CEPR - Center for Economic and Policy Research


En Español

Em Português

Other Languages

Home Publications Blogs Beat the Press Disability Insurance: The Problem of Contagion in the Media

Disability Insurance: The Problem of Contagion in the Media

Tuesday, 26 March 2013 12:56

Economists are used to talking about contagion, the idea that a financial crisis can spread from one country to another. Unfortunately it appears to be at least as serious a problem in news reporting.

Last week This American Life ran a full hour long segment on the Social Security disability program. While the piece was well-done and provided much useful information about the difficulties facing people on the program, it fundamentally misrepresented the economic context. The piece implied that the program has seen a sustained explosion in costs as displaced workers seek it out as a lifeline. This theme has now been picked up in a piece in The Atlantic.

While there have been problems with the disability program for some time, these problems changed qualitatively as a result of the downturn. Disability payments actually had been somewhat below projections until the downturn. The downturn following the collapse of the housing bubble then sent costs soaring. The Trustees projections show that this rise is temporary and projected to fall back once the economy returns to something resembling full employment, as shown below.


Social Security Trustees Reports, 1996 and 2012.

You can get a somewhat fuller discussion of this point in my earlier blog post. Anyhow, before reporters just pick up the This American Life piece and start yapping about how disability costs have exploded out of control, they should take a moment and look at the projections in the Trustees report.

The reality is that the explosion in costs is just one more spin-off of the disastrous economic policy crafted in Washington. We have not suddenly become a nation of slackers or unemployable deadbeats. 

Comments (6)Add Comment
written by skeptonomist, March 26, 2013 2:48
I think Dean is generally right about the causes of increased reliance on disability insurance, but he again seems to be forgetting about the laws of nature (or economics) when it comes to projections. The average length of an expansion period since 1945 has been less than five years (NBER) and there has never been such a period longer than ten years (1991-2001). So a projection as far as 2019 should include another recession - or really at about 2014, going by the average. I don't think the SS Trustees have explicitly included this - projections tend to be based on recent data if on any data at all. Actually I would not be shocked if the projection shown is the result of drawing a line back down to the previous projection at some hopefully-plausible time in the future.

To put this more simply, I don't think anything is ever proven by any economic projections - they are almost worthless whoever does them. You can talk about what would happen if certain relationships hold, but inevitably not all the assumptions required for a projection hold.
Help! I Fell and Can't Get Up! We're All in This Separately
written by Last Mover, March 26, 2013 3:12
Just kidding. I became a taker mooching freeloader during the great recession and earn income from ripping off insurance companies after my SS disability claim was denied.

Before I was laid off, I learned how to steal as an insurance adjuster by watching them rip off poor customers.

I'll be fine. Just go along with the ruse and tell them I broke both legs in a nasty fall. I'll split the take with you as partners in moocher crime. As paramedics you can use it after they cut your wages and benefits and put you on part time.

After the output gap closes I'll go back to my regular honest job as a maker, producing added value as an adjuster denying claims to the poor who thought they had insurance, while approving claims for the rich who pay big bucks for full coverage plans with no questions asked.
Jared Bernstein has a good take from Jan.
written by Scott Supak, March 26, 2013 4:00
"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."



"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."
This cycle is different from all other cycles
written by Dean, March 26, 2013 4:18
Jared is a bit off in looking at cycles to pass judgement on the current situation. We have not had a prolonged downturn like this since the Great Depression. We don't really have a basis for comparison.
Nice try, taker
written by timb, March 26, 2013 4:49
In addition to crooked paramedics and one crooked dr, you'll need faked X-rays, a year off work AFTER your fake accident, fake drs for SSA who will examine you and tell the judge there is nothing wrong with you, another set of faked X-rays for the year(s) afterwards AND the desire to wait 2 years for a hearing, so you have a 50% chance to make $1300/month.

What is it with people who don't understand how this program works and their burning desire to screw the poor with myths and half-truths
The Refuge to Survive
written by FoonTheElder, April 01, 2013 11:47
Now that the so-called safety net of welfare and unemployment is shredded and the ability to find a decent job is unlikely, people will go wherever they need to survive. That one area is Social Security Disability.

More people apply with any disability because they can't obtain enough to live on from anywhere else.

Try getting a job with even a slight disability. Unless the company gets a big tax credit, it won't touch them. They are more worried about any risk of rising health insurance and workers comp costs than actually employing people who don't fit in their perfect box.

Write comment

(Only one link allowed per comment)

This content has been locked. You can no longer post any comments.


Support this blog, donate
Combined Federal Campaign #79613

About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.