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Thursday, September 12, 2013

The New Early Retirement Program In America: Disability

The disability program in America has become the new welfare, only on steroids. The program is federally funded meaning state and local governments have an incentive to push people off of their welfare rolls toward the disability program (saving money on their budgets). Here is an incredible piece from the article Unfit For Work:

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. "What we're offering is to work to identify those folks who have the highest likelihood of meeting disability criteria," Pat Coakley, who runs PCG's Social Security Advocacy Management team, told me.


The company has an office in eastern Washington state that's basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and document their disabilities:


"The high blood pressure, how long have you been taking medications for that?" one PCG employee asked over the phone the day I visited the company. "Can you think of anything else that's been bothering you and disabling you and preventing you from working?"


The PCG agents help the potentially disabled fill out the Social Security disability application over the phone. And by help, I mean the agents actually do the filling out.

There's a reason PCG goes to all this trouble. The company gets paid by the state every time it moves someone off of welfare and onto disability. In recent contract negotiations with Missouri, PCG asked for $2,300 per person. For Missouri, that's a deal -- every time someone goes on disability, it means Missouri no longer has to send them cash payments every month. For the nation as a whole, it means one more person added to the disability rolls.


The following shows the mushrooming size of federal government spending on disability, almost 3 times the size it was in 2000:


There are currently 14 million Americans collecting disability. The average monthly check is $1,130 per month. Those on the program also qualify for federal medical benefits which cost the tax payers an additional $100 billion annually. When combined with food stamps and low income housing programs, there is little incentive to even look for a job when an American gets access to these benefits. How do we know this?

Less than 1% of the people that entered the program at the beginning of 2011 have gone back to work. They have retired.

Is there an incentive for fraud in the program? You betcha. 33.8% of all disability cases, over 1/3, are for back pain which is almost impossible for a doctor to determine actually exists. The second highest (19.2% of all cases) is for mental illness, which is almost as difficult to determine.

This is how our current depression is different from the early 1930's. Government transfer payment programs have replaced the pictures of bread lines.



Instead of bread, they receive an EBT card in the mail which allows them to go shopping at Walmart.



MISH at the Global Economic Trend Analysis ran a calculation of how those on disability who are unemployed and not looking for work impact the unemployment rate. Assuming that only 25% of these cases are fraud (it is much more likely to be over 50%), bringing those Americans back onto the workforce would put the unemployment rate at 12.77%. At 50% fraud it brings the unemployment rate to 14.58%.

This is the new American recovery.

h/t: Cato Institute, NPR, MISH