Senators Speak on the Middle-Class

SENATOR BYRON DORGAN (D-ND) discusses the DPC Fact Sheet "Look at the Record: Can the American People Trust Republicans to Strengthen the Economy for the Middle Class?" Interview on 9/17/09 (0:33). Click here to read the fact sheet.

The State of the Economy for Working Families is Not Good: Senator Sanders takes issue with the Bush-McCain claims that the fundamentals of the economy are sound, even though millions of middle-class families across the country are struggling in remarks on the Senate floor on 9/15/08 (02:11).

Workers Hope for a Better Economic Future: Senator Brown describes how most Americans have become worse off as a result of years of "wrong-headed economic policies" but are still hoping for a better future in remarks on the Senate floor on 9/12/08 (01:02).

Democrats are Making College More Affordable: Senator Brown discusses the increases in student aid that are going into effect as a result of legislation passed by the Senate in a speech on the Senate floor on 6/26/08 (0:56).

Income Inequality is at its Worst Since the Great Depression: Senator Brown discusses the challenges facing hard working Americans in a speech on the Senate floor on 6/25/08 (01:31).

The Mortgage Crisis is the "Issue of the Hour": Senator Dodd discusses the need for Congressional action to respond to the mortgage crisis in a speech on the Senate floor on 6/24/08 (02:00).

When Democrats Tried to Extend Unemployment Benefits, Republicans Said "No": Senator Schumer explains how Senate Republicans have blocked efforts to extend unemployment benefits in a speech on the Senate floor on 6/17/08 (01:31).

Gasoline Has Risen to 250 Percent of the Price it was When President Bush Took Office: Senator Reid discusses the impact that rising gas prices have had on the American people in a speech on the Senate floor on 6/3/08 (01:10).

The Biggest Crisis Facing Working Families is the Rising Cost of Gasoline: Senator Durbin asks why President Bush hasn't stepped in to respond to this national crisis at a Judiciary Committee hearing on 5/21/08 (01:38).

The Bush Administration Fails to Show Leadership in Responding to the Home Foreclosure Crisis: Senators Reid and Kennedy discuss the Bush Administration's failure to help people who have lost their homes as a result of the home foreclosure crisis in a colloquy on the Senate floor on 4/3/08 (02:08).

Where is the Bush Administration?: Senator Kennedy discusses the economic woes facing the states and the failure of the Bush Administration to understand the economic challenges of ordinary Americans in a speech on the Senate floor on 4/2/08 (02:29).

A Failure of Economic Policy: Senator Kennedy discusses the challenges facing American families as a result of the failed economic policies of the Bush Administration in a speech on the Senate floor on 3/12/08 (01:08).

The Failed Economic Policies of President Bush Are Hurting Middle-Class Families: Senator Reed reminds us of the struggles of middle-class families under President Bush’s failed economic policies in a speech on the Senate floor on 3/12/08 (0:35).

Democrats Continue to Strengthen Our Economy: Senator Akaka describes how the Democratic budget puts middle-class families first by lowering taxes, funding education programs, and investing in our infrastructure in a speech on the Senate floor on 3/10/08 (0:55).

Republicans Continue to Block Democratic Efforts to Help Middle-Class Americans: Senator Reid discusses how Republicans are blocking the efforts of Senate Democrats to take up legislation to help middle-class Americans who have been affected by the foreclosure crisis in remarks on the Senate floor on 2/29/08 (:44).

The Senate Must Provide the Unemployment Benefits the Middle-Class Needs: Senator Stabenow discusses the need to extend unemployment benefits in response to the current economic downturn in a speech on the Senate floor on 1/31/08 (02:50).

A State of the Union Reality Check: Senator Sanders discusses the true State of the Union for middle-class Americans in a speech on the Senate floor on 1/29/08 (02:33).

A Crisis of Confidence Among Consumers and Investors: Senator Dodd outlines the economic pressures facing middle-class Americans in a speech on the Senate floor on 01/29/08 (03:13).

The American People Want Change That Helps Middle-Class Families: Senator Stabenow discusses the serious consequences that Republican obstructionism has had on middle-class families in remarks at a press conference on 12/12/07 (0:40).

Middle-Class Families to Face a Republican Tax Increase: Senator Baucus discusses how Senate Republicans have set up middle-class families for a large tax increase by blocking reform on the Alternative Minimum Tax (AMT) in remarks on the Senate floor on 12/5/07 (:51).

Credit Card Debt is Hitting American Families Like a Wrecking Ball: Senator Wyden discusses the credit card crisis and describes his legislation to create a "safety rating system" for credit cards, which would require disclosure, transparency, and simple English, in remarks on the Senate floor on 12/5/07 (01:27).

Honoring Our Covenant with America: Senator Salazar addresses the economic concerns of families trying to pay for education, health care, and rising fuel costs in remarks on the Senate floor on 12/3/07 (01:58).

The Bush Economy Isn't Working for the Middle Class: Senator Sanders discusses how the American middle class has fallen further and further behind on President Bush's watch in a speech on the Senate floor on 12/3/07 (01:19).

We Propose to Invest Right Here at Home: Senator Conrad discusses the need to fund veterans' health care, children's health care, and education in a speech on the Senate floor on 11/16/07 (01:11).

The President Ignores Middle Class Priorities: Senator Menendez discusses the President's misplaced spending priorities in a speech on the Senate floor on 11/14/07 (02:16).

We Are Here to Fight for Middle-Class Americans: Senator Stabenow discusses Republican efforts to obstruct legislation that helps middle-class families in remarks on the Senate floor on 11/02/07 (01:10).

Struggling to Make Ends Meet During the Bush Republican Economy: A Profile of a Middle-Class Family

With the country's economy in a severe downturn, families are struggling to pay for food, gas, health care, and housing, all of which is keeping wealth and prosperity out of the reach of too many Americans. Under Republican policies, corporate profits have increased (until recently) and the rich have gotten richer, but middle-class families have struggled with increasing costs, stagnant incomes, and mounting debts. Over the last seven years, the Bush Administration also shifted more of the tax burden onto middle-class American families, produced the worst budget deficits in American history, compiled the worst job creation record since the Great Depression, and presided over the greatest decline in the dollar in thirty-five years.

Additional Resources

DPC Contact: Erika Moritsugu 4-3232

For more information on the Middle Class Squeeze, see Middle-Class Life Under Bush: Less Affordable and Less Secure, which is updated monthly.

The following report presents the story of the Lees, a fictional American family representing the experience of an average American household put at risk by the Bush Republican economic policies. In 2001, the Lees prepared a family budget of their 2000 expenses to see where they could cut back on their spending and find ways they could stop living paycheck to paycheck and begin to save for their retirement.

Six years later, the Lees drew up a comparable budget. They found that, even though they had been able to cut down on some expenses, many of their monthly costs, including health care, education, housing and gas, had spiked out of control by 2006. At the same time, they were left with little financial security for the future as their real earnings had decreased, they had drained their savings, and their debt had skyrocketed.

Every aspect of this narrative has been drawn from official data relating to the median household in the country and other reports describing the experience of the average family in America.

While Senate Democrats cannot turn around seven years of Bush-McCain policies overnight, we have taken important first steps to make the American Dream affordable again.

A family similarly situated to the Lees would realize a total savings of $1,840 per year from legislation that Congressional Democrats have already passed for America's hard-working families:

$240 = Subsidized Stafford Loan (per year, during 10 years of repayment)
                     College Cost Reduction and Access Act

$600 = 2008 Economic Stimulus Payment
                     Economic Stimulus Act of 2008

$1,000 = for automobiles for two vehicles with an average fuel economy of 25 MPG
                     Energy Independence and Security Act of 2007


That's more than an extra paycheck in the Lees' checking account. This is only a down payment on the Democrats' promise to change the direction in this country, but this represents an example of the type of change Democratic leadership will continue to deliver for middle-class American families.

Meet the Lees: An Average Middle-Class American Family Planning for the Future

Michael and Lisa Lee are a forty-something couple living in Middle America with their son, Ty. In 2000, Mike worked for a local construction company, a business that he had been in since he was in high school. He began working in construction full-time after earning an associate's degree in business.

Lisa worked part-time as an administrative assistant at a local small business. She had attended a year of community college, but decided to drop out when it was time for her and Michael to start a family. In 2000, their combined household income before taxes was $41,990.

  • "Lee" is a common surname that is not easily categorized. In addition to having English and Irish Gaelic origins, "Lee" is also the Americanized spelling of a name found in the Norwegian, Chinese, and Korean languages. (Dictionary of American Family Names, Oxford University Press, available here)
  • According to Social Security Administration Popular Baby Name records, "Michael" was the number one male birth name each year from 1961 through 1998, after which it slipped into second place where it remains today. (Social Security Administration, Popular Baby Names, updated May 11, 2007, available here)

    While it has steadily declined in popularity, during the 1960s, "Lisa" was the most popular female birth names. (Social Security Administration, Popular Baby Names by Decade, available here)

    Ty" is a shortened version of Tyler, Tyrone, Ti, Tyson, Tyrell, and many more. (Behind the Name, available here)
  • The average age of respondents to the 2000 Consumer Expenditure Survey (CES) in the 40,000-49,999 income group was 44.7 years. (U.S. Department of Labor, Bureau of Labor Statistics Consumer Expenditures in 2000, available here)
  • There were 1.5 earners contributing to households in the $40,000-49,999 income group, according to 2000 CES data. (U.S. Department of Labor, Bureau of Labor Statistics Consumer Expenditures in 2000, available here)
  • The median household income in 2000 was $41,990 (in current dollars). (U.S. Census Bureau, Incomes, Table H-8: Median Household Income by State: 1984 to 2006, available here)
  • For men, the most common occupation is "management occupations" with "construction and extraction occupation" as a close second.
    (Bureau of Labor Statistics, Characteristics of the Employed, Table A-19: Employed Persons by Occupation, Sex, and Age, available here)

    Carpentry is the most common construction occupation. (Bureau of Labor Statistics, Occupational Outlook Handbook: Carpenters, available here)

    In the early 1980s, 35 percent of the vocational degrees awarded were in business and commerce technologies. (The Current Status of the Associate Degree (August 1985), available here)
  • For women, the most common occupation is "office and administrative support occupations" (Bureau of Labor Statistics, Characteristics of the Employed, Table A-19: Employed Persons by Occupation, Sex, and Age, available here)

    In the early 1980s, nearly half of the female high school graduates had completed at least one year of college. (National Center for Education Statistics, "Findings from the Condition of Education 1995: The Educational Progress of Women," p. 11, (November 1995), available here)

A Family Plans for the Future

In early 2001, Michael and Lisa sat down to review their family finances. It was the beginning of a New Year and a New Millennium. Life was pretty good -- Lisa had even bought a new car recently - but they resolved to plan an annual family budget and begin to save an amount from each paycheck. Their son Ty would be turning 18 and heading off to college soon, and they wanted to be prepared for this change in their lives.

Under Bush-McCain Republicans, retirement security has plummeted (more)

Also in the forefront of their minds was the ongoing public debate about retirement security, and they wanted to plan responsibly for their future. The Lees decided that it was time to do some serious financial planning.

Fact: Economic anxiety has eroded middle-class life during the Bush Administration (more)

They began by looking at their income and expenditures for the previous year in order to assess their past spending habits. In the past, they would attempt to make ends meet, often scaling back purchases at the end of the pay period if it looked like they were stretching a little bit.

  • For information on retirement security,see, e.g. David Braze, "The New Face of Retirement," (November 20, 2000), available here; Ellen Hoffman, "When You Think about Taxes, Think about Retirement, Too," Business Week (April 21, 2000), available here.
  • The majority (67 percent) of 2000 CES respondents in the $40,000-49,999 income group were homeowners. (U.S. Department of Labor, Bureau of Labor Statistics Consumer Expenditures in 2000, available here.)
  • For information on college financing, see, e.g. College Board, Federal PLUS Loans for Parents, available here.
  • In the 1999-2000 academic year, the average federal grant for dependent students from families with incomes between $40,000-59,999 per year was $1,306.
    (2003 Digest of Education Statistics, Table 320 Average amount of financial aid awarded to full-time, full-year students, by type and source of aid and selected student characteristics: 1999-2000, available here.)
  • For college cost data, see The College Board, Trends in College Pricing 2007, available here.

A Snapshot of the Lees' Expenditures in 2000

The Lees had always tried to live within their means and been able to make some modest savings, roughly designated as a "rainy day" fund and for their retirement. They tried not to rely too much on credit, using their credit cards only to finance unexpected purchases or to bridge the gap at the end of a pay period, but they always tried to clear their balance as quickly as possible (click to enlarge).

Lees' Budget -- click to enlarge

U.S. Department of Labor, U.S. Bureau of Labor Statistics, Consumer Expenditures in 2000, Report 958 (April 2002), available here.

Income is based on the Census Bureau's findings for the median household income in 2000. (U.S. Census Bureau, Incomes, Table H-8: Median Household Income by State: 1984 to 2006, available here)

Consumer Expenditures are, accordingly, based on households with income before taxes between 40,000 to 49,999.

Because mortgage payments are considered a savings by the Bureau, the line item for "Housing" does not include mortgage payments. The Census data includes subsets of shelter for owned dwellings, rental dwellings and lodging out of town. Each of these subcategories is rolled up into one "housing" category for the purposes of this writing. This category includes: mortgage interest, property taxes and insurance, refinancing and prepayment charges, ground rent, expenses for property management and security, homeowners' and fire insurance, expenses for repairs and maintenance contracted out, and expenses of materials for owner-performed repairs and maintenance.

  • "Clothing" is comprised of the line items for "apparel" and "services."
  • "Transportation" represents the CE line items for vehicle purchases, gasoline and motor oil, other vehicle expenses, and public transportation.
  • "Charitable donations" is comprised of the CE Category for "cash contributions."

Under Bush-McCain policies, housing costs have skyrocketed (more)

Michael and Lisa tried to identify areas where they could cut down their spending so they could implement a savings plan. The Lees owned their own home, and even though they spent nearly one-third of their income on housing, there wasn't much they could do immediately to adjust that line item. They did vow to cut down on electrical and heating bills, which would be financially and environmentally beneficial.

Fact: Most families do not have savings to cope with emergencies (more)

Health care spending was also a fixed expense, and to a certain degree, so were their retirement savings and transportation costs (after all, they had to get to work), and they considered Michael's union dues and their contributions to the church in the same category.

On the other hand, they knew that they could cut down on food expenses when their teenager departed for college (and could try to find more sale items and use more coupons in the meantime and cut back on dining out). They could cut back their spending on movies and clothes, and cancel some of their magazine subscriptions.

Meanwhile, they would try to save up at least three months of living expenses in case there was an emergency, and eventually hoped to have enough in extra savings to take their a first "empty nest" vacation after Ty left for college in the fall.

Under Bush-McCain Republican policies, college costs more, government assists less (more)

That summer, Ty took out a subsidized Stafford Loan to finance the portion of his year at the state college that his Pell Grant did not cover. The Pell Grant covered approximately 15 percent of the $8,439 tuition, board, and fees for his freshman year.

Economic Conditions Unravel the Best Laid Plans

Early in 2002, Michael's car finally broke down completely. They knew that buying a new car would increase their monthly expenditures, but with both of them working across town from each other, it was a necessary expense. Fortunately, nearly every car company was offering "zero percent financing" loans and cash rebates, making it easier for them to stomach the expense.

Fact: America's middle class is shrinking (more)

In June of 2002, Michael was laid off. This was a devastating surprise. The Lees thought they had weathered the initial lay-offs following the 9/11 attacks, and had considered themselves lucky. While Michael searched for a new job, they stretched his unemployment checks and Lisa's paychecks as far as they would go.

Bush-McCain tax policies have provided middle class with less (more)

They received a tax refund check from the IRS, but it was less than they expected, and they used it to cover one of their car payments. They began to dip into their "rainy day fund" to cover their monthly bills.

  • See, e.g. David Kiley, "Big Three roll out more incentives, 0 percent financing," USA Today (July 3, 2002).
  • "In the 18 weeks following September 11, employers reported 430 events involving 125,637 workers separated as a direct or indirect effect of the attacks. A majority of the layoff events took place in the weeks immediately following the attacks, and the number of new events had tapered off by March of 2002."

    (U.S. Department of Labor, Bureau of Labor Statistics, "Impact of the Events of September 11, 2001, on the Mass Layoff Statistics Data Series," available here)
  • From 2001 to 2002, 93,000 construction jobs were dropped from construction payrolls, a 1.4 percent reduction.

    (U.S. Department of Labor, Monthly Labor Review, "U.S. Labor market in 2002: Continued Weakness, (February 2003), available here. See also Bureau of Labor Statistics, "Payroll Employment in 2007," (March 2008), available here)

Michael immediately began looking for carpentry or laborer work and showed up at the union hall each day, hoping to get called out on a job. This was a difficult time for the Lees, not only financially but emotionally as well. The stress of an uncertain future and mounting bills added tension to their marriage, and they fought more than usual.

Fact: Job-related health insurance options are shrinking (more)

When Michael lost his job, the Lees lost their health insurance too. Michael's former employer had paid the bulk of their group health care plan's cost for the Lees, deducting the remainder from Michael's paycheck. Michael was given the option to continue his healthcare coverage through COBRA, which seemed too expensive: under COBRA, the Lees would have to pay 100 percent of the total cost of the plan.

Since President Bush took office, health insurance is increasingly unaffordable (more)

With the stress of Michael's job loss and the confusion that they were confronted with when they researched private insurance option, the Lees opted for COBRA coverage. It seemed too risky to go without any coverage after hearing so many hardship stories about uninsured families who lost their homes and assets after an unexpected illness or injury.

  • Under Bush-McCain Republicans, the number of uninsured Americans has increased substantially from 39.8 million in 2000 to a then record high of 44.8 million in 2005.

    (U.S. Census Bureau, 2005 and 2006 Current Population Survey (CPS) Annual Social and Economic Supplement (August 2007), Figure 7, (revised March 23, 2007) available here (see U.S. Census Bureau, Census Bureau Revises 2004 and 2005 Health Insurance Coverage Estimates (March 23, 2007), Table A1, available here; U.S. Census Bureau, Health Insurance Coverage: 2001, Table B.3, available here)
  • Consumers spent 7.7 percent more for healthcare expenditures in 2002 in a third straight year of increases. During all three years, the increase was due primarily to large increases in health insurance and drugs.
    (U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditures in 2002, available here)
  • According to a study by the Kaiser Family Foundation, the average employer-sponsored health insurance plan costs $7,954 in 2002 for family coverage, with employees paying $2,084 of the bill and the employers picking up the remaining $5,870 of the tab.
    (Kimberly Lankford, "Alternatives to COBRA Coverage," (October 18, 2002), available here)
  • Many people are unfamiliar with the individual health insurance market because most Americans' health coverage is accessed either through their jobs or from a public program. In 2002, about 6.6 percent of the non-elderly population (16.5 million people) purchased individual health insurance, compared with 65.0 percent (163.7 million people) covered by employer-based health insurance and 16.2 percent (40.8 million people) covered by Medicaid or other public coverage. Another 43.3 million non-elderly Americans lacked health insurance for the entire year.
    (Kaiser Family Foundation, "Update on Individual Health Insurance," (August 2004), available here. See also AHIP Center for Policy and Research, "Individual Health Insurance 2006-2007: A Comprehensive Survey of Premiums, Availability, and Benefits," (December 2007), available here)
  • For information on COBRA, see U.S. Labor Department, Bureau of Labor Statistics, "Frequently Asked Questions: COBRA Continuation Health Coverage," available here.

Fact: Some 50 million workers now participate in 401(k)-type savings plans (more)

They also lost access to Michael's employer-sponsored pension. And with the limitations on their cash flow while Michael was out of a job, they made no contributions to their 401(k).

Lisa was frustrated by her inability to contribute more to the family finances in her current position. She was still employed part time, but her salary fell far short of their monthly needs. Her employer would not increase her weekly hours, so she had to remain a part-time employee or leave the company.

She had always thought that when Ty was on his own she might go back to school in order to advance her career. She liked her job and the people she worked with, but there was no room for advancement. She knew that a college degree was necessary to move up and earn a higher salary. She hoped that when Michael found work, she would be able to return to night school to finish her degree.

  • In 2002, the number of unemployed rose to 8.4 million people. Due to rising unemployment rates and little growth in employment, those who were unemployed tended to stay without a job longer. (U.S. Department of Labor, Monthly Labor Review, U.S. Labor market in 2002: Continued Weakness, available here)

  • In the fourth quarter of 2002 the average duration of unemployment rose by 3.9 weeks to 17.9 weeks. (U.S. Department of Labor, Monthly Labor Review, U.S. Labor market in 2002: Continued Weakness, available here) In 2002, the number of people unemployed for 27 weeks or more increased by 705,000. (U.S. Department of Labor, Monthly Labor Review, U.S. Labor market in 2002: Continued Weakness, available here).

  • While the construction industry saw an overall increase in job creation from 2000-2005, the rise was in lower paying jobs. There was a corresponding decline in the creation of higher paying jobs. Bureau of Labor Statistics, Monthly Labor Review, December 2006, Table 2, available here. While average weekly hours worked saw an overall decline during the 2001 recession, the construction industry was not hit as hard. U.S. Department of Labor, Monthly Labor Review, "U.S. Labor market in 2002: Continued Weakness," available here.

Michael finally gave up looking for a union job, and settled for less, finding lower paying employment with a non-union contractor. It was November, and he had been out of work for four-and-a-half months. The family's savings were now completely wiped out and they were further in debt than before. Michael had been unemployed much longer than they expected.

Fact: Union workers have better health care and pensions, and higher wages (more)

His new job paid a lower hourly wage and, while limited health care benefits were offered, the Lees' out-of-pocket expenses increased, because the new plan did not provide the same level of coverage that his previous job had.

He would not have access to a pension plan either, as his new company had recently closed pension access to new hires.

Under Bush-McCain policies, laid off workers have been forced to accept higher pay cuts in their new jobs (more)

To make up the difference in pay, he worked as many overtime hours as he was offered. He resented having to start from the bottom again at his age. Nevertheless, the Lees were grateful as they watched friends and other families struggling with even longer periods of unemployment.

  • Under Bush-McCain Republican policies, union membership has dropped. The percent of workers belonging to a union declined by three percentage points between 1995 and 2006. (AFL-CIO, Trends in Union Membership, available here)
  • Under Bush-McCain Republicans, the number of long-term unemployed has increased by 61 percent. (U.S. Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Table A-7, available here)
  • Under Bush-McCain Republican policies, the cost of a standard middle-class life has outpaced incomes. "The cost of a standard middle-class life--a home, healthcare, a college education--has soared...outpacing incomes. It is becoming increasingly difficult for Americans to enter and remain in the middle class."
    (Jennifer Wheary, Thomas Shapiro, Tamara Draut, "By a Thread: The New Experience of America's Middle Class," Demos and the Institute for Assets and Social Policy, Brandeis University (November 27, 2007), available here)
  • The Congressional Research Service reports that most studies find the wages of union workers are 10 percent to 30 percent higher than the wages of non-union workers, after controlling for individual, job, and labor market characteristics. Union membership has been declining steadily in the U.S. for several decades.
    (Congressional Research Service, "Union Membership Trends in the United States," (August 31, 2004), available here)
  • According to the Bureau of Labor Statistics, in March 2007, 78 percent of union workers in the private sector had jobs with employer-provided health insurance, compared with only 49 percent of nonunion workers. Union workers also are more likely to have retirement and short-term disability benefits - 81 percent of union workers participate in pension plans versus 47 percent of nonunion workers. Sixty-seven percent of union workers participate in defined-benefit pension plans, compared with 15 percent of nonunion workers.
    (AFL-CIO, "The Union Difference," available here)
  • A recent study found that in 1987, a family health insurance policy claimed 8 percent of median family income; today it takes 20 percent, and it will require even more tomorrow. If health insurance does not become more affordable, a majority of working class Americans will be uninsured by 2020.
    (New America Foundation, July 2007)

To add to their financial troubles, Ty's tuition increased, even though the amount of his grant failed to keep pace. Ty took on a part-time job so that he could begin paying for school expenses not covered by student loans. There was just no other way to manage the steeper costs, especially with his father out of work.

  • Education showed the largest percentage increase of all categories in the Consumer Expenditure Survey for 2002. (U.S. Department of Labor, Bureau of Labor Statistics, Consumer Expenditures in 2002, available here)

Ty was also approved for his first credit card and used it to pay for his books, incidentals, and entertainment expenses. By the end of the year, however, he had a balance of over $1,700.

Democrats have made college affordability a top priority (more)

The Lees had hoped to provide for their son's education so that he could devote his undivided attention to his studies. Ty had always been a disciplined student and they knew that it was a good investment in his future. He began working 10 hours during the week and all day on Saturday. On Sundays, he hit the books. Michael and Lisa regretted that this job took Ty away from his school work, and they missed his weekend visits home.

  • "Seventy-four percent of undergraduates reported using credit cards for school supplies (paper, notebooks, etc.), the number one reported use of cards; the second most common usage of credit cards reported by undergraduates was a tie between textbooks and food, with 71 percent reporting these as charged expenses. Slightly less than 24 percent reported using credit cards for tuition." (Nellie Mae, "Undergraduate Students and Credit Cards in 2004," (May 2005) available here)
  • "[In 2001] 83 percent of undergraduate students attending four-year institutions (age 18–24) [had] at least one credit card. This is up from 67 percent of undergraduates holding a card in 1998, and 78 percent in 2000. Furthermore, 47 percent of students with credit cards have four or more cards, up from 27 percent in 1998 and 32 percent in 2000. More undergraduate students have cards, and more of them appear to be using their cards regularly. The median credit card debt, which remained fairly steady between 1998 and 2000, increased by a startling 43 percent in 2001 ($1,236 to $1,770). This indicates that the 50 percent of students in the sample who carry the lowest balances have increased the debt level substantially." Nellie Mae, "Educating Undergraduates on Using Credits Cards", available here.
  • According to Nellie Mae, 34 percent of student surveyed work 10-20 hours per week during the school year and 30.5 percent work more than 20 hours during the school year. "We should be concerned about these students who appear not to have a sound financial footing--highest average balances and the highest levels of anxiety about making payments. They are likely distracted from their studies and, in fact, could be creating for themselves a cycle of anxiety related to balancing school and work: facing expenses, charging expenses, then working to pay the credit card bills". Nellie Mae, "Undergraduate Students and Credit Cards in 2004" (May 2005) available here.

Making Ends Meet by Borrowing Against the Future

By 2003, the Lees' debts had reached a level where they no longer thought about budgeting on a monthly basis. They paid what they could, when they could, and the rest just had to wait.

The Lees decided to tap into their one great asset - their home. The housing market was booming, so their home's value allowed them to refinance their mortgage and get the cash they needed to get ahead of their bills.

They were worried that Michael's shaky employment history and their high debt load would make this option impossible, but their neighbor had just refinanced his mortgage from a 30-year "fixed" mortgage to an "interest-only" loan with lower monthly payments. When they called the broker and explained their circumstance, they were delighted to learn that they qualified for a subprime mortgage, with a low fixed-rate and manageable monthly payments for the first two years.

Fact: Subprime mortgages in foreclosure have increased (more)

They used a portion of their lump sum payment to pay down some of their debts and start building a new savings account. The rest went towards helping out with Ty's education expenses, including paying down his credit card balance. They expected that the loan would allow them to catch up on their bills and take control of their finances again. They hoped to re-finance the loan before the rate increased in two years.

  • "With house price appreciation at its strongest since 1979, the amount of equity that homeowners cashed out in 2004 nearly rivaled the record level set in 2003 despite a sharp retreat in refinancing. For the fourth consecutive year, the wealth effects from rising home prices generated about a third of the growth in consumer spending." (Joint Center for Housing Studies at Harvard, "The State of the Nation's Housing 2005," p. 5, (2005), available here. See also Center for Responsible Lending, "Predatory Mortgage Lending Robs Homeowners and Devastates Communities," (2005),available here)
  • The 30-year conventional fixed mortgage rate dropped to a historic low in June of 2003, while re-financing rose sharply in the second quarter of 2003. (Bureau of Labor Statistics, Monthly Labor Review, A Visual Essay: Post-Recessionary Employment Growth Related to the Housing Market, (October 2006), available here)

Under Bush/McCain Republican policies Americans find themselves drowning in debt (more)

In 2004, the Lees continued to struggle. The cash from their home equity had given them a little breathing room and helped them keep their son in college, but it ran out quickly and was not nearly enough to pay down all their debts. Their credit card and other bills continued to pile up (along with the fees, interest, and other charges for carrying a balance). Twice already that year, they were charged overdraft fees on their bank account.

Fact: Health insurance makes up an increasing amount of a family budget (more)

Both Lisa and Michael had received modest raises that year, but somehow there never seemed to be enough money. Their health insurance premiums went up again. Half of every dollar they spent on their family's health care needs now went towards the insurance premiums. Food cost more, utilities cost more, and gasoline prices seemed like they went up every day. Ty's college tuition also went up, while the grant and loan availability did not.

  • Credit cards offer a glimpse at the costs imposed by a rapidly growing credit industry. In 2006, for example, Americans turned over $89 billion in fees, interest payments, added costs on purchases, and other charges associated with their credit cards. That is $89 billion out of the pockets of ordinary middle-class families, people with jobs, kids in school, and groceries to buy. That is also $89 billion that didn't go to new cars, new shoes, or any other goods or services. To be sure, the money kept plenty of bank employees working full time, and it helped make debt collection one of the fastest-growing occupations in the economy."
    (Elizabeth Warren, "Making Credit Safer," Harvard Magazine (May-June 2008))
  • "Last year, banks, thrifts and credit unions collected a record $37.8 billion in service charges on accounts, more than double what they got in 1994, according to the Federal Deposit Insurance Corp. and the National Credit Union Administration. These fees provide a more stable source of income to banks than products tied to fluctuating interest rates. Bounced-check and ATM fees are setting records. Consumers are paying higher service charges for checking accounts. Banks are requiring higher balances on interest-bearing accounts, says. And banks that issue credit cards are increasing fees for late payments and over-the-limit charges to as much as $39 per violation. Make this mistake once or twice, and your interest rate could hit 30 percent."
    (Kathy Chu, "Rising bank fees hit consumers," USA Today (October 4, 2005), available here.
  • For information on Pay Day check cashing companies, see e.g. Center for Responsible Lending, "Payday Lending," available here.
  • The Consumer Expenditure Survey documented a 6.3 percent increase in overall expenditures in 2004, marking the largest change in several years. (U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Expenditures in 2004" (April 2006) available here.
  • Spending on healthcare in 2004 rose 6.5 percent following a 2.8 percent increase in 2003, a 7.7 percent increase in 2002, and a 5.6 percent increase in 2001.
    (U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Expenditures in 2004" (April 2006) available here.
  • Health insurance premiums comprised 51.7 percent of total healthcare costs in 2004, rising 6.4 percent over the previous year. Health insurance expenditures have been rising steadily at statistically significant increments of 7.2 percent in 2003, 10.1 percent in 2002, and 7.9 percent in 2001. (U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Expenditures in 2004" (April 2006), available here.

Ty continued charging his school and living expenses to his credit cards, and was barely making the minimum payment each month. He proposed taking a year off to work and save some money. However, their son's education was a priority for Michael and Lisa. They feared that a year off would turn into two or more, and they knew it would be difficult for him to return to school once he left.

The Democratic-led Congress passed a stimulus package to put more money in the pockets of hard-working American families (more)

The only asset they had left was their 401(k). They were reluctant to tamper with their retirement savings, especially because Michael's new job did not offer a pension, but there were no other options left. They had spent all of their personal savings and had already borrowed against the equity in their home. They withdrew the funds from their 401(k), in spite of the early withdrawal penalty of 10 percent, to pay for their son's last year in college.

  • For information on college cost increases, see The College Board, Trends in College Pricing 2007, Figure 3, available here. See also Democratic Policy Committee, "The College Cost Crunch: A State-by-State Analysis of Rising Tuition and Student Debt," (June 2006), available here.
  • While certain plans and certain employers may allow loans that use 401(k) plan assets as collateral, the IRS does not allow early withdrawals from a 401(k) plan to pay for college expenses.
    (Internal Revenue Service, "Topic 558 - Tax on Early Distributions from Retirement Plans, available here; "Paying for College: Other IRAs & 401(k) Plans," available here.

Fact: A quarter of middle class homes have a family member without health insurance (more)

In 2005, Michael and Lisa proudly watched Ty graduate from college with a degree in business administration. Ty had to move back home, but as soon as he found a job, he planned on sharing an apartment with friends. He had his own credit card debts and student loans to worry about now.

The Lees hoped this temporary situation would not last long. Like many Americans, they expected Ty to make good use of his education and find a profession that would enable him to surpass the accomplishments of his parents. In their version of the "American Dream," Ty would enjoy greater success in a career that paid him a higher income than his parents had ever earned.

Ty, however, was not so optimistic. He saw what his friends and other recent graduates were going through. Jobs were scarce for young adults in their twenties with education but no work experience. He expected this new stage in his life to be a struggle, and he had no idea how he would be able to manage his debts. He could not afford the luxury of waiting for his dream job to come along. He would have to take what he could get when it was offered.

  • Of the 1,400,000 bachelor's degrees conferred in 2003–04, the largest numbers of degrees were conferred in the field of business (307,000). (U.S. Department of Education, Institute of Education Sciences, Fast Facts: Most Popular Majors, available here)
  • Under Bush-McCain Republican policies, young people feel that their generation is falling behind. A poll surveying 17-29 year-olds found that 48 percent of young people believe that their generation will be worse off than their parents' generation.
    (CBS News/MTV/New York Times Poll, released June 26, 2007)
  • A recent study by the Brookings Institution found that two-thirds of American workers believe it is harder to achieve the American Dream than it was for their parents, and it will be harder for the next generation. Only 15 percent of those surveyed believe the next generation will be better off.
    (Brookings Institution, "Economic Anxiety and the American Dream," (July 13, 2007)
  • A 2005 poll asked When your children are the age you are now, do you think their standard of living will be much better, somewhat better, about the same, somewhat worse, or much worse than yours is now?" 56 percent of the respondents believed that their children would do "much better" or "somewhat better," compared to 18 percent who believed that their children would do the "same" and 22 percent who believed that their children would do "somewhat worse" or "much worse." (New York Times/CBS News Poll, (March 13, 2005), available here)
  • The New York Times observed that "a college degree does not ensure a bigger share of the economic pie for many graduates."
    (Editorial, "Economic Life after College," New York Times (June 11, 2007))
  • The Los Angeles Times has reported that: "[w]age stagnation, long the bane of blue-collar workers, is now hitting people with bachelor's degrees for the first time in 30 years.  Earnings for workers with four-year degrees fell 5.2 percent from 2000 to 2004 when adjusted for inflation, according to White House economists...Not since the 1970s have workers with bachelor's degrees seen a prolonged slump in earnings during a time of economic growth...trends for people with master's and other advanced degrees...have found that their inflation-adjusted wages were essentially flat between 2000 and 2004."
    (Molly Hennessy-Fiske, "That Raise Might Take 4 Years to Earn as Well: Those with Bachelor's Degrees Are Finding Their Incomes Stagnate Despite A Growing Economy," Los Angeles Times, p. A1 (July 24, 2006))

Fact: Over a million mortgages are scheduled to reset this year (more)

After struggling through another year, in June 2006 the initial terms of the Lees' subprime loan expired, and a high adjustable rate kicked in, driving their monthly payment up, with the high probability that the rate would increase further. The Lees wanted to refinance the loan back to a traditional fixed-rate mortgage, but they were unable to find any favorable terms due to their bad credit and heavy debt load.

Democrats have taken a major step toward addressing the nation's housing crisis (more)

They were also worried that the value of their home had decreased - two houses on their block were already under foreclosure, and they knew that these changes in the neighborhood would impact the value of their home. The probability that they would not be able to keep up the payments was increasing: they had already been late on payments and the risk of losing their home to foreclosure now loomed.

  • Housing expenditures rose 9 percent in 2005, the largest increase in several years.
    (U.S. Department of Labor, Bureau of Labor Statistics, "Consumer Expenditures in 2005," (February 2007), available here)
  • "A prominent housing study estimated that each foreclosure results in a 0.9 percent decline in nearby property values. For a city block with ten foreclosures, this implies that neighboring homes would lose 10 percent in value. The impact is even higher in lower-income communities."
    (Joint Economic Committee, Sheltering Neighborhoods from the Subprime Foreclosure Storm" (June 22, 2007), citing Dan Immergluck and Geoff Smith, "The External Costs of Foreclosure: the Impact of Single-Family Mortgage Foreclosures on Property Values," Housing Policy Debate, Vol. 7, Issue 1, 2006)
  • Subprime mortgages have higher default risk. "The Mortgage Bankers Association reports that the share of subprime loans that are 90-days delinquent or in foreclosure is running near 3.8 percent, compared with a prime loan share of just 0.5 percent."
    (Joint Center for Housing Studies at Harvard, The State of the Nation's Housing 2005 at 18, available here)
  • According to the Mortgage Bankers Association, delinquent payments on subprime ARM loans increased 31 basis points over the course of 2005.
    (Mortgage Bankers Association, National Delinquency Survey, Fourth Quarter 2006 (March 13, 2007) at 11)

In Search of a New Direction

Beleaguered but determined, the Lees decided to look back on their expenses in 2006 to compare it to their 2000 budget to see whether they could cut their costs even further (click to enlarge).

Lees' Budget -- click to enlarge

  • Source: U.S. Department of Labor, U.S. Bureau of Labor Statistics, Consumer Expenditures in 2000, Report 958 (April 2002) and Consumer Expenditures in 2006 (October 2007), available here.

The Lees were spending less money in nearly every category in their budget, except gasoline and health care. This was not because prices had gone down. Instead, in all categories in their budget except clothing, the cost of goods had jumped significantly.

Democrats are working to lower energy costs for America's middle-class families (more)

Food had increased more than 16 percent, education by more than 13 percent, health care by more than 28 percent, and the price of gasoline had risen by more than 70 percent! The Lees had to cut down on almost every spending category:  food, dining out, entertainment, magazine subscriptions, and even cleaning supplies and clothes. Contributions to their retirement fund had also decreased, as they had more immediate needs that they spent their money on.

  • While average health care spending (which includes those without health insurance) during this period increased by $72, the cost of family health insurance for those who do have health insurance skyrocketed 87 percent since 2000. The average premium for a family of four escalated to $11,480 in 2006, with the average family contribution of almost $3,000. From 2000 to 2006, the amount families pay out of pocket for their share of premiums has increased by approximately $1,300 dollars. (Kaiser Commission on Medicaid and the Uninsured, 2007; Kaiser Family Foundation and the Health Research and Education Trust, 2006 Employer Health Benefits Survey.)
  • Basic food prices have risen by the largest amount in 17 years. "Consumer price for staples, such as milk, bread and eggs, rose by the largest amount in 17 years"
    (Reuters, January 16, 2008)

    An analysis of government data by The Washington Post found that prices have risen 9.2 percent since 2006 for groceries, gasoline, health care and other basics that a middle-income American family has little choice but to consume. That would cost such a family, which made $45,000 on average in 2006, an extra $952 per year, assuming it did not buy less of such items because of higher prices.
    (Washington Post, March 21, 2008)
  • An analysis of the new Consumer Expenditures report concluded that "consumers respond to permanent changes in income from gasoline prices by substituting towards lower-cost food at the grocery store and lower priced items within grocery category."

    Specifically:  "[C]onsumers re-allocate their expenditures across and within food-consumption categories in order to offset necessary increases in gasoline expenditures when gasoline prices rise...[G]asoline expenditures rise one-for-one with gasoline prices, consumers substitute away from food-away-from-home and towards groceries in order to partially offset their increased expenditures on gasoline, and that within grocery category, consumers substitute away from regular shelf-price products and towards promotional items in order to save money on overall grocery expenditures."  (Dora Gicheva, Justine Hastings, Sofia Villas-Boas, "Revisiting the Income Effect: Gasoline Prices and Grocery Purchases," National Bureau of Economic Research, Working Paper 13614 (November 2007) at 2, available here)

    "As many drivers struggle to cope with soaring fuel prices, working-class people like Ms. Lopez who commute long distances to their jobs are suffering the most..... Ms. Lopez looks for weekly specials at the supermarket. Salmon, her favorite fish is $7 a pound these days. So she buys the tilapia for $2.99 instead."  ("Full Tanks Put Squeeze on Working Class," New York Times (May 13, 2006))

Fact: Fewer than one in three middle-class families in America is financially secure (more)

In all this, one thing confused them: Although it was slight, the Lees knew that their combined incomes had increased. But it was a stretch to make ends meet, even after cutting down on as many expenses as they could. Then they realized that they needed to take inflation into consideration. Their 2000 income of $41,990 was $49,163 in 2006 dollars. Their income had actually dropped $962!

Michael and Lisa never thought they would be where they are. It was impossible to stick to the budget they had laid out in 2001. Instead of planning for their future, they were constantly trying to keep up with past debts and keep their heads above water in or the present. They had had the intention of doing all the right things, but the conditions of the economy in middle-class America over the past several years made it impossible to keep up.

Democrats Put Middle-Class Families First

Over the past several years when Republicans controlled the White House and both houses of Congress, they dramatically increased the burdens on our middle-class families. President Bush's record of fiscal incompetence and mismanagement, and Republicans' close ties with special interests, have helped lead to lower wages and skyrocketing costs for basic necessities like gas, health care, and college tuition.

Middle-class families, and our nation, deserve better.

Democrats are committed to protecting middle-class taxpayers, expanding educational opportunities, improving health and healthcare, providing more affordable and sustainable sources of energy, ensuring better pay and protections for working Americans, and restoring fiscal responsibility to the governance of our country.

Under Democratic leadership, the Senate has already passed the Economic Stimulus Act of 2008, legislation that will boost the economy by offering rebate checks to eligible single, married, and elderly Americans, provide tax relief for American businesses, and help families avoid foreclosure by expanding financing opportunities. In addition, the College Cost Reduction and Access Act and the Higher Education Opportunity Act will make college more affordable and accessible and the bipartisan America COMPETES Act, which makes important investments in our students and teachers, have been signed into law. For the second year in a row, Democrats have approved a balanced budget to restore fiscal responsibility and help promote the type of economic growth that provided so many benefits to middle-class families during the 1990s.

A family similarly situated to the Lees would realize a total savings of $1,840 per year from legislation that Congressional Democrats have already passed for America's hard-working families:

$240 = Subsidized Stafford Loan (per year, during 10 years of repayment)

$600 = 2008 Economic Stimulus Payment

$1,000 = for automobiles for two vehicles with an average fuel economy of 25 MPG


That's more than an extra paycheck in the Lees' checking account. This is only a down payment on the Democrats' promise to change the direction in this country, but this represents an example of the type of change Democratic leadership will continue to deliver for middle-class American families.