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Washington, DC – Senator Bob Bennett (R-Utah), chairman of the Joint Economic Committee (JEC), released a report today showing dividend tax relief helps everybody, not just taxpayers who currently receive taxable dividends.

“Ending the double taxation of dividends will help anybody who benefits from faster economic growth and higher stock prices. Simply looking at those who receive taxable dividends doesn’t reveal the whole picture,” Bennett said.

The report argues “static” analyses are flawed because they only account for how tax payments are currently distributed across income levels. “The taxpayer actually writing the check to the I.R.S. doesn’t always bear the economic burden of the tax,” Bennett explained.

For example, Congress currently exempts from income taxes the interest of many bonds issued by state and local governments. Since mostly high-income people buy the bonds, a static analysis would show the tax relief going to them. However, the JEC report shows the real winners are state and local governments that can finance their building projects cheaper because the bond market responds to the tax relief with lower interest rates for their bonds.

Ending the double taxation of dividends will work much the same way. Among other things, it will reduce the cost of capital, making it cheaper and easier for companies to raise money for new investments and new employees.

"Few people complain about tax-exempt bonds as only helping the rich," Bennett remarked. "Ending the double taxation of dividends takes advantage of the same economic phenomenon to benefit investors and the entire economy."

JEC is a unique joint Senate-House committee created by the Employment Act of 1946 to study and advise Congress on economic policy.

To view the executive summary and the full report, visit https://www.jec.senate.gov.

Sep 30 2003

Prescription Drugs Are Only One Reason Why Medicare Needs Reform

Improved Efficiency, More Choice Necessary to Protect Medicare for Future Generations

Washington, DC— According to a report released today by the Joint Economic Committee, Medicare faces enormous fiscal challenges as the “Baby Boom” generation retires and as the program expands to cover prescription drugs. Congress is now focused on the need to extend prescription drug coverage to Medicare beneficiaries. That need is certainly important, but it is not the only reason that Medicare needs reform.

“Medicare is an incredibly inflexible program that is unable to adapt to rapid advances in modern health care,” said Chairman Bennett. “As we debate how to provide a prescription drug benefit to the program, we must keep an eye on the end goal -- to make Medicare more efficient, more flexible, and more responsive to the needs of all Americans.”

The Joint Economic Committee report highlights three key areas that must be addressed to ensure that Medicare will be able to serve an aging population and future generations: improving the long-term financial viability of the program, making Medicare more responsive to health care advances, and introducing choice and competition.

Medicare lags far behind other insurers in providing prescription drug coverage, disease management programs, and a host of other advances. Reforming Medicare to create a more selfadjusting, innovative structure could improve both the efficiency and quality of the medical care provided. That can be accomplished partly by allowing beneficiaries greater choice and introduce greater competition between plans. Giving Medicare beneficiaries greater choice has
at least two key advantages: It allows the beneficiaries to be the primary customer, rather than the government or a former employer. It also creates powerful incentives for all Medicare plans, public or private, to provide the highest quality health care and the most competitive price.
Washington, DC – The Joint Economic Committee, chaired by Senator Bob Bennett (R-Utah), released a new report today, “Medicare Beneficiaries’ Links to Drug Coverage.”

“Make no mistake, too many seniors are without adequate prescription drug coverage, or worse, any coverage at all. Congress needs to act,” Bennett said. “However, as we work to create a new Medicare drug benefit, we must pay attention to the coverage that already exists.”

The Joint Economic Committee’s report shows 78 percent of Medicare beneficiaries already have some drug coverage. Unfortunately, reliable data on the generosity of the drug benefit packages are scarce. The report is based on new data from the Centers for Medicare and Medicaid Services (CMS).

“We must be careful not to disrupt the coverage people already have,” Bennett remarked. “Congress should work with CMS and other agencies to gather better information on the value and quality of existing prescription drug coverage. We should learn from the experiences of the various organizations that already deliver drug benefits, such as employers and state governments.”

The report was issued today at a hearing of the Joint Economic Committee on “Medicare’s Financial Crisis,” which discussed how Medicare’s promised benefits already exceed the program’s financial resources by more than $13 trillion.

“We don’t practice medicine the way we did in the 1960s; we shouldn’t deliver and finance medicine the same way either. Any successful reform must begin with respect for the power of the market,” Bennett said.

“We need to be careful how we design prescription drug coverage in Medicare,” Bennett explained. “The combination of today’s hearing and the committee’s new report makes it clear that we can’t afford to ignore the experience or funding supplied by existing providers of prescription drug coverage. We need to avoid significant reductions to their ability and incentive to continue drug coverage.”

The Joint Economic Committee is a unique joint Senate-House committee created to study and advise Congress on economic policy. For copies of today’s report or for other information, visit the committee online at jec.senate.gov.
Washington, DC—The Joint Economic Committee (JEC) released a report today that puts current deficits into historical perspective and discusses how spending restraint and a growing economy are critical to reducing future deficits.

“The current deficits reflect a near ‘perfect storm’ that has rocked government finances in recent years,” said JEC Chairman Bob Bennett. “Revenues plummeted due to a weak economy and a sharp drop in the stock market. At the same time spending has increased because of terrorism, new homeland security requirements, and two wars. Our economy is large enough to recover from these events, but only if we can practice fiscal restraint.”

Recent projections by the Office of Management and Budget (OMB) show a potential budget deficit of $455 billion this year. Although the current deficit is large in nominal dollars, today’s JEC report points out that in order to have an accurate picture, deficits should be measured relative to the size of the economy. It is important to account for the economy’s capacity to absorb the deficits and the government’s ability to finance them. Both of these factors depend on
the size of the economy. When measured as a percentage of the gross domestic product (GDP), today’s deficits are still below the peaks of the 1980s and 1990s.

“Continued increases in the deficit could pose significant economic problems if they persist,” said Bennett. “It is important to have an understanding of how these deficits arose and to put them in proper perspective. In doing so, we can more effectively implement policies to rebound from current deficits. The reason for the deficits prescribes their solution.”

Fifty-three percent – the largest chunk – of the budget deterioration in fiscal year 2003 has been due to overall economic weakness, declines in the tax base, and other technical estimate changes. Spending increases account for 24 percent of the deterioration. Tax relief and economic growth legislation of the last two years have contributed only 23 percent of declines in projected surpluses. In fact, the economy has fared much better than it would have because of these progrowth actions.

“The economy is beginning to show signs of renewed growth,” said Bennett. “Congress has enacted timely pro-growth legislation. Now is the time for a renewed commitment to spending restraint.”
Washington, DC—Senator Bennett, Chairman of the Joint Economic Committee, held a hearing today on how technology and innovation affect health care costs. In other sectors, new technologies usually lead to greater efficiency and lower costs in goods and services, yet it is unclear whether the same is true for health care. Bennett welcomed witnesses from the Administration and leading medical research institutions to explore the various ways that technology influences health care costs. Panelists included Dr. Mark McClellan, Commissioner of the Food and Drug Administration, and Dr. Carolyn Clancy, Director of the Agency for Healthcare Research and Quality (AHRQ).

“We have a health care financing problem that goes well beyond the budget challenges posed by Medicare,” said Chairman Bennett. “For many years, the nation’s health care spending has grown at a significantly faster rate than the economy, and projections indicate that this will continue. Advances in medical technology are contributing to this rise in health care costs, but the problem is compounded by the way we pay for technology.”

During the hearing, Bennett pointed to the need to examine whether new technologies are used in an efficient and effective manner, and if there are areas where they are being overused or underused. For example, if a new advanced imaging device becomes available, will every hospital in a city decide to purchase it, or can the hospitals share the expensive equipment? At the same time, some new technologies may be underused such as those related to preventative medicine.

“Advances in the medical field are leading to the enjoyment of longer, more fulfilling lives for millions of Americans,” said Chairman Bennett. “We need to make sure that medical technology remains accessible to those who need it by keeping costs at a reasonable level.”

Among the issues that surfaced during the hearing was that the gap between best practices and practices actually in use is substantial. The panel found that it would be beneficial to investigate the actual use and efficacy of different treatments once they have been approved and how much time it takes for medical knowledge to be disseminated throughout the medical community. A study published by the Agency for Healthcare Research and Quality (AHRQ) pointed out that it can take 17 years from discovery of a new medical product or procedure until it is widely used in
practice.

In addition, the panel concluded that incentives – financial and otherwise – do indeed matter in health care. Consumers, providers, and payers all react to incentives, so policymakers should take care to understand how those incentives operate and, where possible, to harness those incentives for the social good. Medical payment systems should encourage good health outcomes and quality treatment, not billable procedures.
Washington, DC – A hearing of the Joint Economic Committee, chaired by Senator Bob Bennett (R-Utah), unearthed a number of creative ideas for financing roads and reducing congestion that Congress could use this year when drafting a new surface transportation program.

“Amidst the routine debate over the program’s budget and spending formulas, some voices can be heard suggesting innovative and creative ideas,” Bennett said.

For example, a wide spectrum of witnesses endorsed an idea of allowing drivers to pay for the use of high-occupancy vehicle (HOV) lanes.

“Shift the operating principle of HOV lanes to HOT lanes – that’s high-occupancy toll lanes,” explained Robert Poole, director of transportation studies at the Reason Foundation. “Convert them to high-speed premium lanes which drivers can use by paying a market price and which truly high-occupant vehicles – buses and vanpools – can use for free.”

Micheal Replogle, transportation director for Environmental Defense, said: “HOT lane critics often unfairly bash them as ‘Lexus Lanes,’ serving only the rich. Several real-world HOT lanes look more like ‘Lumina Lanes,’ used by people of widely varying incomes who occasionally need to bypass traffic delays that disrupt their social, family, or work life.”

Bennett cited a report estimating time spent in traffic jams and wasted fuel cost the U.S. economy $67.5 billion in 2000. “This cost is what I call ‘the ghost tax of congestion,’ always following us around where ever we go,” Bennett remarked.

“Transportation makes up roughly ten percent of our nation’s economy, but the importance of the transportation sector far exceeds its share of output,” Bennett explained. “In a world of ‘just-in-time’ delivery and customized production, companies cannot afford to wait for their parts to arrive or for their finished products to be delivered.”

Congress is scheduled soon to re-authorize the Transportation Equity Act for the 21st Century (TEA-21). The Joint Economic Committee (JEC) is a unique joint Senate-House committee created to study and advise Congress on economic policy. For copies of today’s testimony or for other information, visit the JEC online at https://www.jec.senate.gov.
Washington, DC—The Joint Economic Committee (JEC) today released “A Tale of Two Employment Surveys,” a report that delves into the growing disparity between two sets of employment data produced by the Bureau of Labor Statistics (BLS). The BLS uses two distinct surveys to measure the number of jobs in America, a payroll survey that measures the number of people employers have on their payrolls and a household survey that measures the number of
individuals who report being employed.

“Measuring the economy is difficult in any circumstance, but nowhere is it more important than when assessing the labor market as the nation recovers from a recession,” said JEC Chairman Bennett.

The payroll survey released earlier this month indicates that the number of jobs has declined by 1.1 million since the end of the recession in November 2001, while the household survey indicates that the number of employed people has increased by 1.4 million. This jobs gap of 2.5 million is unprecedented. The JEC made calculations to control for an unusually large statistical adjustment the BLS made to its household estimate in January 2003. Making this correction, the JEC found that the household series still shows a gain of 1.1 million employed workers since the
end of the recession and a jobs gap of 2.2 million.

The BLS states that the payroll survey provides a more comprehensive estimate of the number of people on the payrolls of established organizations. However, only the household survey measures those self-employed and those working in agriculture.

“The disparity between the two surveys may be due to inaccuracies in the surveys, changes in the workforce, or both; only time will tell. For these reasons, focusing only on the payroll survey is misleading. Analysts should consider both the household and payroll surveys in trying to understand the employment situation,” said Bennett.

The complete report can be viewed at https://www.jec.senate.gov.

Sep 05 2003

Chairman Bennett: "Economy is Turning the Corner"

Bennett Explores the Current Employment Situation at JEC Hearing

Washington, DC—Senator Bob Bennett (R-UT), chairman of the Joint Economic Committee (JEC), held a hearing today to discuss the August employment numbers with Commissioner of the Bureau of Labor Statistics (BLS) Kathleen Utgoff. Bennett discussed the state of the current economy and asked the commissioner about a seemingly significant discrepancy in the employment numbers.

“Though not widely known, employment figures come from two different surveys,” said Chairman Bennett. “The BLS surveys individual households to determine the unemployment rate, while it asks businesses about the number of people on their payrolls to determine how many jobs have been gained or lost. Congress relies on these statistics to make policy decisions, and we need to be sure we are acting on the most accurate and complete statistics available.”

According to the household survey, the number of employed people has increased by 1.4 million since the end of the recession. The payroll survey, in contrast, indicates that roughly 1.1 million jobs have been lost over that period. Some of the disparity may reflect methodological differences between the two surveys, or it may be telling us of fundamental changes in our economy. A significant difference between the two surveys is that the household survey accounts for those who are self employed and for small emerging businesses that may be overlooked by the payroll survey.

Chairman Bennett also pointed to many measures that suggest that the economy is turning the corner. Economic growth in the second quarter exceeded three percent, and many forecasters anticipate further acceleration this quarter. The unemployment rate declined slightly from 6.2 percent to 6.1 percent in August, down from its peak of 6.4 percent in June, and well below the peaks of the 1980s and early 1990s.

“I am optimistic about recent developments in our economy, and believe the economic growth that is occurring will soon translate into resumed job growth,” said Chairman Bennett.

Senator Bennett’s complete statement and charts referred to in the hearing can be viewed at https://www.jec.senate.gov.

Aug 01 2003

Economy Continues to Show Signs of Growth

JEC Report Highlights Trends of Economic Growth

Washington, DC—The Joint Economic Committee (JEC) today released “10 Facts About the Economy,” a report that highlights a number of positive trends that have developed throughout the last few years. Despite challenges in some sectors of the economy, the fundamentals of the U.S. economy remain strong, including America’s world-class productivity levels and growth, and long-sought price stability.

“We are in the midst of the first recovery of a new economy,” said JEC Chairman Bob Bennett. “With the rise of information technology we are experiencing dynamics never before encountered. Real-time inventory capability has streamlined business practices and an increase in productivity due to technological advances affects the job market in new ways. Despite the pace of the current economic recovery, I am confident the second half of this year will see
stronger economic growth.”

The report points out that despite a series of unforeseeable shocks, the economy continues to grow. Since the end of the recession in November of 2001, incomes and spending have grown, and home sales have hit record highs. In addition, it was announced today that the unemployment rate saw a modest decrease, keeping the rate well below the peaks of the previous recessions in the 1980s and early 1990s.

The report follows economic indicators released this week from the Bureau of Economic Analysis (BEA) showing a surprising 2.4 percent increase in Gross Domestic Product (GDP) in the second quarter of this year. This increase exceeded expectations for two primary reasons. First, business investment rebounded more quickly than many economists had predicted, with business spending on equipment and software increasing at a 7.5 percent annualized rate, and investment in offices, factories, and other structures increasing at a 4.8 percent rate. This is a positive signal for a long-awaited resurgence of business investment activity. Second, government spending increased significantly, reflecting a sharp increase in defense spending.

The report can be found on the JEC website at https://www.jec.senate.gov, or contact Rebecca Wilder at (202) 224-0379.