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Analyzing the possible merger of SSDI and OASI -- Part II

Many Newark, New Jersey, residents may be aware that there have been proposals from various quarters to merge the Social Security Disability Insurance Trust Fund and the Old-Age and Survivors Insurance Trust Fund. That is because the SSDI trust is experiencing financial difficulty and experts believe that the funds will be gone by 2016 unless something is done by authorities immediately.

The previous post on our blog discussed some the effects that such a merger may cause. Two major concerns that experts pointed out pertain to the individual financial independence and sustainability of the two programs and the perceptions that people across America have of SSDI and OASI. In addition to those concerns, experts also pointed out that a merger of SSDI and OASI may lead to a situation where authorities ignore the financial resolution necessary to sustain the two programs.

According to experts, a combined SSDI-OASI trust fund will hold until 2033; however, that may lead to legislators delaying necessary repairs, which may eventually lead to a disaster for SSD. The SSDI program trustees have indicated that if legislators wait until the fund reserve is depleted as expected in 2033, it may not be feasible to take corrective action. Instead, they recommend that the funds be merged, if it becomes necessary, only after corrective action is taken regarding SSDI being able to sustain financially.

Another concern is the lack of transparency in how the SSDI trust fund functions. Many people assume that SSDI and OASI give returns that are proportionate to the contributions. Interestingly, there is already a lack of transparency about how the trust funds' income is redistributed. As a result, people often demand what they think they have earned over the years but actually, that leads to increases in the program's costs and tax burdens increasing. In the process, the younger population feels the burden of rising tax burdens and net income losses.

Source: Economics21.org, "Costs of Merging Social Security Retirement and Disability Funds," Charles Blahous, April 27, 2015

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