Caseloads and costs for U.S. disability programs are rising at an unsustainable pace. The Social Security Trustees and the Congressional Budget Office estimate the Social Security Disability Insurance (SSDI) system will be insolvent in 2018 (CBO 2010b; SSA 2010a). Previous attempts at SSDI policy reform in the United States have succeeded in controlling program growth only temporarily. Reforms started by the Carter administration and vigorously pursued by the Reagan administration in the early 1980s--during a severe economic recession--were extremely controversial and resulted in a backlash that made it nearly impossible to remove current beneficiaries from the disability rolls. Subsequent SSDI policies that made entry into the program easier have resulted in U.S. caseloads that, in 2009, exceeded eighty per thousand workers, twice the level they reached before the system-expansion policies of the mid-1980s and greater than that of the Netherlands, a country whose disability system until recently has been seen as out of control. In 2009 and again in 2010, application rates for SSDI reached historic highs. In all likelihood, this will produce calls for program reforms to end the crisis in rising program costs. Rather than returning to policy changes taken up in the 1980s, we argue that more systemic solutions should be considered. Here we make the case for experience rating SSDI payroll taxes.

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Richard Burkhauser is an adjunct scholar at AEI. Mary C. Daly works at the Federal Reserve Bank of San Francisco.