By Pierce, Richard J., Jr.
Regulation , Vol. 34, No. 3
Government Spending Policy--Reports
Public Finance--Economic Aspects
Social Security--Economic Aspects
Disability Insurance--Economic Aspects
United States. Federal Deposit Insurance Corp.--Reports
United States. Federal Deposit Insurance Corp.--Officials and employees
United States. Federal Deposit Insurance Corp.--Government finance
United States. Social Security Administration--Reports
United States. Social Security Administration--Officials and employees
United States. Social Security Administration--Government finance
The 1,400 administrative law judges (ALJs) who work for the Social Security Administration are making a significant contribution to the economic problems the United States is now experiencing. When an applicant for Social Security disability benefits receives two negative decisions from the SSA, he can appeal to an ALJ. Over the past four decades, the proportion of the U.S. population that has been determined to be permanently disabled has more than doubled, according to the SSA. The cost of the disability program has increased over four-fold over the past two decades. During that period, the cost of disability benefit awards increased from 10 percent of the SSA's total budget to 18 percent. Annual payments from the trust fund that was established to pay disability benefits are now $124 billion dollars - one percent of total U.S. gross domestic product. As a result, that fund is expected to be exhausted by 2018, many years before the expected exhaustion of the Social Security Old-Age or Medicare trust funds.
The large increase in the proportion of the U.S. population that has been determined to be permanently disabled is also having broader adverse effects on the performance of the U.S. economy.
The proportion of U.S. adult males who are available for work has declined from 80 percent in 1970 to 71 percent in 2010. As The Economist noted in an article last April 28% "Widespread male worklessness has huge economic, fiscal, and social costs."
Most of the increase in the proportion of the population that has been determined to be permanently disabled is attributable to ALJ decisions that reversed initial SSA decisions that denied applications for benefits on the basis of determinations that he applicants were not disabled. Thus, for instance, a single SSA ALJ, Charles Bridges of Harrisburg, Pa., overruled the SSA and awarded benefits to 2,285 applicants in 2007 alone, at a cost to taxpayers of $2.1 billion. Unless we address this problem promptly and effectively, it will increase in severity and scope.
As the tendency of ALJs to grant benefits that the SSA twice denied has become well-known, there has been a predictable increase in the number of applications for benefits. In 2008 alone, the number of applications increased by 21 percent, to 2.8 million, and the backlog of cases pending before ALJs reached 752,000. The number of decisions granting benefits increased 28 percent between 2007 and 2010. Since the average cost of a decision granting disability benefits is $245,000 and ALJs grant benefits in 60 percent of cases, the total cost of the pending cases alone will be about $117 billion.
As a practical matter, ALJ decisions that grant disability benefits are final and irrevocable commitments of taxpayer funds. The SSA lacks the resources to review ALJ decisions that grant benefits, and less than one percent of individuals who are awarded benefits ever leave the rolls of beneficiaries.
If there was reason to believe that all, or even most, ALJ decisions granting disability benefits were accurate reflections of the health status of the individual applicants, I would reluctantly accept the high cost of those decisions as one of the costs of living in a humane and compassionate country. There is no reason to indulge that belief, however, and there are many reasons to reject it as highly unlikely.
Nonexertional disabilities | First, most of the applicants who are awarded benefits by ALJs are determined by the ALJ to have a "nonexertional restriction"--either a mental condition such as anxiety or depression, or pain attributable to a musculoskeletal condition. Thus, for instance, between 1983 and 2003, awards based on nonexertional restrictions increased 323 percent; by 2003, they accounted for over half of all awards.
Nonexertional restrictions have characteristics that are important in evaluating disability decisions. …