Energy Efficiency is a Bright Idea

Each time a family decides to change a light bulb, upgrade a heating or cooling system, or buy a new appliance or a new car, that family is making a decision that impacts both its pocketbook and the environment. High energy prices and rising awareness of the consequences of global warming have led more consumers to factor energy and environmental costs into their decisions to invest in new homes, appliances and vehicles. Even so, many Americans remain unaware of the private and social benefits of energy-efficient technologies and practices. Energy efficiency translates into lower household energy costs, less pollution and fewer greenhouse gas emissions for all of us. Additionally, increasing household energy efficiency can work to reduce U.S. reliance on foreign fuel sources.

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 Money in the Bank, Not in the Tank

In the past week, retail gasoline prices have surged to their highest levels ever to a national average of over $3.22 a gallon. As the Memorial Day weekend kicks off the summer driving season, many industry analysts expect that gas prices will only continue to rise.

There are a number of reasons that gasoline prices have hit these unprecedented levels, including increased demand, reduced refinery capacity, and the impact of consolidation in the petroleum industry. As gas prices rise, the costs to American families become more onerous. This year alone, families with children can expect to spend an average of $3,180 to fill up their tanks. This is money that would be better spent on education, health care, and saving for retirement, but instead it ends up in our nation’s gas tanks.

There is little question that the long-term solution to our energy problems lies with encouraging the production and use of alternative fuels. But it will take a long time to achieve such basic shifts in energy use. In the near-term, American families need policy solutions that will provide them with real savings.

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As the costs of raising a child continue to increase, working families need assistance to make ends meet and manage the difficulties of balancing work and family. Several provisions in the federal tax code are available to help families with children: the Child Tax Credit, the Child and Dependent Care Tax Credit, the Earned Income Tax Credit, and Dependent Care Assistance Programs. This report provides a summary of the maximum federal values of these credits and similar state credits.

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 The Economic Benefits of Investing in High-Quality Preschool Education

Future fiscal challenges, global economic competition, and shifting demographic trends all highlight the need for policies to improve the skills and productivity of American workers and thereby increase future living standards. A promising strategy for achieving these aims is expanding government investment in high-quality preschool education.

Government funding of education in general has long been justified on the grounds of the significant public good that comes of having an educated population. Reliable evaluations of high-quality preschool have shown that this argument extends to preschool specifically.

High-quality preschool programs improve the futures of participants by raising their ultimate educational attainment and earnings levels and by reducing the likelihood that they will engage in socially harmful behaviors. These outcomes in turn ease the burden on public resources, allowing government spending to shift toward more productive uses. As much as 80 percent of the projected benefit of high-quality preschool for disadvantaged children goes to the public. In the long term, investing in high-quality preschool available to all children has been estimated to increase gross domestic product by as much as 3.5 percent, further enhancing U.S. living standards.

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 Most Baby Boomers are Saving Enough, But Many are at Risk of Significant Shortfalls

As the first wave of baby boomers reaches the traditional retirement age next year, the question of whether workers are preparing adequately for retirement has become more important than ever. Despite numerous media reports on boomers’ dire retirement prospects, by various measures the average baby boomer household is on track to retire comfortably. Nevertheless, a significant minority of boomers—particularly those at the bottom of the income and wealth distributions—is at risk of a substantial decline in living standards during retirement. Moreover, the baby boom generation faces a number of uncertainties that may leave them less prepared for retirement than what the data would suggest.

The U.S. retirement system has traditionally been described as a three-legged stool made up of Social Security, employersponsored retirement plans, and personal saving. It is important that Social Security and private pension plans remain stable and secure, and that all families, but particularly those with less income and wealth, have the opportunity and incentive to increase their own personal saving.

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 SPECIAL MOTHER'S DAY REPORT: Helping Military Moms Balance Family and Longer Deployments

This Mother’s Day marks the fourth year of the U.S. military’s presence in Iraq and the sixth year of the U.S. military's presence in Afghanistan. Women make up a significant percentage of the current active duty force, representing one in seven U.S. military personnel in Iraq.1 Mothers in the military, those in the active duty force and the spouses of male service members, make up a substantial portion of women in the military.

Like mothers in the civilian world, mothers in the military face challenges in balancing work with family, such as meeting monthly expenses, finding and accessing high quality child care, and accessing quality health care services for their families and themselves. Yet, military moms often face the added burden of lengthy and more frequent deployments and separation from their children and spouses. While the military has taken steps to address the needs of mothers within its ranks, the added strain on the military caused by the long mission in Iraq putting even more stress on military mothers.

Key challenges facing military mothers include the following:

Child care services are not meeting current needs, or increased demands due to deployment;

Short family leave periods after child birth and adoption impact the retention of mothers in the military; and

Limited resources dedicated to mental health services to help military mothers and their children

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 Over the course of the past six years, the Bush administration has done everything it can to alleviate the tax burden on the wealthiest taxpayers. Yet it has done little to ensure that eligible American families take advantage of tax credits specifically designed to reward their hard work and help them get ahead.

Benefits such as the dependent care tax credit, the earned income tax credit (EITC), education tax credits, and the saver’s credit are among the federal government’s most effective tools to help American families afford to raise their children, pay for higher education, and save for retirement. Yet each year millions of these taxpayers do not claim the credits for which they are eligible, leaving billions of tax credit dollars on the table.

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

 

Recent increases in delinquencies and foreclosures in the subprime mortgage market have raised widespread concerns about the possibility of accelerating foreclosures throughout this year and next. While lenders, banks, and securities traders scramble to figure out how to insure themselves from the market consequences of rising subprime mortgage defaults, local communities are struggling to stem the tide of foreclosures that impose significant costs on families, neighborhoods and cities. This report analyzes the subprime foreclosure phenomenon at the local level, describes the high spillover costs of foreclosures, and argues that foreclosure prevention is cost-effective.

Key Points

Subprime foreclosures are expected to increase in 2007 and 2008 as 1.8 million hybrid ARMS—many of which were sold to borrowers who can not afford them—reset in a weakening housing market environment.

Varying local economies, housing markets and state regulatory regimes mean that some local areas are getting hit by the subprime foreclosure crisis much harder than others and deserve immediate attention.

It pays to prevent foreclosures in these high-risk cities – every new home foreclosure can cost stakeholders up to $80,000, when you add up the costs to homeowners, loan servicers, lenders, neighbors, and local governments.

Policy responses to the subprime crisis should be designed to address the local foreclosure phenomenon and include both foreclosure prevention strategies and improved mortgage lending regulations.

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Despite efforts by the Bush Administration to portray the economy as doing well, Americans remain skeptical. One reason why the President is having such a tough time selling his message is that the economy has done so much worse on his watch than it did under President Clinton by a variety of indicators.

Economists properly caution that many forces beyond presidential leadership affect the performance of the economy. But in one area where the president does matter—fiscal responsibility—President Clinton’s record stands in marked contrast to President Bush’s. The strong policy environment under President Clinton created conditions in which the economy could flourish.

The following indicators illustrate key differences in economic policy and economic performance under President Clinton and President Bush:

·        Job Creation

·        Unemployment

·        Wages and Income

·        Other Measures of Economic Well-being

·        Fiscal Responsibility

 

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The U.S. labor market is a constantly churning sea of job creation and destruction. On average, 18 million new jobs appear each year, while 15 million jobs are lost.1 The vitality of the labor market creates great opportunities for those who can navigate it successfully, but it also creates great risk and uncertainty for working families.

One result of a constantly changing labor market is that many American families experience substantial year-to-year instability in their earnings. While there is an ongoing debate whether that volatility has increased significantly in recent years, there is no question that it exists. About one in five workers experiences a decline in earnings of at least 25 percent from one year to the next, while one in nine workers sees a decline of 50 percent of more.

Some of the volatility in earnings reflects family decisions to change jobs or to take time off from work to devote more time to family responsibilities. It also reflects involuntary loss of earnings as a consequence of illness or injury. Some of the volatility, however, is the outcome of the shifting job market as workers are displaced by slack demand, technological change, or competition from foreign producers.

Elements of the social safety net can help cushion the impact of a temporary decline in earnings because of a job loss, but there are few government programs to help those who suffer a permanent reduction in earnings. Unemployment Insurance (UI) is the main bulwark against temporary job loss, but the UI program has many gaps and is not designed to help with long-term job displacement or reduced earnings once a worker is reemployed. Programs explicitly designed to help displaced workers such as Trade Adjustment Assistance (TAA) are limited in scope and reach very few workers.

The federal income tax provides some assistance to families who experience a decline in earnings through the Earned Income Tax Credit (EITC), but that help is limited to those families whose earnings are low enough to qualify for the credit. Moreover, the EITC itself and other features of the tax system can exacerbate the consequences of earnings fluctuations by imposing higher taxes on families whose income fluctuates from year-to-year than on families with the same average earnings but whose earnings remain steady.

This paper explores the extent of earnings and employment instability faced by American families and possible ways to improve the social safety net and the federal tax code to help cushion the blow of job displacement and the complete or partial loss of earnings that too-often occur in today’s economy.

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