Burkhauser and Daly have identified a serious problem, but I don’t think their solution is sufficiently radical. Let’s go through their diagnosis first.

The problem | SSDI is a social insurance program that was established to provide cash benefits to men and women of working age who become disabled—that is, unable to perform “any substantial gainful activity.” The amounts paid to them depend on their past labor earnings and funds to pay those benefits come from a flat-rate tax levied on employers and employees. The SSDI program is distinct from SSI, which is a mean-tested welfare program that pays benefits to adults and children who are disabled. The funds for SSI come from general tax revenues.

Disability caseloads as a percentage of the population have been rising steadily for decades in both programs. That increase would make sense if it were true that disabilities are becoming more prevalent in society, but the authors show that they are not. The rising percentage of Americans receiving disability benefits is not due to increasing incidence of disability, but is instead due to changes in the administration of the programs—caused in part by a U.S. Supreme Court decision—that made it easier for people to get on and stay on them.

That, of course, is bad news for taxpayers, but Burkhauser and Daly argue that these trends have also been harmful to the disabled themselves. Over the last 30 years, the relative position of those on disability benefits has declined with respect to the rest of society. Easy money has been luring many people who might work into the disability world. However, disabled workers often find many opportunities for improving their circumstances if they stay in the ranks of the employed. What seems to be “compassionate” is often detrimental; SSDI and SSI are proof of that.

A telling piece of evidence in this regard is the fact that claims of disability filed under the categories most difficult to disprove—mental conditions and musculoskeletal problems—have been increasing the most rapidly. Apparently more and more Americans are discovering that they can get disability checks by claiming that they are suffering from, e.g., back problems or depression that keeps them from holding down a job. The system allows many who are not incapacitated to get away with it.

The situation with regard to disabled children under SSI is at least as disturbing. The rationale for SSI was that it would give families who have children with disabilities some additional income to compensate for the fact that one or both parents were kept from working because of the need to care for the child. Over time, however, this aspect of the program has evolved into an entitlement for any family that can claim to have a disabled child. Furthermore, the authors report, “a substantial fraction of children on the SSI-disabled children program move directly to the SSI-disabled adults program without attempting to enter the labor market.” Once they are on disability relief, very few ever get off. Again, public policy encourages individuals who might have become self-supporting (at least in part) to become permanent wards of the state.

Once they are on disability relief, very few ever get off. Again, public policy encourages individuals who might have become self-supporting (at least in part) to become permanent wards of the state.

At the root of the mushrooming costs of SSDI and SSI are the subjective criteria that allow officials wide discretion in deciding whether to approve claims. Evidently, many officials are inclined to be generous and thus we are seeing more and more determinations that children and adults are disabled.

Burkhauser and Daly merely hint that the awarding of disability benefits is far more frequent than it should be due to the proclivity among Social Security Administration personnel to approve benefit claims and avoid having to turn people down. In an August 2000 Cato paper, “Facilitating Fraud: How SSDI Gives Benefits to the Able Bodied” (Cato Policy Analysis No. 377), James M. Taylor argued that this is a crucial part of the problem. Based on many cases he had studied, Taylor stated, “When a federal agency charged with disbursing federal dollars is derelict in enforcing its qualification standards, and instead seems extremely eager to hand out free money, the fault for the ensuing abuse lies more with the federal agency than with the individual claimants.”

Personnel is policy, as the saying goes. When it comes to government agencies charged with deciding whether people who apply for benefits receive them or not, there is a natural inclination for people who want to feel helpful to apply for positions. Combine that with vague standards and no penalty for deciding cases in favor of the applicant and it is almost inevitable that the percentage of people who claim and receive disability benefits will rise.

Furthermore, the system is heavily stacked in favor of claimants. In cases where the SSA initially denies a claim (unfortunately, the book gives no figures on the frequency of denials or how that percentage has changed over time), the individual can request a reconsideration and, if that is not granted, then he can appeal to an administrative law judge (ALJ), where he can have legal representation and present witnesses. (If the SSA still contests the claim, it may not bring in lawyers and witnesses.) If the ALJ turns down the claim, the claimant can then appeal to federal district court. A decision in favor of the claimant at any stage is final. (For more on the appeals process, see “What Should We Do about Social Security Disability?” Fall 2011; “What We Should Do About Social Security Disability,” p. 16.)

While the book doesn’t go into the effect of lawyers, there is good reason to believe that they (especially firms specializing in disability claims) often try to deceive the ALJ. The stakes are considerable since the lawyers are entitled to 25 percent of any back pay awards.

Reform | Burkhauser and Daly conclude that “antiwork incentives in SSDI/SSI have led to a disability system designed to enroll too many individuals for long-term cash benefits in lieu of work.” They point to the 1996 welfare reforms that changed incentives away from dependency on government largesse and toward work and argue that disability programs can be reformed along similar lines. They would begin by separating the two programs and devolving SSI to the states. The states, they argue, would be more inclined to minimize its costs by creating programs to keep people in the labor force (or encourage them to get into it), as they did for single mothers when Congress replaced Aid to Families with Dependent Children with Temporary Assistance to Needy Families.

Regarding SSDI, their main policy change would be to make the payroll taxes on employers subject to “experience rating.” What that means is that the more a company’s employees become eligible for and draw SSDI disability benefits, the higher the company’s tax rate would go. We have adopted that approach for unemployment insurance taxes—companies that rarely or never lay off a worker pay a minimum rate, while companies that often lay off workers pay the maximum. Burkhauser and Daly say that the change to experience rating would give employers an incentive to look for ways to accommodate or rehabilitate workers who suffer some disability but can still work, rather than allowing them to easily slide into the dead end of disability.

Those are not bad ideas. They would probably lead to marginal improvements: more people who have a disability would be working and fewer would be drawing benefit checks. The authors say that such a result would be consistent with the policy of the Americans with Disabilities Act (ADA).

When I first saw the title of the book, I assumed that one of its targets would be the ADA since many scholars who have analyzed the effects of the statute maintain that it has been detrimental to disabled people on the whole. For example, Thomas DeLeire, now the director of the La Follette School of Public Affairs at the University of Wisconsin, wrote in this magazine, “The burden of [the ADA’s] cost has fallen especially hard on those workers least likely to have been accommodated voluntarily by firms in the absence of ADA, namely, less experienced and less-skilled workers and workers with mental disabilities” (“The Unintended Consequences of the Americans with Disabilities Act,” Spring 2000). By making it costly—potentially very costly—to hire anyone who seems to have a disability, the statute creates a strong incentive for employers to avoid taking chances with them.

The authors acknowledge this line of criticism (mentioning DeLeire specifically) but downplay the effect of the ADA itself on lessening the employment prospects for people with disabilities. They suggest that we might amend the ADA to “exclude from harm” employers who hire workers with identifiable high risks. Such tinkering might marginally reduce the hazards of hiring the handicapped but it wouldn’t eliminate them, and it introduces still more complexity into an already treacherous statute.

A good case can be made that the ADA creates far more costs than benefits in total, but putting that aside, the reforms Burkhauser and Daly propose don’t seem to strike at some of the worst features of the status quo. Even with their reforms, we would still have a system that is stacked heavily in favor of claimants and a system in which politicians’ favorite three villains (waste, fraud, and abuse) are widespread. (Taylor’s paper noted above contains many examples, including instances in which workers have sued their employers under the ADA for not offering them workplace “accommodation” while at the same time collecting disability benefits.)

Summing up, this is an eye-opening book on a serious policy issue. It opens debate on how we should approach the problem of the disabled, but we should now hear from analysts who suggest more radical changes that don’t rely on government.