There are a couple of other points worth making on the Sixty Minutes piece beyond what I said earlier. First, the numbers involved should be put in some context. The Sixty Minutes folks were warning us that if the Disability fund runs dry, "it's your money and our money." So we should know how much of our money is at stake.
According to the Social Security Trustees Report, spending on the disability program in 2013 will be $144.8 billion. If we go to CEPR's incredibly spiffy responsible budget reporting calculator we find that this sum is equal to 4.2 percent of spending for the year.
Before you run off and spend this windfall, it is important to remember that the bulk of the people collecting disability would almost certainly even fit Senator Coburn's definition of disabled. We have people with terminal cancer, people who were paralyzed in car crashes, and many other ailments that undoubtedly impose a real impediment to work.
Based on what we know from the University of Michigan study, it is unlikely that even 10 percent of those collecting disability would fit most people's definition of bogus claims. But just to humor our disability bashing friends at Sixty Minutes, let's say that it's 20 percent. That means that we can knock down federal spending by 0.84 percent ($29.0 billion) if we just crack the whip. That's not trivial, but not enough to allow too many big fiestas with the savings.
This brings up the second point. The bogus cases will never be so polite as to identify themselves as bogus cases. In order to weed out a higher percentage of the people who should not be getting benefits we will have to tighten restrictions and deny a large share of claims. This will mean denying more claims that should be approved.
In other words, we can undoubtedly whittle down the number of bogus claims that get approved, but the cost will be that more legitimate claims will be turned down as well. So the price of denying benefits to some people who might be making too big of a deal out of back pain may be to deny benefits to people who can barely walk due to a back injury.
If the judgment of the hearing officers were perfect we wouldn't have this problem, but it's not. The question that anyone who wants to go the crackdown route has to answer is how many genuinely disabled people are you prepared to deny benefits in order to weed out a bogus applicant? Unfortunately, Sixty Minutes did not ask this question.