of beneficiaries (and, indeed, many of the applicants denied benefits) have little potential for retraining for jobs that exist in the economy. It is utterly inhumane to refuse to recognize that in an economy with chronically high unemployment, the chances of DI beneficiaries securing paid work are very slight. Millions of able bodied job seekers have no success. When Humphrey-Hawkins was under consideration, Congress-once again-declined to adopt full employment as a goal to be achieved soon. Under such circumstances, it is pious and cruel nonsense to seek to flog all DI beneficiaries into being job seekers when very few, practically none, could look forward to actual jobs. B. What "rehabilitation" means-usually neither a job nor substantial earned in come Since the inception of the Disability Insurance program, Congress has rightly emphasized rehabilitation efforts. Considerations of humanity and efficiency warrant providing help to disabled people to regain as much ability to function as possible. That should mean recovery of social as well as economic capability. The emphasis, however, has been upon restoring earning capacity. The best rehabilitator is a full employment economy. That provides employers eager to use people's capabilities to the maximum. Real job opportunities provide incentives to impaired individuals to redevelop their capacities. And such a condition gives training facilities more realistic targets for which to offer training. At the opening of Secretary Califano's February 22 testimony before Ways & Means he referred to the rehabilitation program and "the rate at which beneficiaries recovered and returned to work" (p. 3 of prepared text). In the body of his statement, (p. 11), that changed to "medical recovery or return to work". The first misleadingly suggests that removal from the DI rolls for "recovery" also means a job. It does not mean any such thing for the great majority of the recovered. The second version, with or, is more accurate, but still obscures the realities. Realism requires recognizing that the severely disabled (the group which qualifies for DI or comes close to doing so) will be among the last to be hired. This results not only from their physical devastation, but also from their age and low skill levels and training as well. Rehabilitation can make a difference in these capacities, but in an economy with a surplus of able-bodied would-be workers, both fairness and realism warn against expecting very much. Rehabilitation does not mean getting a job nor achieving substantial earnings. As administered, it means either going through the requisite training or regaining the mythic capacity already described. A study of 6,194 disabled-worker beneficiaries "rehabilitated" in fiscal year 1969 showed 44.2 percent with no earnings for 1970 "after rehabilitation". The table shows that just about two-thirds (62.1 percent, including the 44.2 percent with no earnings) achieved earnings under $2,000 (or under $1 an hour for a full employment year of 2,040 hours). Happily about one-fifth (21.4 percent) earned over $5,000. TABLE 57.-DISABLED-WORKER BENEFICIARIES REHABILITATED (WITH TRUST FUNDS) IN FISCAL 1969: RECOVERY AND OTHER BENEFIT TERMINATION EXPERIENCE AS OF DECEMBER 1970, BY 1970 EARNINGS AFTER REHABILITATION TABLE 57.-DISABLED-WORKER BENEFICIARIES REHABILITATED (WITH TRUST FUNDS) IN FISCAL 1969: RECOVERY AND OTHER BENEFIT TERMINATION EXPERIENCE AS OF DECEMBER 1970, BY 1970 EARNINGS AFTER REHABILITATION-Continued 1 Earnings based on earnings taxable under social security, which are subject to maximum limits. No covered earnings since 1950 reported for 1 percent of the rehabilitants; some may have had noncovered earnings, others may have been incorrectly identified by account number. * Recovery refers to OASDI benefit termination for medical improvement or return to sustained employment. "Committee Staff Report, Committee on Ways and Means, on the Disability Insurance Program" p. 290 (Committee Print, July 1974). A similar analysis in the same report, concerning a somewhat longer period (1967-72) and larger group 28,058, showed essentially the same patterns: in 1972 about one fifth (22.4 percent achieved earnings of $5,000 a year or more while 44.9 percent earned nothing; 10.2 percent earned $1 to $999; and another 12.4 percent earned between $1,000 and $2,999. (The 1972 figures were somewhat better than those for 1971, which were somewhat better than those for 1970-but much of the dollar amount creep simply reflects inflation.) It is also pertinent that those with the highest pre-disability earnings had larger rates of separation from benefits, possibly due to higher skill levels. One should not minimize the achievements of that minority-a small minority— who did obtain substantial earnings to observe that most of the "rehabilitated" did not. And it is instructive that, despite the small earnings of the great majority of the "rehabilitated," most did not go back on the benefit rolls, presumably because they had earning "capacity." Only, 2,111 (7.5 percent) did go back on benefits. (40.9 percent were not removed from benefit status to begin with.) The small rehabiliation program naturally concentrated on the individuals with the greatest potential for restoration of earning capacity. So, greater efforts (not accompanied by more ambitious training and a general economic recovery) could be expected to yield smaller proportions of return to substantial earnings. C. Low job potential in a high unemployment society This brief commentary does not denigrate rehabilitation. It simply points out that the DI population, very damaged people, has but slight potential for return to substantial gainful employment in the economic climate characteristic of the last decade. These data also warn that attempts to goad the disabled into employment by reducing benefits has slight potential for gainful employment and great potential for human suffering. IV. THE ISSUE OF EXCESSIVE BENEFITS A. Alleged abuse entirely theoretical The proponents of a cap offer no actual proof of abuse due to high benefits. After all the years of concerned probing of this program, proof would be presented if it existed. The 1978 Committee Print (95-39) on the Burke bill in the preceding Congress, which set the pattern for the Administration and other like proposals, developed entirely theoretical high benefits with illustrations of "almost $1,000 a month" (p. 8). This it was asserted, without a shred of evidence presented, "include[s] malingering" (quoting the Committee's actuarial consultant). As Abraham Lincoln sought to find out before Congress committed the folly of going to war with Mexico where? when? The answer comes: the case is hypothetical and "an extreme case" at that! Yet it includes a finding of motive. Embracing the entirely theortical analysis of economists, Secretary Califano advocates a cap of 80 percent of "average" earnings prior to disability. This "average" should not be confused with earnings just prior to disablement. Rather it is the "earnings on which the benefit are based" (to quote the Secretary); that is, the average of all credited earnings, which, in the case of many, includes the quite low earnings and lower creditable earnings of remote periods. So, the 80 percent “cap" in reality means that often families subject to the limit would receive in benefits less than 80 percent of the income earned by the disabled person just prior to disablement. The older the worker, the more likely that will happen. The Secretary's argument for the 80 percent cap runs this way: "Benefits often (his word, my emphasis) equal or exceed pre-disability earnings" [he omits "average" at that point] This is a "disincentive." Therefore, put a cap on benefits. (All of this appears on page 3 of his testimony.) But on page 8, the presentation shifts: His words: "Under current law, a small proportion of beneficiaries receive benefits so high in relation to their predisability earnings, that the benefits, in effect, serve as an incentive not to go back to work." (my emphasis) And he goes on: "Approximately 16 percent of beneficiaries receive benefits that are more than 80 percent of their average [here it is] pre-disability-earnings." That overstates his own 1978 testimony to the same subcommittee; there (page 1 of Committee Print WMCP-95-84) he indicated he was using "last year's awards." As specialists in this field know, recent awards are higher than earlier awards because affected by more recent, inflation-affected earnings." So, the real figure for 80 percent plus recipients is below 16 percent for all beneficiaries. And, he points out, the higher benefits occur because of the addition of dependents' benefits, principally for spouses and children. B. The inapplicability of private insurance experience 1. Inaccurate Comparison.-Nor is the Secretary accurate when he states that the 80 percent cap “will still leave benefits well above those of private insurers.” (p. 9). He's comparing grapes and grapefruits. The two-thirds limits found in private insurance apply to total earnings; the 80 percent limit counts against only credited earnings, which were very low until recently. Moreover, private disability benefits are found only in high pay jobs. 2. Differing purposes-private plans designed to facilitate removal of active workers. A frequent purpose of private plans is to facilitate the removal of active workers when they do not perform up to the desires of management. In some plans-as also with public programs for Police and Fire Pension Programs-the program is designed to enable insiders to retire at relatively young ages with favorable tax treatment. And private plan definitions of disability frequently enable retirement if the individual no longer can do his assigned job, rather than any job. Any number of such plans give management the option to require the retirement and when it, rather than the employee, makes the choice the benefits are higher. (So, for example, only last week I was consulted (without fee) on the operation of a plan which paid double the benefits for management-decided early retirement-not quite the same thing as under discussion here, but indicative of motivation of some managements for providing high benefit rates.) So, the argument that experience under private disability plans shows high levels of retirements does not apply to the DI program. Many such private plans provide the high benefits purposely to enable easy separation. The purpose, definition, and administrative approach of private plans frequently-I would say, usually-differ from those in DI. C. The new Lourdes-low benefits Many times in the past hysterics have promised quick cures for the lame, the halt and the blind. The economists new Lourdes is low benefits. So, they foretell, slug-abed arthritics and hibernating hypertensives will arise and go back to work-lured, the new Ladies of Fatima prophesy, by the fact that they can no longer receive lush benefits as DI beneficiaries. In fact, DI benefits already are low (even before decoupling). The most recent new benefit awards reported averaged $327.66 a month disabled workers. (In September 1978, reported in January 1979 Social Security Bulletin page 1.) Published data do not readily show the average family benefits in payment status. However, the family maxima tend to be less than twice the primary benefit-so-a $600 average family benefit below $600 a month might be a reasonable guess. $150 a week for a family of five hardly will lure many-if any-from live jobs if they could get and keep them. V. INCOME NEEDS OF THE DISABLED A. Cash income-before and after disablement Practically all disabled people need more cash income after they are disabled than before. The reason simply is that the able bodied do many things for themselves that disablement often prevents. Many such activities are the equivalent of income. Many are essential to day-to-day existence. To the extent that other family members assume those functions, their ability to work, to learn, and tend their own affairs is reduced. Meanwhile, the savings resulting from not working are negligible. Let's take up those points in reverse order. In estimating the needs of disabled people, it is common to note that not going to work results in savings-on transportation, clothing, and food. Well, the disabled must eat at home. Most people who qualify for DI formerly performed blue or gray collar work, most of whom take their lunch boxes or brown bags (or whose employers provide food). So, savings on food would be infrequent and not certain for all disabled. While white collar workers might save on clothing by not going to work, blue and gray collar workers do not. Transportation costs would be saved. However, to the extent that the disability prevents driving (as many conditions or their treatment do), many disabled must use more expensive forms of transportation, such as taxi cabs. In blue and gray collar families, both spouses work more often than not; and if the non-disabled spouse didn't before, she or he will do so after the partner's disablement if she/he can be spared. So transportation services by other family members cannot be readily assumed. Most of us turn our thermostats down when all family members are at work and at school. A disabled person staying at home inevitably has higher heating, cooling, lighting, and cooking bills than before. Take one example recently reported on the front page of the St. Louis Post Dispatch (February 18, 1979). The headline gives the essence: "Families Choice: Heat, Food or Rent Money" It tells the story of an elderly couple. The woman, who formerly brought home some income from working as a cleaner in a commercial building, attempted to maintain herself and her husband, who had been disabled for 25 years by workconnected injuries and Parkinson's Disease. He constantly wets himself in the bed and repeatedly falls down. She no longer can go to work because he needs constant attendance. Their income: about $400 a month. Their heating bill: $82.69 in one winter month. (I deduce from the story that they receive a minimum Social Security check plus SSI. But it could just as readily be DI.) One does not need to be Keynes or Samuelson to know of the skyrocketing cost of heating. (This family tried to economize by installing a trash burner and huddling around it during the night.) Yet, Congress let lapse the federal program to help the needy pay for heating bills. And the proposed budget recommends $40 million for the entire nation for next fiscal year-which is one-fifth of what that program provided two years ago when heating costs were much lower. And most of that smaller amount would go for weatherproofing rather than fuel bills. In sum, lower benefit cannot be reasonably predicated on savings attributable to not working. Taxes on pay would be saved. At the lowest tax bracket paying 14 percent, after deductions and standard exemptions, this savings cannot be more than-or even as much as-10 percent. B. Increased health care costs—unavailability of medicare Moreover, medical expenses usually increase for the disabled. Private work-based health insurance disappears with one's former job. And Medicare does not become available to DI beneficiaries during the first two years of disability-a terrible hardship. C. Loss of pre-disability noncash income Many able bodied people engage in non-employment activities that produce goods and services to themselves and their families-what economists call "imputed in 54-198 0 - 79 - 15 come." So, for example, many people do their own repair work. Rather than paying plumbers, electricians, painters, or mechanics, they fix and maintain their homes and cars. They plant gardens and grow some of their own food; they tend fruit trees and mow their own lawns. One study at the University of Michigan placed the average value of such activities at $3,500 a year per family (in 1964 prices) or the equivalent of about half of average family cash income. (The two figures would have to be increased substantially to translate into 1979 dollars.) These activities included housework. Anyone who has coped in the absence of his/her spouse, knows that housework takes enormous effort and time. Where one substitutes for the former activities of another family member, the activities subtracts from income production, other tasks producing imputed income, study, and, not unimportantly, leisure. Indeed, studies show that disablement places enormous strains upon family relationships, often leading to family break up, which is hardest on the disabled person. (In one seminar, my students came upon several examples. One woman had been rendered a paraplegic in a one car accident; her husband drove the car. After she spent several months in an iron-lung; he divorced her. She subsisted-alone-in an institution, kept alive by SSI. Had she worked, it would have been DI.) One out of three DI beneficiaries also receives SSI (whose qualifying criteria and benefits are not themselves terribly generous). That provides some measure of the adequacy of DI benefits. In all, the blind and other disabled receiving SSI benefits numbered about 2.2 million persons (in September 1978). They about equaled the number of destitute aged (over 65) receiving SSI. These are seriously disabled people. Work (of any substantial amount) is not a real alternative for them, at least not under existing economic conditions. They should not be the first group sacrificed to the demand for economy. Indeed, they should be among the last. Millions of the able bodied will join their ranks. (Peter Milius of the Washington Post recently reported an estimate that one-third of the population will draw DI benefits sometime during their life time. I cannot vouch for the estimate, given to him, however by someone with expertise. The figure seems high to me.) If and when our time comes, all of us would hope for a better deal than currently available. None of us would opt for the proposals recommended by Secretary Califano. That should be instructive. VI. SECRETARY's Califano's MISTAKES Frankly, I don't think that Secretary Califano knows what he's talking about in regard to this program. He's too compassionate a person to knowingly advocate a program that's so unfair and cruel to the weakest members of society. It's not hard to guess what happened. The pressure has been on to lower Social Security payroll taxes. Meanwhile, specialists remain stimulated by the "crisis" in DI costs; although the crisis is ebbing, that wasn't so apparent when they launched their efforts to trim costs. The staff people did what they were told: they came up with plausible, if forced, arguments to justify cuts. They have been egged on by a few economists still manipulating graphs based upon economic man (whose elasticity is questionable in the best situations; the disabled are a lot less elastic than the rest of us. The rest of us are not so fantastically elastic, either; a stroke would put most of us out of business.) Anyhow, the Secretary, a busy executive, does not have the expertise in this difficult field to see the thin places in the data and logic. So, like the hyperactive, overachieving enthusiast that he is, he heartily recommends a program that is as questionable as it is heartless. I just hope that, as a thoroughly moral man, he will take the time and show the intellectual and ethical courage to reverse himself. Wouldn't that be refreshing? VII. SUMMARY OF ARGUMENTS AGAINST BENEFITS CAP Trimming Disability Insurance rolls and costs are not as urgent as formerly appeared because applications and awards have dropped to the lowest rates in two decades and the 1978 Social Security decoupling has already reduced projected benefits and program costs. Those awarded benefits as disabled are disabled. The statute, regulations, and SSA Administration are rigorous. The work potential of DI benefits is negligible, especially in current high unemployment conditions. The Secretary's emphasis on rehabilitation is at odds with program history. It is not realistic to expect rehabilitation to return substantial |