President Bush's Dismal Economic Record

On Monday, January 28, President Bush will deliver his annual State of the Union address to Congress. As he has in the past, President Bush is likely to claim that the policies of his administration have helped strengthen the economy. But President Bush’s claims are misleading. President Bush has turned a federal budget surplus into record deficits and is tied with his father for the worst job creation record of any President in 70 years. Under President Bush’s failed economic policies, the unemployment rate is now increasing and the number of unemployed Americans is now 1.6 million greater than when he took office. At the same time, household income has declined for all but the wealthiest Americans after accounting for inflation, and America’s middle class has been squeezed by rising energy, health care and education costs. If current economic trends lead to a recession, as many economists are currently predicting, President Bush will become the first President to preside over two recessions since the Nixon administration.

For the full text of this report, please click on the file listed under "Related Resources."

Worsening Economic Conditions Will Increase Demand for the State Children's Health Insurance Program and Medicaid

Worsening economic conditions will likely create substantial increases in demand for enrollment in states’ Medicaid and Children’s Health Insurance Program (CHIP) programs over the next few years, even apart from the normal growth trend in public coverage. If employment growth falls to the levels seen following the 2001 recession, then demand for these programs will grow as the economy slows.

• Between 700,000 and 1.1 million additional children will enroll in Medicaid/CHIP each year due to slowing employment growth alone.

• Up to 1.5 million total additional persons will enroll in Medicaid each year due to slowing employment growth alone.

Increases in Medicaid/CHIP enrollment combined with federal funding cuts proposed by President Bush in the Medicaid and CHIP programs could create additional pressure on state budgets that are already strained by the weak national economy and the worsening housing crisis.

Nearly every state is required to balance its budget. In the face of the economic slowdown, state governments will therefore face a difficult choice between cutting back on health insurance for children, implementing cuts in other budget areas, or raising taxes. If proposed Administration regulations are implemented, the additional cuts in Federal support will make the problem even more severe.

For the full text of this report, please click on the file listed under "Related Resources."

The President says his policies are working to make the economy strong and that all Americans are benefiting, but the facts show an economic record that has left the vast majority of American families behind. During the last six years, the economy has performed in a lackluster fashion, without strong growth in output, investment, or employment. America’s working families have seen little or no improvement in their standard of living during this time. The recovery from the recession in 2001 has been very weak, and household income is still substantially below its pre-recession peak of the 1990s. Further, the number of households with employer-provided health insurance has declined. In short, the economic indicators that matter most to the typical family are moving in the wrong direction.

By almost every measure, the Bush Administration’s economic policies have produced a recovery that has been remarkably weak. The President’s ill-designed tax policy has added to the deficit and exacerbated income inequality. At the same time, programs that benefit middle- and lower-income families have been cut back. Dramatic increases in defense spending for the war in Iraq have increased the budget deficit, which will have an impact on future generations. Instead of focusing spending increases on areas that would help economic growth in the long term, such as repairing and modernizing America’s transportation and urban infrastructure, the administration financed a war that has already produced total economic costs exceeding a trillion dollars.

The subprime mortgage crisis, which may lead to millions of Americans losing their homes, and the subsequent credit crunch have weakened an already soft housing market. The deteriorating housing market threatens to have pronounced negative impacts on growth. The vast majority of American families have not benefited from the economic gains we have seen so far and now there are strong indications that a downturn may be just around the corner.

So far, the Administration has been slow to change course and are satisfied with the status quo. The country needs a change in direction to get our economy back on the right track and to ensure that all American families share in our nation’s growing prosperity.

For the full text of this report, please click on the file listed under "Related Resources."

Analysis of the Energy Bill Tax Provision 199

At the request of Senators Jeff Bingaman, Chairman of the Senate Energy and Natural Resources Committee, and Max Baucus, Chairman of the Senate Finance Committee, the JEC examines the impact of denying the Internal Revenue Code (IRC) Section 199 manufacturing deduction to major integrated oil and gas producers (while simultaneously freezing the deduction for other oil and gas producers) on consumer prices of oil and natural gas. The report finds that the proposed modification of this deduction would have a negligible effect, if any, on consumer energy prices. This tax provision will likely be included in a larger Senate energy bill as a way to finance renewable and energy conservation efforts.

Key Points

• Because the removal of the tax deduction does not affect production decisions in the near term, removing or modifying the tax deduction will have no effect on consumer prices for gasoline and natural gas in the immediate future.

• In the long run, the removal of the tax deduction is unlikely to have any effect on consumer prices for oil and gas. Oil prices are more than three times higher than they were when the tax deduction was implemented in 2004 – and those high prices are an incentive for investors to continue to invest in oil and gas companies. Although natural gas prices are not significantly different from their 2005 levels, natural gas prices rose significantly over the last decade and those higher prices also provide good incentives for investors.

For the full text of this report, please click on the file listed under "Related Resources."

War at Any Price?: The Total Economic Costs of the War Beyond the Federal Budget

The long wars in Iraq and Afghanistan have cost the United States in many ways. For the American Armed Forces, the human toll has been profound: as of November 9, 2007, 4,578 American soldiers have lost their lives, and 30,205 have been wounded, many of them gravely. The damage to our international reputation at a time when the United States faces grave security challenges all over the world has also been severe. And the full economic costs of the war to the American taxpayers and the overall U.S. economy go well beyond even the immense federal budget costs already reported. These “hidden costs” of the Iraq war include the ongoing drain on U.S. economic growth created by Iraq-related borrowing, the disruptive effects of the conflict on world oil markets, the future care of our injured veterans, repair costs for the military, and other undisclosed costs.

In this report, the Joint Economic Committee estimates the total costs of the long war in Iraq to the American economy as a whole:

• The total economic costs of the wars in Iraq and Afghanistan so far have been approximately double the total amounts directly requested by the Administration to fight these wars.

• The future economic costs of a prolonged military presence in Iraq would be massive. Even assuming a considerable drawdown in troop levels, total economic costs of the wars in Iraq and Afghanistan (with the vast majority of costs a result of in the war Iraq) would amount to $3.5 trillion between 2003 and 2017. This is over $1 trillion higher than the recent Congressional Budget Office (CBO) Federal cost forecast for the same scenario, which counted only direct spending and interest paid on war-related debt resulting from that spending.

• The total economic cost of the war in Iraq to a family of four is a shocking $16,500 from 2002 to 2008. When the war in Afghanistan is included, the burden to the American family rises to $20,900. The future impact on a family of four skyrockets to $36,900 for Iraq and $46,400 for Iraq and Afghanistan when all potential costs from 2002 to 2017 are included.

The American people and Democrats in Congress have urged a dramatic change of course in Iraq. This war has cost Americans far too much, in terms of lives, dollars, and our reputation around the world. This report also demonstrates that a change in course would bring substantial economic savings to our country.

For the full text of this report, please click on the file listed under "Related Resources."

The Subprime Lending Crisis: The Economic Impact on Wealth, Property Values, and Tax Revenues, and How We Got There

As the losses caused by the subprime lending crisis continue to work their way through the financial markets, there is a growing awareness among policymakers and financial market regulators that we need to prevent the continuing foreclosure wave from affecting the broader economy. A significant increase in lax (and often predatory) subprime lending during a period of rapid housing price appreciation put risky adjustable rate mortgages in the hands of vulnerable borrowers who are now facing substantial payment shocks and risk foreclosure when their loans reset this year and next.

Part I of this report shows that unless action is taken, subprime foreclosure rates are likely to increase as housing prices flatten or decline, and the effects of the subprime crisis are likely to extend beyond the housing market to the broader economy. The decline in housing wealth will negatively affect consumer spending, and the forced sale of large numbers of homes is likely to negatively impact the prices of other homes.

Part II of this report shows that, unless action is taken, the number and cost of subprime foreclosures will rise significantly. For the period beginning in the first quarter of 2007 and extending through the final quarter of 2009, if housing prices continue to decline, we estimate that subprime foreclosures alone will total approximately 2 million.

Part II also includes forward looking, state-level estimates of subprime foreclosures and associated property losses and property tax losses, covering the second half of 2007 through the end of 2009. For that shorter period, and assuming only moderate housing price declines, we estimate that:

Approximately $71 billion in housing wealth will be directly destroyed through the process of foreclosures.

More than $32 billion in housing wealth will be indirectly destroyed by the spillover effect of foreclosures, which reduce the value of neighboring properties.

States and local governments will lose more than $917 million in property tax revenue as a result of the destruction of housing wealth caused by subprime foreclosures.

Part III of the report highlights the underlying causes of the subprime crisis and explains how incentive structures in the subprime market work against the interests of borrowers and have had much to do with the dimensions of this crisis.

Finally, in Part IV, policy options aimed at reducing foreclosures and preventing the crisis from reoccurring in the future are offered.

For the full text of this report, please click on the file listed under "Related Resources."

Fiscal Responsibility: Which Party has a Better Record?

When it comes to fiscal responsibility, Democratic administrations have a proven track record. The great majority of our national debt has been incurred by the past three Republican administrations. Instead of building up surpluses in preparation for the upcoming retirement of the Baby Boom generation, the current Bush administration has abandoned fiscal discipline and permitted the debt to skyrocket.

Sharp Contrast Between Parties on Annual Public Borrowing

• The U.S. government has borrowed over $5 trillion from the public in the past thirty years. 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.

Over One-Third of the Total National Debt Has Been Incurred Under the Current Administration

• About $3.2 trillion of our $8.9 trillion total national debt has been accumulated during the past six years of the current Administration.

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

For the full text of this report, please click on the file listed under "Related Resources."

American Families are Losing Ground on Bush's Watch; Income Down, Poverty Up Since 2000

The U.S. Census Bureau released its 2006 report on income, poverty and health insurance coverage in the United States . Although median household income rose slightly in 2006, after adjusting for inflation, the report showed that all but the richest of American households have seen their incomes decline since 2000. The JEC compiled highlights of the Census Bureau's report and analysis of economic conditions under the Bush administration in three fact sheets focusing on poverty, income, and health insurance.

 

Poverty

Each year, the Census Bureau releases new estimates on the number and percent of Americans living in poverty. Under the Bush administration, the number of Americans living in poverty has increased by 4.9 million people. Today, nearly one out of every eight Americans is living below the federal poverty line.

Income

New estimates by the Census Bureau show that real (inflation-adjusted) median household income increased slightly between 2005 and 2006. From 2000 to 2006, however, real median household income fell by 2.0 percent, with the poorest households experiencing disproportionately large declines even as the richest households saw their incomes rise. Those data confirm that the vast majority of Americans have not benefited from economic growth over the past six years.

Health Insurance

Both the number of Americans without health insurance coverage and the uninsured as a percentage of the population rose in 2006, according to the latest estimates by the Census Bureau. The number of people without health insurance is the largest on record and has increased in every year since President Bush took office.

 

For the full text of these reports, please click on the files listed under "Related Resources."

 

 

 

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.

 

Key Facts

 

·          CHIP has dramatically reduced the percentage of uninsured children.

·          Together with Medicaid, CHIP has ensured that disadvantaged children receive critical preventive care.

·          Investing in children’s health insurance is a sound public investment.

·          Children with health insurance are more likely to enter adulthood with greater employment and earnings potential.

·          CHIP is a cost-effective way to ensure that millions of low-income, uninsured children receive quality health care.

·          CHIP is not “government-run health care”.

·          Despite CHIP’s success, about nine million children remain uninsured.

 

 

For the full text of this report, please click on the file listed under "Related Resources."

Report Update: Sheltering Neighborhoods from the Subprime Foreclosure Storm

In an update to the Joint Economic Committee's March report, "Sheltering Neighborhoods from the Subprime Foreclosure Storm," the JEC finds that foreclosures continue to rise across the nation as more and more subprime borrowers’ loans reset to higher rates in a weak housing environment.

 Key Facts

·          Home Foreclosures are on the Rise.

·          Foreclosures Exact a High Toll on Families.

·          Foreclosures are Costly to Communities.

·    Neighboring Homeowners Lose 1 Percent in Property Value Per Foreclosure on  their Block.

·      A Vacant Property Can Cost Local Taxpayers $20,000 in Annual Maintenance.

·   Foreclosure Prevention Counseling Saves Families’ Homes and Communities.

·          Foreclosure Prevention is a Cost-Effective Strategy.

 

 

For the full text of this report, please click on the file listed under "Related Resources."