Service Members Home Ownership Tax Act Of 2009--Continued

Floor Speech

SERVICE MEMBERS HOME OWNERSHIP TAX ACT OF 2009--(Continued) -- (Senate - December 03, 2009)

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Mr. THUNE. Will the Senator yield for a question?

Mr. GREGG. I am happy to yield.

Mr. THUNE. My understanding is as to the CLASS Act, to make the deficit situation with the enactment of this bill look better, they argue they are actually going to reduce the deficit as a result of this bill because of the revenues that come in early from the CLASS Act. I think the Senator from New Hampshire has accurately described this. You get a short-term infusion of revenues and another long-term liability which is why the Senator from North Dakota described it as a Ponzi scheme of the highest order, something of which Bernie Madoff would be proud. I guess my question to the Senator would be, how does this impact deficits in the long run and the debt in the long run? There was a lot of discussion around here, probably more rhetoric than action, about doing something to reduce the deficit and deal with the debt that continues to pile up and accumulate and at some point will be handed off to future generations. This Ponzi scheme, as it has been described by the Senator from North Dakota on the other side, in the form of the CLASS Act does seem in the short term to understate the fiscal impact of the cost of this health bill which, as the Senator from New Hampshire has described, is $2.5 trillion. But could the Senator elaborate on what happens in the outyears? You talked about the impact down the road when all the bills come due. You get all the revenue in the short term, and then some time down the road that revenue gets spent and you are stuck with all these liabilities. How is this going to affect deficits and debt in those years in the future when our children and grandchildren will have to pay for it?

Mr. GREGG. The Senator has asked a very pointed and appropriate question, because the answer is pretty startling. The point I think most people don't understand is that this money gets spent as it comes in. In other words, let's say over the next 30 years, younger people pay into this new alleged insurance program, accurately described as a Ponzi scheme. All that money that comes in will be spent on other activities of the government and, therefore, the other activities of government will be allowed to grow fairly dramatically. There will be a lot of money here. You are talking potentially $1 trillion over the next 30 years.

Those expenditures, which will have occurred as a result of this money coming in, which will have nothing at all to do with paying for the cost of the health care which these people who buy into this CLASS Act think they are getting--in other words, long-term care insurance, it has nothing to do with that--it will be on, as I said, education, roads, national defense, whatever we spend it on around here. Those expenditures will be built into the baseline forever. They will presume that there is going to be revenue to pay for them. What happens when that generation that has bought into the CLASS Act starts to actually need the money it is alleged it is going to get? Two things happen. The younger generation is going to have to pay taxes to cover that cost because the money will not be there. There will be no money in the kitty, none, zero. There will be zero money in the kitty, the alleged kitty to pay for this insurance program. Second, ironically, the government will have been grown by all the money that came in and was spent on new programs. So you are basically going to double down on the cost here.

Our children and our grandchildren are going to have to pay twice, not only to pay for the long-term care which allegedly has been promised to these people under these insurance programs but also to pay for all the new spending that will occur as a result of spending the premiums which were supposed to be saved for these programs. So they are going to get hit twice. The implications are, quite honestly, staggering.

We already know we have a $38 trillion unfunded liability in Medicare. We know, when you combine Medicare, Medicaid, and Social Security, we have a $60 trillion unfunded liability. If you calculate in the cost of the CLASS Act on top of that, you are adding potentially trillions more of unfunded liability, which will all have to be paid by our children and our grandchildren.

At the essence of this bill, there are a number of problems, but the problem I find most inappropriate in the way we are doing this is we are creating a government which our kids cannot afford under any circumstance. We are absolutely guaranteeing that our children are going to have a lower standard of living than we had because of the burden we are going to put on them as a result of these expansive new programs, which we know cannot be afforded in the outyears.

We already know we cannot afford the government we have in the outyears. We already know the public debt is headed above 80 percent of GDP by 2019. So the Senator from South Dakota has touched on a core issue. What is the real cost of this? Well, it is extraordinary. As I said, it hits the next generation twice. First, they will have to pay the taxes to pay for the program that was put on the books, which is allegedly there, plus they will have to pay to support all the programs which the money that came in was supposed to be preserved for.

Mr. THUNE. I say to my colleague from New Hampshire, it is the classic definition of a Ponzi scheme, which, as I said, is how it has been described not just by the chairman of the Budget Committee from North Dakota but also by others who have looked at this. Editorial pages in newspapers across this country have looked at this CLASS Act and said it does not add up, and it does not add up. I think Ponzi scheme is a good description.

The Senator from New Hampshire has correctly outlined the impact this will have on future generations, on deficits and debt, and spending and the growth of government. That is why it is such a bad idea to include this. The sense of the Senate resolution is simply that. It has no legal binding effect on spending. It simply is sort of a political statement that makes everybody feel better, but in the end it is going to be our kids who pay.

Mr. GREGG. I think the Senator from South Dakota touched on another point. The sense of the Senate, basically, confirms the fundamental flaw of the CLASS Act. The fact that you would think a sense of the Senate is necessary pretty much proves that everybody around here understands there is a big game going on with the CLASS Act. The problem is, of course, the sense of the Senate has no effect of law and, therefore, the problems the CLASS Act creates in the area of spending, the revenues that come in for the purpose of something other than what the CLASS Act alleges people are buying when they pay for that insurance, will still exist, and the CBO will still score the CLASS Act as benefiting the budget situation, when it should not be scored that way at all.

As I said, this is a nice resolution from a political standpoint, but substantively it has no effect on correcting the problems which the CLASS Act generate in the area of fiscal policy.

I understand there is a unanimous consent request that somebody wishes to offer. I was asked if I would listen to it.

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