NEW ANALYSIS BY JOINT ECONOMIC AND HOUSE BUDGET COMMITTEES: 83 PERCENT OF CRUSHING FEDERAL DEBT IS A PRODUCT OF PAST THREE GOP PRESIDENTS

Schumer and Maloney Urge White House to Stop Loading Future Generations with Backbreaking Debt

Washington, D.C.Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC) and Rep. Carolyn B. Maloney, Vice Chair of the JEC released a new JEC and House Budget Committee analysis of total national and public debt incurred under the past five administrations.  The analysis highlights a proven track record of fiscal responsibility under Democratic administrations, and conversely a sharp increase in debt under Republican administrations.

The great majority of our national debt has been incurred by the past three Republican administrations. Over the past thirty years, those administrations have borrowed an average of $233 billion each year from the public. In contrast, under Democratic administrations the Federal government has borrowed an average of $26 billion each year, just one-ninth as much.

Instead of building up surpluses in preparation for the upcoming retirement of the Baby Boom generation, the current Bush administration has continued the tradition of Reagan and Bush Sr. by abandoning fiscal discipline and permitting the debt to skyrocket. 

Sen. Schumer said: “The last three Republican administrations have thrown future generations under the runaway train of debt.  Our children and grandchildren will be responsible for repaying mountains of debt and shoring up the financial solvency of the federal government.  The fiscally irresponsible Republicans owe the American people a return to the common sense fiscal policies of the Clinton administration, when surpluses and prosperity, not deficits and recession, were the norm.” 

Rep. Maloney said: “Republican administrations over the last thirty years have made us a nation of debtors, vulnerable to the economic and political decisions made half a world away.  Democrats in Congress want to restore the fiscal discipline of the 1990s that reduced our debt and helped create broadly shared prosperity. We have a realistic budget plan that adheres to pay-go principles for bringing down the deficit, but that doesn’t shortchange our national defense or our citizens.”  

 

Highlights from the joint JEC and Budget Committee analysis reveals:

TOTAL NATIONAL DEBT:

The total national debt includes amounts owed by one U.S. government account to another, mostly for Social Security payments promised to future retirees.

Approximately $3.2 trillion of our $8.9 trillion national debt has been accumulated during the past six years of the Bush administration.

  • Nearly three-quarters of the total national debt has been accumulated under the past three Republican administrations – Reagan, George Bush the elder, and the current George Bush.

TOTAL PUBLIC DEBT:

Debt held by the public excludes amounts owed by one U.S. government account to another. The net debt held by the public determines the total interest payments the government must pay, and most directly reflects the degree to which the Federal government must borrow to finance current deficits. For this reason, many economists focus on total debt owed to the public as the best single metric of the government’s indebtedness. 

  • The U.S. government has a total debt of over $5 trillion owed to outside parties.  Nearly half of that is owed to foreign governments, primarily to Japan, China, and the United Kingdom. 
  • In 2007, American taxpayers will pay $235 billion in net interest payments to service this debt, or 9.1 cents on every dollar of government revenues
  • $1.8 trillion, or 35 percent, of the total debt owed to the public has been accumulated under the past six years of the Bush administration.
  • $4.2 trillion, or 83%, of the total debt owed to the public was accumulated under the past three Republican administrations.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

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SCHUMER: WEAK JOB GROWTH AND PLUNGING HOME SALES ARE STARK EVIDENCE THAT SUBPRIME MARKET WOES ARE SPREADING

ADP Announces Only 38,000 Private Sector Jobs Added in August, the Slowest Rate of Growth Since June 2003

NAR Report Shows Pending Sales of Existing Homes Plunged in July, Falling to the Lowest Level Since September 2001

Washington, D.C. – Today, U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee and the Housing Subcommittee on the Senate Banking Committee, reacted to bleak economic news on employment and housing sales.  The ADP /Macroeconomic Advisors report on private sector job growth announced this morning showed that private payrolls grew by only 38,000 jobs in August, the slowest rate of growth since June 2003.  The National Association of Realtor's Pending Home Sales Index showed pending sales of previously owned U.S. homes plunged in July, falling to a reading of 89.9, the lowest since September 2001 when the index stood at 89.8.   

Private Sector Employment Figures:

“Today's ADP report showing a huge drop in jobs created in August is very troubling.” Schumer said.  “If Friday's employment figures from the Bureau of Labor Statistics (BLS) mirror the ADP, it has to be a wake up call to the Administration and to the Fed, particularly on the spillover of the subprime crisis intro the broader economy. Last week, President Bush made a move toward addressing this crisis, but the administration must do more to restore confidence in the mortgage market and to help borrowers who were duped into bad loans.”

While data on payroll employment for August will be released by the Labor Department on Friday, the advance indicator of that measure released by ADP today suggests the possibility that August jobs growth was substantially slower than most analysts are expecting.  The ADP is the largest sample of actual payrolls available prior to the Labor Department’s release, but it is a smaller sample than the Department’s.

The ADP figures (a measure based on the private-sector payroll numbers processed by ADP for August) show that private payrolls grew by only 38,000 jobs last month.  Adding to that projected growth of 20,000 government jobs, the ADP advance estimate suggests that growth in total nonfarm payrolls gained only 58,000 jobs in August.  That’s a slower gain than the 92,000 job increase in July, and well below the 110,000 jobs financial markets are expecting (which itself is slower than recent trends).    The report also revised July's private sector job growth downward from the originally reported 48,000 to 41,000 jobs added.  

Sinking Sales of Existing Homes:

“The disturbing drop in pending home sales in July is stark evidence that the subprime crisis is hitting the housing market hard,” Schumer said.

 The NAR Pending Home Sales Index, based on contracts signed in July, fell 12.2 percent to a reading of 89.9 in July from the June index of 102.4, and was 16.1 percent lower than in July 2006 when it stood at 107.1.

The index is a leading indicator for the housing sector, based on pending sales of existing homes.  A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

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SCHUMER STATEMENT ON THE CONFIRMATION OF FMR. REP. JIM NUSSLE TO HEAD THE OFFICE OF MANAGEMENT AND BUDGET

U.S. Senator Charles E. Schumer, the Chairman of the Joint Economic Committee, released the following statement in opposition to the confirmation of former Rep. Jim Nussle to head the Office of Management and Budget:

"Former Rep. Nussle may be President Bush's new choice for managing the federal budget, but if this administration's fiscal policies don't change significantly, his confirmation will not move us one step closer towards fiscal responsibility.  If we stay on the President's current economic course, we are going to continue to incur massive federal deficits and our lackluster economic growth.  I sincerely hope that Rep. Nussle is an advocate for sensible pay-as-you-go budget priorities, not just for the ideological agenda put forth by the administration." 

Rep. Nussle's nomination was just approved by the Senate by a vote of 69-24.  Sen. Schumer voted against the nomination.

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IN THE WAKE OF NEW HOUSING STATISTICS, SCHUMER REPEATS CALL FOR INCREASED FORECLOSURE PREVENTION AND RENEWED FOCUS ON HOUSING MARKET

 

Sales of Existing Homes Down 0.2% from June and 9.0% from July 2006

 

Schumer: More Needs to Be Done to Address Subprime Mortgage Mess and to Restore Confidence in Housing Market

 

Washington, D.C. – Today, U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC) reacted to the National Association of Realtors announcement that existing home sales declined by 0.2 percent in July, leaving the level of sales 9.0 percent below the level 12 months ago.  

 

“The decline of existing home sales is another in a series of daily reminders that more must be done to prevent the subprime mortgage market from further damaging the housing market and broader economy,” Schumer said.  “While preserving liquidity in the financial markets is important, the fundamental problems spurring on this crisis must be addressed.  We need to deal with widespread uncertainty in the mortgage market and help to refinance borrowers who were duped into bad loans so we can restore confidence in the housing market and keep credit worthy families in their homes.”

 

Sales of existing single-family homes were down 0.4 percent last month, and 9.3 percent over the past year.  The median sales price of existing single-family homes was $228,600 in July, down 1.0 percent from last July. Over the next two years, nearly 2 million homeowners with adjustable-rate mortgages will experience payment shocks as their loans reset in a weakening housing market, a harbinger of more foreclosures to come.

 

Market experts estimate that up to 40% of current subprime borrowers could now qualify for prime, fixed rate loans, making the crisis one that could be curtailed by strong efforts to assist borrowers.  Not only will such efforts save hundreds of thousands of families from losing their homes, it will also prevent further damage to the already weak housing market and the economy overall.

 

Acting to prevent foreclosures is not only important from the perspective of protecting entire communities, but it also makes good economic sense.   Foreclosures can cost up to $80,000 for all stakeholders—homeowners, neighbors, cities and local governments, lenders, and loan servicers.  Meanwhile, estimates suggest that foreclosure prevention counseling can cost as little as $1,000 per household.  To be successful, these programs require one-on-one counseling with the homeowner and negotiations with a variety of stakeholders – making them very resource-intensive.  The rising wave of subprime foreclosures has caused existing programs to become overwhelmed by requests for assistance, stressing the non-profits’ ability to give troubled homeowners the assistance they need to workout a suitable payment plan with the lenders.

 

Senator Schumer has been at the forefront of Congressional efforts to contain the subprime market crisis and ensure that irresponsible underwriting of this magnitude is not allowed to happen again.  In May, Schumer introduced the first major legislation to deal with unscrupulous lending practices this Congress, the Borrowers Protection Act, which would upgrade standards that mortgage brokers must abide by when making new loans to borrowers. 

 

Schumer has also fought for $300 million in federal resources targeted to community foreclosure prevention specialists to help stem the tide of foreclosures that threaten to cost more families their homes and further weaken the housing market.  The full Senate Appropriations Committee has approved $100 million for HUD Housing Counseling programs in the Transportation, Housing and Urban Development, and Related Agencies FY08 Appropriations Bill. With these funds, non-profit agencies will be able to provide individual counseling by working one-on-one with borrowers who are in unaffordable subprime loans.

The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

www.jec.senate.gov

 

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JULY'S EMPLOYMENT FIGURES RAISE CONCERNS FOR THE STRENGTH OF U.S. ECONOMIC EXPANSION
 
Schumer: Administration Must Make Job Growth a Higher Priority
 
Washington, D.C. – U.S. Senator Charles E. Schumer, Chairman of the Joint Economic Committee, responded to new jobs numbers from the Bureau of Labor Statistics which indicated that the unemployment rate rose 0.1 percentage points to 4.6 percent in July, and only 92,000 total payroll jobs were created.  Private-sector payrolls grew by 120,000 jobs after gaining only 107,000 jobs in June.  Overall job creation in May and June was revised down slightly from earlier estimates.
 
“Anytime we see new jobs being created that is a good thing.  But job growth below expectations will not help American families get ahead, and poses significant challenges for America’s economic growth and competitiveness,” Schumer said. “The uptick in the unemployment rate, downward revisions to jobs created in May and June, combined with the ongoing subprime lending crisis, should spur the administration into more action and less cheerleading.  This country needs more high-paying jobs, a plan to slow the housing market slump, and real efforts to shrink the widening trade and budget deficits.”
 
Highlights of today’s employment figures:
* The unemployment rate rose 0.1 percentage point to 4.6 percent in July, and 92,000 total payroll jobs were created.

* Growth in payroll employment has been modest by the standards of past economic recoveries.  Payrolls have grown by 1.4 percent over the past year, and the 12-month pace has declined since the start of last year.  By comparison, at the same point in the 1990s recovery, 12-month growth in payrolls was 2.3 percent and rising.

* Many labor market indicators remain weaker than they were at the start of the 2001 recession in March 2001.
1.      The labor force participation rate is 1.1 percentage points lower than when the recession began and the fraction of the working-age population with a job is 1.3 percentage points lower.
2.      Nearly one in every five unemployed people – 1.3 million Americans – have been jobless for more than 26 weeks, the maximum number of weeks for receiving regular unemployment insurance benefits.
  • Overall, there are 7.1 million unemployed Americans, and 4.8 million additional workers who want a job but are not counted among the unemployed (including nearly 1.4 million who have searched for work enough to be considered marginally attached to the labor force). An additional 4.3 million people work part-time for economic reasons.
  • The unemployment rate would be 8.3 percent if the figure included those who are marginally attached to the labor force and those who are forced to work part-time for economic reasons. 
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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SCHUMER: MIXED BAG OF ECONOMIC NEWS PROVES WE MUST ACT TO STEM THE TIDE OF SUBPRIME MORTGAGE MELTDOWN
 
Favorable Consumer Confidence and Inflation Measures Tempered by More Bad News for Housing and Home Construction
 
Today, the U.S. Department of Commerce announced a barrage of economic statistics. Headlining the economic news, the price index for personal consumption expenditures (PCE), excluding the highly volatile food and energy, rose 0.1% in June, matching its rise in the previous three months and placing inflation in the Federal Reserve’s preferred range.  Separately, the Conference Board announced the Consumer Confidence Index hit 112.6 in July, its highest level since August 2001.
 
However, other numbers released by the Commerce Department today showed a weakening in consumption in June, especially in housing-related categories, a slight deceleration in the wage component of the Employment Cost Index, and continued weakness in residential housing.   In response to today’s mixed bag of numbers, U.S. Senator Charles E. Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), reiterated his support to help existing homeowners with enhanced resources to stem the tide of avoidable subprime foreclosures which would help bolster the housing market.
 
“The good economic news on the inflation and consumer confidence front is tempered once again by weak housing and construction data and a slowdown in consumer spending,” Schumer said. “The bottom line is that the administration needs to take a much more pro-active role to avert widespread economic troubles stemming from the serious subprime mortgage fallout.”
 
Consumer Confidence at Six Year High
According to the Conference Board, a private research group, consumer confidence rose to 112.6 in July and its highest level since August of 2001, when it reached 114.0.  The preliminary report is based on a monthly survey of 5,000 U.S. households.  However, the collection cut off for preliminary reports was July 24th, prior to last week’s tumble in the stock market.
 
Personal Consumption Expenditures Flat in June, Exposed Weakness in Housing, Auto Markets
After adjusting for inflation, personal consumption spending was flat in June, with a 1.6 percent drop in spending on durable goods.  Much of that drop stemmed from a decline in consumer spending on motor vehicles and parts (-2.2 percent).
 
A number of housing-related categories of consumption also showed weakness in June, indicating the ripple effect of the fallout in the housing market as a whole.  For example, consumer spending on furniture was down 0.7 percent, and spending on housing services decelerated to a 0.1 percent gain.
 
Wages Up, But Growth in Wages Down
Compensation costs (wages plus salaries) for civilian workers rose by 0.9% from March to June, following a 0.8 percent gain over the previous 3 months. However, wage and salary growth decelerated to 0.8% from 1.1% in the previous quarter.  
 
Residential Construction Spending Down Signaling that Housing Weakness Continues
Total construction spending decreased 0.3 percent to $1.175 trillion in June. That is 2.4% lower than a year ago.  Private residential construction spending decreased 0.7 percent to $544 billion in June, and is 16.4 percent lower than a year ago.
 
One of the few points of strength, non-residential and public construction remains strong.  Growth of private nonresidential construction spending slowed to 0.3 percent in June, but is 17.4 percent higher than a year ago.  Public construction spending remained at $284 billion in June, and is 10.4 percent above year-ago levels.
 
Home Prices Decline Again
Home prices continue to fall, marking the 18th consecutive decline in the growth rate of housing prices, according to the monthly S&P/Case-Shiller's Home Prices Indices, which tracks housing prices in metropolitan areas and is considered a leading measure of U.S. single-family home prices. The 10-City Composite index showed an annual decline of 3.4% (its biggest since 1991) and the 20-City Composite reported an annual decline of 2.8%.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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SCHUMER: GDP REBOUND IS ENCOURAGING, BUT SUBPRIME MARKET WOES AND HOUSING SLUMP WORRISOME FOR LONG-TERM STRENGTH OF U.S. ECONOMY
 
Today, U.S. Sen. Charles E. Schumer, the Chairman of the Joint Economic Committee, responded to the Department of Commerce advance report of 3.4 percent growth in the nation’s Gross Domestic Product (GDP) for the second quarter of 2007. The GDP is the most comprehensive measure of our domestic production.
 
“This GDP rebound is a temporary oasis amidst too much bad economic news. Unless we curb the impact of the Subprime mortgage market fallout, I will continue to be concerned about the ability of the housing market to recover and prevent further drag on the U.S. economy. Rouge lenders, unscrupulous mortgage brokers, and an absence of federal standards and enforcement have seriously damaged one of the most important engines of our economy – the housing market,” Schumer said.
 
Sales of new homes decreased 6.6 percent in June, a 22 percent drop from the same time last year, underscoring the effect of the Subprime mortgage lending fallout that has pushed the housing market into its worst slump in 16 years. The National Association of Realtors yesterday revealed sales of previously owned homes fell 3.8 percent to an annual rate of 5.75 million, the slowest pace since November 2002. June home building permits applications, announced last week, dropped far below expectations to the lowest rate in the last decade. Reflecting pessimism among builders over the near – term outlook for new homebuilding, permits were down 7.5 percent to 1.406 million units, just slightly higher than the 1.402 million unit rate in June of 1997.
 
Some quick facts on today’s economic news:
 
·        Economic growth rebounded in the second quarter of 2007. Real (inflation-adjusted) gross domestic product (GDP) grew at a 3.4 percent annual rate in the second quarter. That growth follows a 0.6 percent advanced in the first quarter. In the second quarter, real GDP was only 1.8 percent above its level a year earlier. Economists do not expect the 3.4 pace of growth in the second quarter to be sustained in the second half of the year.
·        The second – quarter acceleration in economic growth was widely anticipated and largely reflects growth in components of demand that were unusually low in the first quarter. The acceleration in real GDP growth in the second quarter reflects an upturn in the trade balance on goods and services (exports accelerated and imports turned down), a pickup in federal defense spending and inventory accumulation, and some acceleration in business investment, concentrated in construction. While business investment in equipment and software accelerated in the second quarter, its 2.3 percent growth pace (annual rate) remains low.
·        Housing continued to decline in the second quarter. Real residential investment fell at a 9.3 percent annual rate – the sixth consecutive quarterly decline – and subtracted ½ percentage point off the pace of GDP growth.
·        Consumer spending slowed sharply in the second quarter. Real (inflation-adjusted) consumption expenditures grew at a 1.3 percent annual rate. That is considerably slower than consumption growth in the first quarter (3.7 percent) and the fourth quarter of last year (3.9 percent).
 
The Department of Commerce releases its advanced second-quarter estimate of GDP before June data are available on some components on GDP (particularly, the trade deficit and inventory change). The Department will revise its first-quarter estimates in late August, using more complete data.
 
The Joint Economic Committee, established under the Employment Act of 1964, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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SCHUMER: CHIP A PROVEN SUCCESS IN
EXPANDING HEALTH INSURANCE COVERAGE TO LOW-INCOME CHILDREN; CONGRESS MUST REAUTHORIZE AND EXPAND PROGRAM
 
Since Creation of CHIP, the Number of Uninsured Low-Income Children Has Dropped by About 33%
 
Joint Economic Committee Paper Proves CHIP Makes Economic Sense
 
As the Senate prepares to reauthorize the Children’s Health Insurance Program (CHIP), Senator Charles E. Schumer, Chairman of the Joint Economic Committee and a member of the Senate Finance Committee, released a new fact sheet highlighting the benefits of reauthorizing and expanding CHIP. According to the fact sheet, entitled “CHIP Makes Economic Sense,” CHIP has dramatically reduced the number of uninsured children since its creation in 1997. Over one million children currently covered by the program stand to lose coverage under the President’s reauthorization proposal, as states would face a total federal funding shortfall of as much as $7.6 billion over the next five years.
 
“With skyrocketing private health insurance premiums and ever increasing costs, CHIP has been a lifeline for families struggling to provide health care for their kids,” Schumer said. “CHIP has proven cost-effective and successful, and it is a moral imperative to extend its benefits to those who work hard but still cannot afford health insurance for their kids. There are nine million reasons that we must act now – nine million American children are still uninsured.”
 
The full JEC fact sheet is available at www.jec.senate.gov. According to it, CHIP currently provides health insurance coverage to 6.7 million children. Since its creation in 1997, CHIP has helped reduce the uninsured rate of low-income children by about one-third from 22% to 15%. Despite CHIP’s success in reducing the numbers of uninsured, about nine million children still lack health care coverage. Nearly two out of every three uninsured children live with adults who earn a modest income and work full time.
 
Fully funding CHIP and expanding its coverage to the 5.5 million children who qualify for the program but are not enrolled and to all children of parents making less than 300% of the poverty level (up from 200% in the current program), is a sound public investment. As highlighted in the JEC fact sheet, individuals without health insurance and access to preventative care tend to have higher rates of serious health problems and more frequently use the more expensive services of emergency rooms and acute care. Research demonstrates that low-income children who have health insurance are more likely to have regular well-child and dental visits and have fewer unaddressed medical needs compared with their uninsured counterparts.
 
Beyond the direct economic impact of higher health care expenditures resulting from acute and emergency room care, parents of children with serious health problems may be more likely to miss work, lose income, and have lower productivity compared with parents of healthy children. Children with health insurance are more likely to enter adulthood with greater employment and earnings potential, because children in poor health are more likely to miss school and fall behind academically, thus generating lower tax revenues later in life while having greater dependence on public assistance.
 
Economists generally agree that CHIP is a cost effective way to expand health insurance coverage. Expanding public insurance leads to some decline in private coverage, either through employers cutting back their coverage or through employees newly eligible for publicly-funded coverage declining employer-based coverage. Leading health economist Jonathan Gruber noted that any “crowd-out” effect of public insurance expansions is likely lower when only certain family members, for example children qualifying for CHIP, are covered by the expansion. Further, Gruber concludes the most cost-effective method of expanding health insurance coverage remains expanding public insurance programs like CHIP.
 
The current CHIP authorization expires on September 30, 2007. The reauthorization bill pending in the Senate Finance Committee would raise the federal excise tax on cigarettes by 61 cents (to $1 a pack) in order to pay for a $35 billion expansion of CHIP over five years, covering an additional 3.3 million children. President Bush has proposed a $5 billion increase in federal funding for CHIP over five years, which according to the Congressional Budget Office would not be enough to continue to cover the children currently enrolled in the program.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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SCHUMER: HITS KEEP ON COMING FOR U.S. HOUSING MARKET
 
Fed’s New Pilot Program to Rein in Subprime Loan Broker May Not Be Enough; Tougher Federal Laws Needed to Hold Mortgage Broker Accountable
 
With New Permits Way Down, JEC Chair Call to Stem Tide of Foreclosures With Foreclosure Prevention Funding for Families on Brink of Losing Their Homes
 
Today, the U.S. Department of Commerce announced that June home building permit applications dropped far below expectations to the lowest rate in the last decade, down 7.5 percent to 1.406 million units, just slightly higher than the 1.402 million unit rate of June 1997. U.S. Senator Charles E Schumer (D-NY), the chairman of the Joint Economic Committee (JEC), released a report showing that rising subprime mortgage foreclosures could lead to further weakening of the housing market as more supply is dumped onto the market. In response to today’s disappointing housing numbers, Sen. Schumer reiterated his support to help existing homeowners by stemming the tide of avoidable subprime foreclosures.
 
“The hits just keep on coming for the U.S. housing market. Today’s data that new house building permits are way down together with repeated reports that foreclosures are way up indicates two things to me. First, the foreclosure storm is brewing and we have not seen the worst of it yet; and second, we have to do something to hold mortgage brokers accountable for bad loans and we must increase resources for foreclosure prevention.”

Permits Down and Little New Construction of Single Family Homes:
New construction of privately owned housing rose by 2.3 percent in June to 1.467 million units at an annual rate. Even so, housing starts remain weak, down 19.4 percent over the last 12 months. Moreover, the June rise in total housing units started was concentrated in multi-family housing – new construction of single-family homes fell by 0.2 percent last month.
 
More ominous was the 7.5 percent plunge in permits to build new homes. That was the largest monthly decline since January 1995. Permits are now 25.2 percent below their level a year ago, reflecting continued pessimism among builders over the near-term outlook for new homebuilding.
 
Foreclosure Market Crisis and Fed’s Pilot Program:
Weakness in the housing market is largely fueled by the avalanche of mortgage foreclosures resulting from the irresponsible underwriting and deceptive lending practices in the subprime mortgage market. Foreclosures continue to rise across the nation as more and more homeowners’ loans reset to sharply higher rates. The Mortgage Bankers Association (MBA) reported that first quarter foreclosure inventory rates for subprime loans rose from 4.53 percent to 5.10 percent, or that the 2.2 million households in the subprime market that could fall victim to foreclosure over the next several years could lose as much as $164 billion, primarily in lost home equity.
 
To address the crisis, the Federal Reverse announced yesterday its plan to create a pilot program, joining the Board of Governors of the Federal Reserve with the Office of Thrift Supervision and the American Association of Residential Mortgage Regulators to conduct targeted consumer-protection compliance reviews of underwriting standards, oversight, and risk-management practice within non-depository lenders with significant subprime mortgage operations.
 
“While I welcome the Fed’s new pilot program to monitor independent subprime brokers, I don’t think consumers will be truly safe from irresponsible and deceptive lending practices until we enact tougher federal laws to prevent this mess from happening again,” Schumer said. “Sustainable home ownership is essential to the strength and stability of our nation’s economy. As indications of the weakness in housing markets continue to mount there is an urgent need for better protections for existing and aspiring homeowners”
 
Schumer Two Proposal:
Sen. Schumer has a two-step plan to address the subprime mortgage crisis. Schumer has fought for $300 million in proposed federal funds targeted to community foreclosure prevention specialists, and separate legislation to upgrade standards that mortgage brokers and originators must abide by when making new loans to borrowers. The full Senate Appropriations Committee has approved $100 million for HUD Housing Counseling programs in the Transportation, Housing and Urban Development, and Related Agencies FY08 Appropriations Bill. With these funds, non-profit agencies will be able to provide individual counseling by working one-on-one with borrowers who are in unaffordable subprime loans. This money will help stem the tide of foreclosures that are prolonging the slump in the housing market and dashing the American Dream of homeownership for too many families.
 
The Joint Economic Committee, established under the Employment Act of 1946, was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.
 
 
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SCHUMER REACTS TO USTR ACTION AGAINST CHINA'S TRADE DISTORTING SUBSIDIES
Today, Sen. Charles E. Schumer (D-NY), Chairman of the Joint Economic Committee, and a member of the Senate Finance Committee, reacted to an announcement from the U.S. Trade Representative that the United States has requested the World Trade Organization to establish a dispute settlement panel to investigate possible Chinese violations of WTO rules. Specifically at issue are trade-distorting subsidy programs that favor the use of domestic products over imported products or encourage exports. China agreed to abide by the WTO Agreement on Subsidies and Countervailing Measures in December 2001 (when it joined the WTO), which prohibits such subsidies.
 
"I'm encouraged to see that the administration is moving beyond talk and into action with their request for WTO dispute settlement panel review of China's prohibited subsidies; but we must make sure the administration follows through by applying constant pressure to this process. China has gotten away with far too much, for far too long, and we can't afford to miss any opportunities to even the playing field."
 
Below is the statement from the USTR:
USTR NEWS
 
UNITED STATES TRADE REPRESENTATIVE
 
www.ustr.gov                             
Washington, D.C., 20508
202-395-3230
 
For Immediate Release:
 
July 12, 2007
 
United States Requests WTO Panel in Challenge to China's Prohibited
Subsidies
 
Washington, DC - The Office of the United States Representative announced today that the United States has requested the World Trade Organization (WTO) to establish a dispute settlement panel regarding subsidies provided by China that appear to be prohibited by WTO rules.
 
“Although our two rounds of WTO consultations with China have been constructive, they have not resolved our concerns about China’s apparent use of trade-distorting subsidies that it pledged to eliminate upon joining the World Trade Organization,” said USTR Spokesman Sean Spicer.
 
“China has taken a positive step by repealing one of the subsidy programs we challenged, but much more needs to be done. We continue to prefer a negotiated settlement to this dispute, but without assurance of complete corrective action by China, we must continue to pursue the WTO process to enforce our rights.”
 
The U.S. request for a WTO dispute settlement panel challenges several subsidy programs maintained by China that the United States believes are prohibited by WTO rules. Subsidies conditioned either on a firm's use of domestic over imported products or on exports are prohibited by the WTO Agreement on Subsidies and Countervailing Measures. They also are inconsistent with other WTO obligations, including specific commitments undertaken by China as part of its WTO accession agreement to eliminate such subsidies before it joined the WTO on December 11, 2001.
 
The United States and Mexico requested WTO consultations with China over these subsidies in February and then filed supplemental consultation requests in April after China eliminated one subsidy and passed a revised income tax law with new provisions that appear to provide for prohibited subsidies. While consultations have been productive and useful, China has not to date been able to assure the United States and Mexico that it will promptly eliminate all of the subsidy programs that remain of concern.
 
Mexico plans to join with the United States and file its own request for the establishment of a WTO panel today.
 
Background
 
The United States initiated the dispute over China's prohibited subsidies by requesting consultations with China on February 2, 2007. Mexico requested consultations with China on the same measures on February 26, 2007. Shortly before joint consultations were held on March 20, 2007, China eliminated one of the subsidy programs challenged by the United States and Mexico, but also adopted a new income tax law providing additional tax breaks for qualifying firms. In order to clarify whether these new tax breaks constituted new prohibited subsidies, the United States and Mexico requested supplemental consultations with China, which were held jointly on June 22, 2007.
 
Under WTO rules, the WTO Dispute Settlement Body (DSB) will consider the United States' request for the establishment of a panel at its next meeting on July 24, 2007. In addition to allegations under the WTO Agreement on Subsidies and Countervailing Measures and China's Protocol of Accession, the United States' complaint also alleges violations of the 1994 General Agreement on Tariffs and Trade and the Agreement on Trade-Related Investment Measures.
 
 This is the second dispute against China for which the United States has requested a WTO dispute settlement panel. The United States, together with Canada and the European Communities, requested a panel in September 2006 to examine China's regulations imposing local content requirements in the auto sector through discriminatory charges on imported auto parts. Panel proceedings in that dispute are underway.
 
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