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Unintended Consequences: Raising Retirement Age Could Cause Spike in Disability Payments

The purpose of raising the retirement age, we’re told, is to increase cat food sales save money and put Social Security on a path to long-term solvency. But the bean-counting geniuses Erskine Bowles and Alan Simpson didn’t take one thing into account: it could actually cost more to the system if people go on disability in those later years because they’re unable to work. And this wasn’t the National Hippies Foundation who made this assessment, it was the Government Accountability Office.

The projected spike in disability claims could harm Social Security’s finances because disability benefits typically are higher than early retirement payments, the Government Accountability Office concluded.

The report, obtained by The Associated Press ahead of its scheduled release Friday, provides fodder for those opposed to raising the eligibility age for benefits, as proposed by the leaders of President Barack Obama’s deficit commission.

“There’s more to consider than simply how much money the program would save by raising the retirement age,” said Sen. Herb Kohl, D-Wis., chairman of the Senate Special Committee on Aging. The report shows an unequal effect on certain groups of people, he said Thursday, and many of them “would have little choice but to turn to the broken disability program.”

The GAO report really opposes raising the age for early retirement, because of the disability issue. Less remarked-upon than the increase in the age for full benefits from 67 to 69 in the Bowles-Simpson report was their proposed increase of the early retirement age from 62 to 64. The two claim that a hardship exemption for people with stressful jobs would allow for retirement at 62, but GAO found it would still add to the overall cost of the system.

Bowles and Simpson are fond of saying that everyone has to sacrifice. Apparently that also means the long-term solvency of Social Security, which would be harmed by raising the early retirement age.

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David Dayen

David Dayen