Disability Insurance Observer: Sunny California

Apparently, the California disability trust fund is doing well.

But the reason to set up a government-run disability insurance program is that people who are unable to work because of a serious illness or injury are often truly desperate.

As hard as it is to find a job in California right now, imagine trying to find a job there if you couldn’t see, couldn’t walk, or couldn’t control pain well enough to sit at a desk or stand behind a counter for a full work day.

If the state disability fund is really collecting too much money, maybe it could emulate the example set by the health insurers subject to the new Patient Protection and Affordable Care Act (PPACA) minimum medical loss ratio (MLR) rebate requirements and pay rebates. Maybe the recipients would give the state economy a boost by blowing the money on dinners out, or at least paying some bills.

If California will actually pay the fund back, and pay any kind of respectable rate of interest, the fund could come out looking better than if it had invested the assets in Ben Bernanke’s low, low rate bonds.

But, if I were a fund trustee, or a worker insured by the fund, I think I’d be scared of the idea of trusting in the creditworthiness of a cash-poor entity that seems to have the ability to make up its own financial rules as it goes along.

Come to think of it, what holds for California might hold for the United States, too.

I think economists like Paul Krugman make convincing arguments that Keynes was right about plenty of things, that giant countries are different from households, and that, in some cases, you have to spend today to have a civilization worth worrying about tomorrow.

But big countries can get used to the idea that they can make up whatever rules they want to follow. If the countries fail to maintain their economic and military might, if they lose their standing in the world, then: Spain. Today’s it’s just another struggling country that has some good filmmakers and some good restaurants. A few hundred years ago, it was a superpower. Times change.