability insurance from the Spring 2015 Journal of Economic Perspectives, with a discussion of what what going wrong in the US system and discussions of reforms from the Netherlands and the UK.
Well, the report of the 2019 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance Trust Funds was recently published. And it now projects that the Disability Insurance trust fund won't run out for 33 years. In that sense, Disability Insurance looks to be in better shape than Medicare or the retirement portion of Social Security. What just happened?
This figure from the trustees shows the "prevalence rate" of disability--the rate of those receiving disability per 1,000 workers. The dashed line shows the actual prevalence of disability. The solid line shows the change after adjusting for age and sex. You can see the sharp rise in disability prevalence over several decades leading up to about 2014, which was leading to the concerns about the solvency of the system mentioned above. And then you see a drop in the prevalence of disability--both in the gross and the age-sex-adjusted lines.
As Henry Aaron writes: "What happened next has stunned actuaries, economists, and analysts of all stripes. The number of people applying for disability benefits dropped…and kept on dropping. Some decline was expected as the economy recovered from the Great Recession and demand for workers increased. But the actual fall in applications has dwarfed expectations. In addition, the share of applicants approved for benefits has also fallen. ... And if the drop in applications persists, current revenues may be adequate to cover currently scheduled benefits indefinitely."
Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.