So what do you do if you’re Barack Obama and you’ve just been elected president of the United States and you’ve promised to spend a gazillion dollars to improve education and health care and the infrastructure and to hand out “tax cuts” (many of which will actually be income transfers) to 95 percent of the public?
And you’re fiscally constrained because the government is bailing out or buying out banks left and right?
What you need is some serious new inflows of cash, you need it fast, and, contrary to everything you’ve claimed on the campaign trail, you know you can’t get it all by dinging the people making over $250k.
Fortunately—for a President Obama, that is—Senator Edward Kennedy (D-MA) is pushing legislation that would create that government income stream. And a really BIG stream at that.
Senator Kennedy’s CLASS Act (Community Living Assistance Services and Support Act) is an effort to have the federal government become the national long term care insurer.
Under the legislation, most workers would (unless they choose to opt out) participate by paying a $30-monthly tax to the federal government. If a person becomes disabled, the government would give the individual a check for $1,500 or $3,000 a month, depending on the extent of the disability. Workers would have to pay into the system for five years before being eligible to collect disability payments.
Kennedy’s office expects some 90 percent of workers to participate, which may be on the high side. But even if fewer participate, the plan has the potential to become the newest government slush fund. If, for example, 100 million workers were to join the program at $30 a month, that’s about $36 billion in new government revenues in a year. Multiply that times five years and Congress and the administration would have some $180 billion before ever having to spend a penny on claims.
Since the government doesn’t save this money or put it in private accounts, but rather would issue an IOU and spend it, Barack Obama and the Democrats would have a never-ending honey pot of new money. Think Social Security for disabilities, only without the imminent financial collapse for many years in the future.
With Kennedy’s recent illness, and considering his long-standing efforts to get the government more involved in health care, a Democratic-led Congress will likely want to give the senator a legacy to remember him by—and pass the bill to the rest of us.