The State of the Economy

THE STATE OF THE ECONOMY -- (Senate - September 29, 2006)

Mr. REED. Mr. President, most American families have lost ground in the Bush economy and are working harder than ever to keep up with rising living expenses.

The administration is trying to paint a rosy picture of the economy, but the American people know better. They know that the President's policies are not working for them.

Despite 4 years of economic expansion, job growth has been modest, wages are failing to keep pace with inflation, real incomes are falling, household debt is rising, employer-provided health insurance coverage is declining, and private pensions are in jeopardy.

Slow job growth and stagnant wages during the Bush administration have depressed families' incomes. Adjusted for inflation, median household income in 2005 was 2.7 percent lower than it was in 2000 a loss of nearly $1,300 during President Bush's time in office.

Strong productivity growth has translated into higher profits for businesses, but not more take-home pay for average workers. Wages, the most important source of income for most families, have not kept pace with skyrocketing costs for many living expenses and many households are sending more family members to work in order to maintain their current living standards. This trend is likely to continue, since workers may find it even harder to get pay raises now that economic growth and job creation have begun to slow.

Indeed, as a recent Washington Post editorial observed: ``[T]he recent phenomenon of wages falling even during good times is disturbing and exceptional.'' Mr. President, I would like to enter the entire Washington Post editorial from September 4, 2006, into the RECORD, and note that the editorial goes on to say: ``So whereas past presidents could declare that a rising tide lifted all boats, Mr. Bush cannot honestly do so.''

Higher prices for gasoline, college education, and medical care are squeezing the take-home pay of workers. College tuition is up 44 percent; health insurance premiums are up 87 percent; and the price of gasoline was only $1.45 per gallon when the President took office.

A recent survey by Lake Research found that 3 out of 10 workers have taken on debt for necessities like food, utility costs, and gasoline. That is shocking on its face, but not surprising when you learn that household debt hit a record high this year. Average household debt has increased by more than $26,000 since 2000, from about $75,400 to $101,700 per household. For the first time since the Great Depression, the Nation registered a negative personal savings rate last year. Far too many Americans are forced to spend more than they earn just to get by.

Sadly, the administration has made no real progress against the rising tide of poverty in America. Nearly 5 1/2 and a half million more Americans have fallen into poverty since President Bush took office--37 million Americans are now living in poverty, including 13 million children.

We are the richest Nation in the world and yet more than 1 in 6 American children lives in poverty. The number of poor children has increased by more than 11 percent during the first 5 years of the Bush administration, but the number of children receiving temporary assistance for needy families, TANF, has declined by 15.5 percent over the same time period, according to the Department of Health and Human Services.

So while the President stumps for more tax cuts for people who don't need them, the basic needs of millions of children go unmet. Even after Hurricanes Katrina and Rita put the spotlight on this shameful problem, Americans are slipping into poverty much more easily than before and finding it so much harder to escape once they are there.

What must the American people think about this Congress's priorities when the Republican majority is more interested in finding a way to repeal the estate tax than in finding a way to reduce poverty? As Senator Grassley, chairman of the Finance Committee, put it last year after the hurricanes, ``It's a little unseemly to be talking about eliminating the estate tax at a time when people are suffering.''

The majority in Congress has thwarted efforts to address the needs of people living in poverty but twice tried to roll back the estate tax this year. Ninety-nine percent of estates pay no estate tax at all and those who do are multimillion-dollar estates. Far from being a ``death tax,'' the estate tax falls on heirs who seldom had any real role in earning the wealth built up by the estate holder.

The minimum wage--which hasn't been raised in 9 years is an important policy tool to lift low-income families out of poverty, but the majority in Congress won't let us have an up-or-down vote without poison pills like the estate tax.

No one who works full time should have to live in poverty, but the current minimum wage isn't enough to bring even a single parent with one child over the poverty line--even if the parent works 40 hours a week, 52 weeks a year. The average minimum wage worker brings home more than half of their family's weekly earnings, and 80 percent of those who would benefit from an increase in the minimum wage are adult workers,

The policy priorities of the administration and the majority in Congress are truly misplaced.

The ranks of those without health insurance have also grown by nearly 7 million on President Bush's watch. The number of uninsured increased to a record high 46.6 million in 2005--1.3 million more than in 2004. More Americans are now without health insurance than at any point since the Census Bureau began collecting comparable data nearly 20 years ago.

Soaring health care costs have contributed to the decline of employer-sponsored health insurance, which is the largest component of the U.S. health insurance system. The percentage of Americans with employment-based health insurance fell to 59.5 percent in 2005, which is the lowest it has been since 1993.

If you are lucky enough to have health insurance, you are paying a lot more for it. Health insurance premiums for the average family have soared by 87 percent--a stunning $5,325 jump, from $6,155 in 2000 to $11,480 in 2006.

At the same time that earnings are stagnating and costs are rising, the average worker's retirement prospects are more uncertain than ever. The number of workers employed by firms that sponsored some type of retirement plan fell by 3.7 million since President Bush took office--from 56 million in 2000 to 53 million in 2005. This reversed a trend of positive growth in employer-sponsored retirement plans in the previous 5 years.

Twenty years ago, most workers with a pension plan could expect to receive a defined benefit based on years of service and salary. Today, defined contribution plans--which shift most of the investment risk and responsibility onto workers--have become the dominant form of pension coverage. As a result of this increased risk and responsibility, average workers may end up with inadequate retirement savings.

In fact, the weakness of traditional pensions underscores the importance of the current Social Security Program. For over 60 years, Social Security has provided a dependable and predictable stream of income to retired or disabled workers, their dependents, and their survivors. Forty-eight million men, women, and children rely on Social Security benefits each month to help them live with dignity.

Social Security benefits are protected from inflation and you can't outlive them. Yet the President supports privatizing Social Security, putting the guaranteed benefits of retirees, survivors, and the disabled at risk.

We need to strengthen Social Security and improve our pensions system to ensure that Americans who work their entire lives have the financial security they deserve and worked so hard for when they retire. And although we recently enacted a pension bill, this should not be viewed as mission accomplished.

The President's deficits will only exacerbate the economic problems of middle- and low-income families.

A $5.6 trillion 10-year projected surplus from 2002 to 2011 has turned into a deficit of $2.7 trillion, based on actual deficits so far and on CBO baseline projections for the remaining years. Realistically, the 10-year deficit is probably much higher than that because this administration has a history of leaving out big-ticket items such as war costs or fixing the alternative minimum tax in its projection of future budget deficits.

Irresponsible budget policies pursued over the past 5 years by the Bush administration and the Republican Congress have mortgaged our future to foreign investors and foreign governments and damaged our international competitiveness. A little over a decade ago, the Clinton administration stepped in to stabilize the Mexican economy in the midst of a currency crisis, and today Mexico is the 10th largest holder of U.S. Treasury debt.

In this year's global competitiveness report from the World Economic Forum, the United States fell from first place last year to sixth place as high budget deficits and record trade imbalances have begun to seriously erode this country's international competitiveness.

Instead of sound budget policies aimed at preparing for the imminent retirement of the baby-boom generation, the Bush administration and the majority in Congress have refused to adopt the kinds of budget enforcement rules that helped achieve fiscal discipline in the 1990s; have pursued an open-ended commitment to rebuilding Iraq that relies on supplemental appropriations rather than the normal budget process; and have remained committed to extending irresponsible tax cuts that will add further to the budget deficit. All of this comes at the cost of destroying greater economic opportunities for most American families.

That, of course, is not what we are hearing from the administration and its supporters, who keep telling us that the economy is doing well, that their tax cuts are an important reason why, and that everyone is benefiting. It should not be surprising that this is not a message that resonates with the American people because, in fact, the current economic recovery has been weaker than the typical business-cycle recovery since the end of World War II, and large numbers of Americans are still waiting to benefit from any economic growth.

This administration touts its tax cuts, but these cuts haven't made a dent in the pocket books of most American families.

The nonpartisan Tax Policy Center estimates that this year's tax cut will only save middle-income families about $55--about what it now costs to fill the gas tank of their minivan. But taxpayers making over $1 million will receive a cut of nearly $38,000--enough to buy a new Mercedes.

Middle and lower income families are paying the price for the President's tax cuts for the wealthiest, as investments in programs that promote greater economic prosperity for ordinary Americans have become candidates for budget cutting.

Regrettably, it is not surprising how under the Republican leadership, low-income families have been abandoned but what is surprising is how the administration and Republican majority in Congress have also squeezed the middle class.

The President has proposed cuts to elementary and secondary education, student aid and loan assistance for higher education, job training for displaced workers, childcare assistance so that parents can go to work, and community development grants aimed at expanding small businesses. The President is also shortchanging investments in research and technologies that will create the high-wage jobs of the future.

Unfortunately, the rising tide is no longer lifting all boats. The benefits of this economic recovery are simply not going to ordinary Americans. Most Americans are concerned that this is as good as economic conditions will get under the Bush economic policies. Our focus should be on strengthening the safety net for American families--whether it is raising the minimum wage or preserving Social Security, pensions, and health insurance coverage.

That is why we need a new direction for America--one that focuses on creating greater economic opportunities for all families.

I ask unanimous consent to have printed in the RECORD the Washington Post editorial dated September 4, 2006.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

Mr. Bush and Labor Day--Workers Aren't Benefiting From Growth

Emerging from a meeting with his economic team at Camp David on Aug. 18, President Bush declared that ``solid economic growth is creating real benefits for American workers and families.'' This assertion was false. Mr. Bush should use this Labor Day to rethink his rhetoric and adjust his policies.

The latest evidence on what the economy is doing for workers comes from last week's Census Bureau report. This showed that the growth cycle that began at the end of 2001 has in fact created remarkably few benefits for most Americans. Between 2001 and 2005 the income of the typical, or median, household actually fell by 0.5 percent after accounting for inflation, even as workers' productivity grew by 14 percent.

The picture is hardly any better if you consider 2005 alone. Workers' pay usually takes a while to pick up after a recession: In the first stage of a recovery, unemployment falls; in the second stage, a tight labor market pushes up wages. But this second stage is taking an awfully long time to arrive. In 2005, the fourth year of the expansion, the median income did rise slightly, but that reflected a gain for retirees. The typical full-time worker continued to fall backward.

Since 1980 the wages of the typical worker have tended to decline during bad times and recoup the losses during good ones, with the overall result that they've been stagnant. That stagnation, which contrasted with rapid gains for workers at the top, was bad enough. But the recent phenomenon of wages falling even during good times is disturbing and exceptional. In the first four years of the last expansion, from 1991 to 1995, median income rose 2.9 percent; in the two upswings before that, the first four years delivered gains of more than 8 percent. So whereas past presidents could declare that a rising tide lifted all boats, Mr. Bush cannot honestly do so.

The current growth cycle has also failed to dent poverty. In fact, between 2001 and 2005, the poverty rate rose from 11.7 percent to 12.6 percent. Again, this is exceptional: In the previous five economic cycles, the poverty rate fell during the first four years of the recovery. Moreover, 5.4 percent of the population now occupies the ranks of the extremely poor, with incomes less than half the poverty line. That's the highest rate of deep poverty since 1997.

In a speech at Columbia University on Aug. 1, Treasury Secretary Henry M. Paulson, Jr. rightly acknowledged that ``amid this country's strong economic expansion, many Americans simply aren't feeling the benefits.'' Mr. Paulson needs to explain this point to Mr. Bush, who appears to see things differently. But beyond a change of language, the president needs to understand that his tax and spending policies must do more than target growth. If policies do not take inequality into account, the majority of Americans won't benefit from economic expansion--and popular support for free trade and other pro-growth ideas will continue to deteriorate.

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