SPECIAL REPORT | January 25, 2008
The State of the Economy: 2008
For years, American families have been paying the price for Republican policies that put special interests ahead of the middle class. Instead of helping our hard-working families squeezed by skyrocketing costs and declining incomes, retirement accounts, and real estate values, Republicans have spent hundreds of billions of dollars on budget-busting tax breaks and other handouts for multi-millionaires and special interests. Middle-class families, and our nation, deserve better, and Senate Democrats have worked and will continue to work for the real change that makes a difference for America’s middle class and the American worker.
The Real State of the Economy
Seven years of the Bush presidency, aided and abetted by Bush’s Republican allies in the Senate, have led to:
·Higher college education costs. College education costs have risen by over 60 percent since the 2000-2001 academic year.Average tuition, fees, room and board costs at four-year private universities have increased by $10,067,from $22,240 in the 2000-2001 academic year to $32,307 in the 2007-2008 academic year. Tuition, fees, room and board charges at four-year public colleges jumped from $8,439 for the 2000-2001 academic year to $13,589 for the 2007-2008 academic year – an increase of $5,150, or 61percent. The cost of a college education is rising faster than inflation and family income, but key federal tuition assistance programs such as the Pell Grant program have failed to keep pace with the rising cost of college. (College Board; Analysis of Department of Education data)
·Increased healthcare costs and more uninsured Americans.The cost of family health insurance has skyrocketed 78 percent since 2001. Meanwhile, the number of uninsured Americans has increased every year since President Bush took office, from 39.8 million in 2000 to a record high of 47 million in 2006. (Kaiser Family Foundation; U.S. Census Bureau)
·Skyrocketing energy costs. The rising costs for gasoline, electricity, and natural gas have strained the budgets of middle class Americans. Prices at the gas pump have jumped 107 percentsince President Bush took office in January 2001. In 2008, the average household with children will spend about $4,487on transportation fuel costs, an increase of 136 percent or $2,584over 2001 costs.
Natural gas and electricity prices are also straining the pocketbooks of middle-class Americans. Since President Bush took office, the cost of heating a home with natural gas during the winter has increased by 90 percent ($465 to $884) and the annual electricity costs for an average American home has increased from $972 ($81 per month) in 2001 to $1,148 ($96 per month) in 2006.
The record oil prices that have hit the American economy have also further strained the economy. In a recent three-month period, the price of oil spiked by approximately 24 percent. This is important to the economy because empirical evidence suggests that the cumulative effect of just a 10 percent increase in oil prices during a three month period would reduce economic output by 1.1 percent. Therefore, all else being equal, the recent 24 percent oil price spike would/could have reduced economic output by at least 2.2 percent. (Energy Information Administration)
·A volatile housing market. Due in part to the irresponsible and predatory mortgage lending practices that have been allowed to flourish in recent years, the country is facing a mortgage crisis that threatens not only the American dream of homeownership, but the entire domestic – and international – economy. As many as two million Americans may be at risk of foreclosure as their home loans adjust to higher rates, far beyond their ability to pay, which would represent more than $160 billion in lost equity. Worse, millions more will see their property values drop, to the tune of nearly $1.2. trillion nationally, as their neighbors lose their homes, and millions of others will be unable to obtain home loans due to the resulting credit crunch. (Center for Responsible Lending; Joint Economic Committee)
·Declining incomes. America’s families are working harder and earning less today than they were at the start of the Bush Administration. Median household income, adjusted for inflation, has declined $962 from $49,163 in 2000 to $48,201 in 2006. (U.S. Census Bureau)
·Higher unemployment and fewer job opportunities.In December 2007, the unemployment rate shot up to a two-year high of five percent, with nearly 500,000 more Americans looking for work than in the previous month, private employers cutting payrolls for the first time in more than four years, and destructive job losses in manufacturing, construction, financial services, and retail sectors. This is a significant increase from the 3.9 percent unemployment rate in December 2000, before President Bush took office. (Bureau of Labor Statistics)
·Record deficits and debt. Bush Republicans turned record budget surpluses into record deficits, increased the national debt by over $3 trillion. Foreign-held debt also has exploded. It took 42 presidents 224 years to run up a trillion dollars of foreign debt, but President Bush has more than doubled that amount. (Office of Management and Budget; U.S. Department of Treasury; U.S. Department of Treasury)
For more information and economic data that is updated every month, see the DPC Fact Sheet entitled Middle-Class Life Under Bush: Less Affordable and Less Secure, available here.
President Bush and Senate Republicans Should Join Democrats in Helping America’s Families
Democrats were elected to take the country in a new direction by advancing the priorities of the American people. One year into the Democratic-led Congress, Democrats have made a significant down-payment on those expectations. After nearly a decade of Republican control, we have worked to alleviate the pressure of the increasing cost of college, improve access to health care, alleviate the pressure of skyrocketing energy costs, increase the earningsof our country’s minimum wage workers, fight to keep the American dream of homeownership alive in the midst of the far-reaching housing crisis that this country is facing, and protect middle-class taxpayers.
·Landmark legislation to make college more affordable has become law. Higher education is becoming more and more important to achieving the American dream, yet it is also becoming increasingly unaffordable and inaccessible. Democrats recognize that students and their families are struggling to cover the rising cost of college and have made college affordability a top priority. That is why under Democratic leadership, Congress overwhelmingly approved the College Cost Reduction and Access Act, legislation that will increase access to higher education, and direct federal dollars where they are needed most.
This legislation will increase student aid for low- and middle-income students, providing over $20 billion in new student aid and benefits, the largest increase in student aid since the G.I. bill. The bill will also make student loan debt more manageable, forgive student loan debt for those who commit to public service, and reform the student loan system to work for students, not banks. Moreover, the higher education legislation, approved by the Senate, will provide benefits to students at no cost to taxpayersby reducing excessive lender subsidies and redirecting federal aid to students who need it most.
·Under Democratic leadership, Congress is working to ensure that low-income, working families can afford health insurance for their children. For the past ten years, the Children’s Health Insurance Program (CHIP) has played a crucial role in helping reduce the rate of uninsured children in low-income families. By every measure, CHIP is cost-effective, and has been shown to work well in meeting the basic health care needs of our nation’s children. Democrats recognize that investment in CHIP and Medicaid are more crucial than ever during this time of economic downturn.
In September, the House and Senate overwhelmingly approved a bipartisan, bi-cameral agreement to invest significant new federal resources into the program and cover millions more low-income uninsured children who are eligible for CHIP and Medicaid, but whose families cannot afford private insurance. But President Bush vetoed the legislation. Although the President’s arguments against the legislation to renew CHIP are unfounded, Democrats and Republicans worked together once again to produce a revised CHIP reauthorization bill that addressed the issues raised by the President and those Republicans who opposed the original bill. In October, Congress overwhelmingly approved this updated CHIP legislation, which – like the CHIP legislation passed in September – would cover nearly ten million low-income American children whose families cannot afford private insurance.
Despite the overwhelming support for this legislation and the promise it offers to our nation’s children, President Bush has, again, vetoed it – for the second time denying millions of our nation’s most vulnerable children the care they need when they’re sick, and the checkups they need to stay well. As a result of the President’s actions, Congress was forced to merely extend the current CHIP program though March 31, 2009, thereby protecting coverage for currently-enrolled children, but not making any headway in reducing the number of uninsured children. Regardless of the President’s vetoes of this critical legislation, 69 Senators, 43 governors, hundreds of organizations, and the vast majority of the American people continue to support the bipartisan CHIP reauthorization legislation.
·Senate Democrats took the first steps towards creating a cleaner energy policy. In December, Senate Democrats passed a new energy bill that will quickly move our country toward greater energy independence, save taxpayers money, and reduce emissions of greenhouse gases. Specifically, the Democratic energy bill will save an average family with two cars up to $1,000 each year in gasoline costs, reduce U.S. oil consumption by two million barrels, and avert the emission of approximately 200 million metric tons of carbon dioxide.
The bill also sets national efficiency standards for light bulbs which represents the most important energy efficiency improvement in American history. The first set of new standards will reduce emissions by about 13 million metric tons of carbon dioxide, which is equivalent to approximately 24 new coal plants, each of which produces 500 megawatts of electricity. In addition, the Democratic energy bill expands the renewable fuels standard to 36 billion gallons by 2022.
·Democrats secured better pay for working Americans by passing legislation to raise the minimum wage. In May 2007, after a ten year battle, Congress, under Democratic leadership, gave workers a long overdue raise by increasing the federal minimum wage from $5.15/hour to $7.25/hour. The raise will benefit nearly 13 million workers – 5.6 million directly and 7.4 million indirectly – and help reverse years of wage stagnation, without harming the economy. Nearly 59 percent of those who will benefit are women and 10 percent are single parents. Minimum wage earners also serve as the sole breadwinners of 46 percent of families who will benefit. Moreover, the raise will help well-over six million children under the age of 18 whose parents will receive an increase in earnings. While more needs to be done, raising the federal minimum wage was an important step toward economic security for working Americans.
·Senate Democrats approved measures that will help Americans buy a home – and keep a home. From coast to coast, American families are facing a record number of mortgage payment delinquencies and foreclosures. An estimated two million households may lose their homes to foreclosure this year and next, resulting in hundreds of billions of lost home equity.Unwilling to do nothing as millions stand to lose everything, Democrats have been focused on fixing the nation’s housing problems – by working with the private sector, government agencies, and homeowner advocacy groups to find real world solutions.
In the first session of the 110th Congress, the Senate passed the Federal Housing Administration Modernization Act of 2007, which would help homeowners facing foreclosure obtain safe and affordable homes loans and bring stability to the economy and local communities. The bill would make FHA loans a more viable alternative to the subprime market and expand access to post-purchase homeownership counseling, enhance fraud protection, and expand access to credit for borrowers without sufficient credit histories.
The Democratic-led Congress also sent the Mortgage Forgiveness Debt Relief Act of 2007 to the President, legislation that offers tax relief to American families caught in the sub-prime mortgage crisis. This fully off-set bill creates a three-year exception for debt forgiveness on home loans – helping families already unable to meet their mortgages to avoid incurring large tax bills as well – and extends a provision allowing homeowners to deduct mortgage insurance payments from their taxable income.
·Democrats took action to protect middle-class taxpayers. In 2008,the President signedthe Temporary Tax Relief Act of 2007, legislation passed by the Democratic-led Senate and House to protect 19 million American families from being hit by the alternative minimum tax (AMT). While the AMT was created in 1969 to keep wealthy people from avoiding taxes altogether, it has started to hit working families instead. Without this legislation, the hard-working American families that would have been ensnared by the AMT would have been hit with an average tax increase of nearly $2,000.
For more information, please see DPC Report entitled Democratic Accomplishments in the 110th Congress: A New Direction for America, available here.
Senate Democrats are proud of these accomplishments for the country, but are far from satisfied. Senate Republicans and President Bush have stood in the way of progress time and time again and have often refused to work with Democrats in good faith to address the needs of the nation. The American people are fed-up; they are tired of partisan politics, and Democrats share their frustration. As we look toward 2008, Senate Democrats will not rest until we have addressed the real priorities of our nation. We invite Republicans to join us. Together, with the American people at our side, Congress can and will take the country in a new direction.
- Erika Moritsugu (224-3232)