Record U.S. Disability Payouts

As the latest monthly jobs numbers are due out next Friday, the U.S. may again see a drop in the unemployment rate.

But the country is seeing a record rise in the number of federal disability beneficiaries.

This month, the number of Americans collecting disability benefits from the Social Security Administration rose to a new record of 8,803,335, government data show (for more, click here.) That's up from the previous record of 8,786,049 set in September, and is up nearly 20% since February 2009, the second month of President Barack Obama’s term in office.

It’s a safe bet that, if the president is re-elected, and the same policies stay in place, at current growth rates the 1.36 million workers added to the federal disability payrolls under President Obama’s term will outstrip those added under President George W. Bush’s eight years in office, 2.4 million.

The Social Security disability fund is expected to become insolvent in 2018, says the Congressional Budget Office (CBO).

The White House has noted rising federal disability beneficiaries cause a drop in the labor force in a report last December: “Workers on SSDI [Social Security disability insurance] rarely return to the labor force, resulting in a loss to society of the economic contribution those workers could have made. Thus, keeping the long-term unemployed in the labor force should be a priority.”

The CBO has also explained in matter-of-fact language: "When opportunities for employment are plentiful, some people who could quality for DI (disability insurance) benefits find working more attractive. Conversely, when employment opportunities are scarce, some of those people participate in the DI program instead."

The CBO added: “Many people who have been out of the labor force for extended periods find it difficult to return to work, and new beneficiaries rarely leave the DI program to return to work simply because the economy has improved.”

Beneficiaries are not supposed to get Social Security disability benefits indefinitely. S.S. administrators are supposed to review cases “periodically” to ensure the worker is truly disabled, the government says.

However, these beneficiaries can qualify for Medicare after two years, putting pressure on this cash-strapped system as well.

The surge in federal disability payouts directly correlates with the drop in the labor force participation rate, now at around 63%, FOX Business senior editor Charles Brady has noted. “There is a strong inverse relationship between the growing ranks of the disabled and the shrinking unemployment rolls,” he says.

Brady adds: “In the past four years, the number of unemployed Americans has declined by 2.52 million. However, during the same four-year stretch, a nearly identical number of people - 2.32 million - have left the labor force because of a disability and are therefore entitled to receive disability benefits.”

In other words, the long-term unemployed, “instead of collecting unemployment checks, now collect disability checks, essentially shifting from one form of government subsidy to another,” Brady notes.

The CBO concurs. It says that federal disability “applications to the program increased during and immediately following the recessions that occurred in the early 1990s, in 2001, and over the past few years, as did the number of people receiving DI benefits.”

In addition, there are 83 overlapping federal and state government welfare programs that together represent $1.03 trillion in fiscal 2011 spending, based on data from the Congressional Research Service (CRS).

Medicaid spending is currently the single-largest category of spending in the federal budget, more than Medicare, Social Security and defense. And it equals the budget for defense and Medicare combined.