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."

  

 

 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.

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

 

 

 

 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.

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

 

 

 

 

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.

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

 

 

 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.

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