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111TH CONGRFSS,
Ist Session
I
SENATE
{
RFP(OFT
111-1
THE 2008 JOINT ECONOMIC REPORT
REPORT
OF THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ON THE
2008 ECONOMIC REPORT
OF THE PRESIDENT
To()ETHEIR WITH
MINORITY VIEWS
11
.JANt-AIR
A111111
9, 2009.-Ordered to he printed
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5 (a) of Public Law 304, 79tb Congress]
HOUSE OF REPRESENTATIVES
Carolyn B. Maloney, New York, Vice Chair
Maurice D. Hinchey, New York
Baron P. Hill, Indiana
Loretta Sanchez, California
Elijah E. Cummings, Maryland
Lloyd Doggett, Texas
Jim Saxton, New Jersey
Kevin Brady, Texas
Phil English, Pennsylvania
Ron Paul, Texas
SENATE
Charles E. Schumer, New York, Chairman
Edward M. Kennedy, Massachusetts
Jeff Bingaman, New Mexico
Amy Klobuchar, Minnesota
Robert P. Casey, Jr., Pennsylvania
Jim Webb, Virginia
Sam Brownback, Kansas
John E. Sununu, New Hampshire
Jim DeMint, South Carolina
Robert F. Bennett, Utah
MICHAEL S. LASKAWY, Executive Director
CHRISTOPHER J. FRENZE, Republican StaffDirector
JEFFREY L. SCHLAGENHAUF, Senate Republican Staff Director
ii
111TH CONGRESS |
Ist Session
I
S
SENATE
I
REPORT
111-1
THE 2008 JOINT ECONOMIC REPORT
REPORT
OF THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ON THE
2008 ECONOMIC REPORT
OF THE PRESIDENT
TOGETHER WITH
MINORS VIEWS
JANUARY 9, 2009.-Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
46-303
WASHINGTON: 2009
LETTER OF TRANSMITTAL
December 31, 2008
HON. HARRY REID
MajorityLeader, US. Senate
Washington, DC
DEAR MR. LEADER:
Pursuant to the requirements of the Employment Act of 1946, as amended, I
hereby transmit the 2008 Joint Economic Report. The analyses and conclusions of this Report are to assist the several Committees of the Congress and
its Members as they deal with economic issues and legislation pertaining thereto.
Sincerely,
CHARLES E. SCHUMER
Chairman
iii
Table of Contents
Overview of Current Economic Conditions ........................ 1
28
Majority Staff Reports .............................................
Worsening Economic Conditions Will Increase Demand for
the State Children's Health Insurance Program and Medi29
caid .............................................
High Oil Prices Have Significant Effects on Consumers and
39
the U.S. Economy .............................................
Paid Family Leave at Fortune 100 Companies: A Basic
Standard but Still Not the Gold Standard ................... . 45
A Good Job Is Hard To Find: Evidence for Extending Unemployment Insurance Benefits Already Exists ......
75
Coast To Coast, Home Prices Are Down and Families Have
Lost Wealth From 2007-2009 ................................
88
Impact of Subprime Foreclosures on Home Equity, Property
90
Values, and Property Taxes .................................
Extending the Bush Tax Cuts is the Wrong Way to Stimulate
92
the Economy ..........................................
Your Flight Has Been Delayed Again: Flight Delays Cost
101
Passengers, Airlines, and the U.S. Economy Billions...
Equality in Job Loss: Women Are Increasingly Vulnerable
146
to Layoffs During Recessions ..............................
157
African American Families Are Being Squeezed ..........
159
Hispanic Families Are Being Squeezed .....................
161
Young Workers And Their Families Are Being Squeezed
Families Near Retirement Are Being Squeezed ............
163
Women and Their Families Are Being Squeezed ..........
165
Income In America: Household Income Up Slightly in 2007,
but Down Since 2000 Highlights from the Census Bureau's
167
Update on Household Income in the United States ......
Health Insurance In America: Number of Uninsured Americans
is 7.2 Million Higher Than When President Bush Took Office
Highlights from the Census Bureau's Update on U.S. Health
173
Insurance Coverage .........................................
Poverty in America: One in Eight Americans Living in Poverty
Highlights from the Federal Government's Update on Poverty
178
in the United States .........................................
From Wall Street To Main Street: How The Credit Crisis Affects
184
You ............................................
State By State Economic Snapshots .........................
193
Minority Views of Representative Jim Saxton and Senator Sam
353
Brownback.....................................................
401
Minority Staff Reports .....................................
V
111TH CONGRESS I
1st Session I
SENATE
I
I
REPORT
111-1
THE 2008 JOINT ECONOMIC COMMITFEE REPORT
JANUARY 9, 2009.-Ordered to be printed
MR. SCHUMER, from the Joint Economic Committee,
submitted the following
REPORT
together with
MINORITY VIEWS
Report of the Joint Economic Committee on the 2008 Economic Report of the
President
JEC Annual ReDort 2008
In the 2008 Economic Report of the President (ERP), the Council of
Economic Advisers took a sanguine view of the U.S. economy and its
near-term prospects. Although defaults on subprime and Alt-A mortgages were inflicting losses on any firm with exposure to them, and
although the Federal Reserve was taking extraordinary measures to
preserve financial stability, the Council expressed a belief that financial
markets would fix themselves:
"Participants in the credit and housing markets are actively addressing challenges that were revealed during
the summer of 2007. Markets are generally better
suited than government to adapting to changes in the
economic environment; markets can respond quickly
to new information, while government policy often
reacts with a lag or has a delayed impact." '
'Economic Renrt of the President Februaly 2008, 19.
2
The ERP also forecast continued expansion for the real economy during 2008-2009, noting that:
"[t]he Administration's forecast calls for economic expansion to continue in 2008, but at a slower pace.
Slower growth is anticipated for the first half of the
year, and the average employment rate for 2008 is projected to move up from the 2007 level. In 2009 and
2010, real GDP growth is projected to grow at 3 percent, while the unemployment rate is projected to remain stable and below 5 percent." 2
The views expressed in the ERP have, unfortunately, turned out to be
spectacularly wrong. Financial markets have not repaired themselves.
Instead, the financial crisis has expanded, important financial institutions have failed, and credit markets remain severely disrupted.
The real economy is also in grave difficulty. The current recession,
which the National Bureau of Economic Research (NBER) dates from
December 2007, has caused massive job loss and real GDP is contracting. There are strong indications that this downturn could be the worst
in the post World War II period.
Under these circumstances, strong fiscal stimulus measures, together
with continued efforts to preserve.financial market stability, are clearly
necessary. Market economies are easily capable of producing sustained episodes of high unemployment and feeble real output. Avoiding the economic losses and human costs of such a sustained downturn
is clearly the first order of business for the federal government.
*
The collapse of housing and credit market bubbles in 2007 has
produced the most significant financial crisis since the Great
Depression.
Beginning in 1998, house prices began a sustained and rapid increase
that did not end until mid-2006. The real price of houses increased by
about 7 percent annually during this period. If sustained, this rate of
increase would have caused the real price of houses to double approximately every 10 years. With median real household income stagnant
and ultimately declining after 2001, this rate of price increase was
clearly unsustainable. Had it continued, most households would have
been unable to purchase a house.
Ibid, 18.
3
Asset bubbles, unfortunately, can produce large economic distortions
in the real economy. The house price bubble enabled mortgage lenders
to rapidly expand the origination of subprim e and Alt-A mortgages.
Large volumes of these mortgage loans were made to households that
could sustain them only if they experienced quick capital gains from
price increases, and used their increased equity to refinance. This speculative and often predatory process resulted in over $4 trillion in subprime and Alt-A mortgage originations between 2001 and 2007.3
The house price bubble began to deflate in mid-2006, which meant that
defaults on outstanding subprime and Alt-A loans were bound to rise.
From that point on, anyone holding whole or securitized subprime and
Alt-A mortgages, derivatives based on those mortgages, or obligations
to cover losses on those assets, was destined to experience substantial
losses. The size and scope of the economic and financial problems
were not immediately recognized. It was not until mid-2007, when
credit rating agencies began to downgrade securities backed by subprime mortgages, that there was general admission that serious problems were on the way.
Since mid- 2007, ongoing declines in house prices, together with a
weakening real economy, have caused rising defaults on subprime and
Alt-A mortgages (see Figure 1). For those financial institutions with
significant exposure to subprime assets, the results have been disastrous. The losses that the financial institutions have taken produced liquidity and solvency crises. Some very large institutions have failed,
and others have been rescued by federal authorities because their failure was thought to threaten the stability of the financial system.
Joint Economic Committee, The Subprime Lending Crisis The Economic Impact on
Wealth, Property Values, and Tax Revenues and How We Got There, available at
http //jec.senate.gov/mdex cfmn9FuseAction=Reports.Reports&ContentRecordid=c6627bb23See
7e9c-9af9-7ac7-32b94d398d27&Region md=&lssue Id=
4
Fqpue 1. Delinquency Rates forPrime and Subprime Mortgages
Tobl lat BDe, SeanaalY Adjsted
25.0
20.0
-SdbdeARM
-SeFRM
15.0
=PtimeFRM
o
t 10.0
5.0
0.0
A ?
Ci&y all
4k '1
S
4'
d&
41
&
i
&
6?
b?
Saume Maslppflmkeu Anowb=2
Commercial banks were among the first institutions to feel the effects
of subprime losses. Banks had provided guarantees for off balance
sheet conduits and structured investment vehicles (SIVs) that contained
subprime securities and derivatives. Banks also held subprime mortgages, securities and derivatives on their balance sheets. Banks with
large concentrations of these assets were forced to write down assets
and raise additional capital.
The effect of these losses, and uncertainty about where future losses
were concentrated, caused disruptions to financial markets. The interbank lending market, in which banks make unsecured term loans to
each other, was severely affected. The spread between the Treasury
rate and the dollar London Interbank Offer Rate - the so-called "TED
spread" -- increased dramatically as bank losses were first recognized.
It has yet to recover to normal levels, indicating a continuing unwillingness of banks to extend credit to each other (see Figure 2).
5
Figure 2. The TED Spread
Differenceletweeen 3-Month London Interbank Borrowing Rate (LIBOR) and 3-Moth
TreasuryBillYide, Juarv 2007eDecember 2003
5.0
4.5
4.0
3.5
3.0
V 2.5
* 2.0
cE1.5
1.0
0.5
0.0
Jan
Mar
Jun
Auig
Noy
Jan
Apr
Jul
Sep
Dec
Somues:EC M*rity Stff Ccadmia baed on data form the U.S. DepZMat of &eTrnury and
le FiMCW Tanes.
Because conduits and SIVs were exposed to subprime losses, investors
developed an aversion to the asset backed commercial paper (ABCP)
issued by these entities, and that aversion spread to other issuers of
ABCP as well. From its peak value in July 2007 the amount of ABCP
outstanding fell by about a third, and has yet to recover (see Figure 3).
This and subsequent events initiated a long term increase in investor
risk aversion, reflected in a steady decline in the interest rate on short
term Treasury debt. The rate of interest on three month Treasury bills
has declined consistently since mid-2007, and is now near zero (see
Figure 4).
Figure 3. Commercial Paper Outstanding, by Type of Originator
Weekly Amount Oubtanding, January 2001- Present
1,290
1,190
300
-AussetBadmd
leftazis)
-Fisandil (left zs)
-Nanlnscsight
axi)
,,190
'~9990
280
260
/
2
240
a1s,990
090
a
NGO.2
~80
130
0790
490
.
R
160 M
R
590
490
Jan'01 Nov'01 Oct'02 Aug'03
Source Fedel Reseve Boad.
140
120
100
Ml'04 YTim'05 Apri06 Mar'07 Jan'08 Dec'08
6
6.0
5.0
4.0
V
i 3.0
It
2.0
1.0
0.0
Jan
Mar
am
Aug
Nov
Jan
Apr
Jul
Sep
Dec
Sourves:JEC Majority Stff Calagaion based mndatafrasthe U.S.Depautmt ofi Treaury asd dhe
Financial Timm.
Beginning in early 2008, major financial institutions began to fail as
losses from subprime assets rendered them insolvent or illiquid (see
Figure 5). In January Countrywide, a California-based thrift with assets of more than $200 billion and a major originator of subprime
mortgages nationwide, avoided failure when it was acquired by Bank
of America. In March the investment bank Bear Stearns, with large
exposures to subprime and Alt-A assets on its books, lost access to the
short term financing necessary to run its business. The Federal Reserve, concerned about the effects of a failure on derivatives and debt
markets, arranged for JPMorgan Chase to acquire Bear. As part of the
process, the Fed provided $30 billion in term financing to JPMorgan,
secured by Bear assets with a nominal value of $30 billion. JPMorgan
will bear the first $1 billion in losses from this portfolio and the Fed
will realize any gains. JPMorgan's unwillingness to shoulder the risk
of this portfolio suggests that Bear was insolvent. 4
Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that play a major role in mortgage markets, were the
next to fail. The principal role of these two firms is to securitize and
guarantee mortgages that meet reasonable underwriting standards and
are within size limits set by their federal regulator, the Federal Housing
U.S. Treasury, Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of
2008 Loan to Facilitate the Acquisition of The Bear Steams Companies, Inc. by JPMorgan
Chase &Co
7
and Finance Authority (FHFA). Once the financial crisis began, investors virtually ceased buying mortgage backed securities without GSE
guarantees. This made the two GSEs crucial to the continued functioning of mortgage markets.
FEgure 5. runelhne of Major Financial Failures and Takeovers
Dowlams
January2008
12,26&39
t2,26i.t
L4-.r,'X:; 7-
.:.
7--
1/11: Countrywide Financial ne,
of the nation's largest subprime
mortgage leders, announces it
will be purehased by Back
America for $4.1 billion.
12A50.36
3/16: The Feeal Reserve arr -gesa dislressed sale of
stem. to JP. morain'Chase
The Fed provides a $30 billion
nedi line to fikeiliate tki 5ale
12,S20.13
711: ludyM 8an
ahrge
Al-A mortgage lender, is
seied by the FDIC. Estimated
oses re S8 billion.
12,631.32
,t, i
>
.r,.,t
'i
9/7: Fannie Mamand Fehj
It,3 0.05
Mat are placed itot C~onw-
,
vatorliip after replamrs
etermine that the GSEs may
be idequately capitalized.
I
11,37&02
9S15: Lehman Bithins declaes
11,543.55
t0J50.66
9,325.01
&829.04
bnduptcy aPtr government officials refse to offer a lifeline.
9W5: WashinAton M '. the
nation's lorgest tlrift is seized by
ie FDIC and its opeations are
sold to IP M~r Chs
Loan iscnsed
by the FDIC and
syiaeqoetniy arqiredby US
k
11123: The Treasury provides a $20
billion loan gumee te Citiom and,
along with the Fedeal Reserve and the
FDIC. pledge to baclstop losses on
5300+ billion of real estate assets.
14: Bank of America
announces i wll purchase
hfMerill Lyrh for $50.3
billiom
I
9/16: Federal Reserve proviles
American international Gon
(
wLG)With
an $85 billion loan in
order to avoid badncrptry. Subsequently, the Fed increases the loan
maximum by $21 billion and Treasmy buys S40 billion in preferred
stu& .
__J
9 -1043:
After initially ageeing to a
bkwmewdeal by Ciipru and asisted
by the FDIC. Wa
is ultimately
pchased by Wes Far f $15 billion. Wachovin's mid-2006 prechase of
fin
mrtage company Goldn West
Financial recipktated its downfll.
Deember 2008
The GSEs -- which are publicly traded, for-profit firms -- had unfortunately acquired substantial portfolios of Alt-A and subprime loans and
securities in an effort to increase earnings (see Figure 6). As the value
of these portfolios declined, investors began to suspect that the GSEs
8
were insolvent. This led to a precipitous decline in stock market valuations, and difficulty in funding GSE debt (see Figure 7). In September,
federal regulators concluded that they were insolvent and both were
placed into conservatorship. The Treasury injected capital by purchasing preferred stock, and additional contingent support has been approved by Congress.
Figure 6. Alt-A Mortgage Exposure at the GSEs
Share of Portfolio
(Percent)
Unpaid Balance
(billion $$)
GSE & Vintage
11.1
Fannie Mae (M)298.9
2007
76.9
25.7
2005
56.3
18.8
2007
60
17.0
2005 or earlier
75
6.0
Note: Percent shares in vintage years represent share of credit book of business for
that specific year.
ISources: Fannie Mae and Freddie Mac.
so
70
60
aI
50
40
-r
01.
30
20
I0
0
Jan
Mar
SoMue: Google Fince.
Jun
Aaug
Nov
Jan
Apr
Jul
Sep
Dec
9
The September failure of Lehman Brothers, a large investment bank,
delivered a significant shock to several financial markets. The decision
by the Federal Reserve and the Treasury not to execute a rescue meant
huge losses for Lehman's debt holders. This changed the risk calculations for creditors of other financial institutions, and made it more difficult and expensive to borrow. The sharp jump in the TED spread in
September reflects this change.
In addition, Lehman's default on its debt caused a run on prime money
market mutual funds. These mutual funds typically invest in commercial paper. When Lehman defaulted, the Reserve Prime Fund experienced significant losses and suspended redemptions. This caused
investors to withdraw $500 billion from other prime funds in a short
period of time. The Treasury was forced to provide guarantees for
money market fund assets to prevent additional runs, which would
have caused distressed assets by the funds. As a consequence of the
Lehman-related losses, money market funds and other investors became reluctant to buy commercial paper. In November, the Federal
Reserve created a Commercial Paper Funding Facility, to purchase
commercial paper directly from corporate issuers, in order to support
the functioning of this market.
One day after the Lehman collapse, the Federal Reserve effectively
nationalized the insurer AIG. AIG had written credit default swaps
(CDS) on more the $300 billion in collateralized debt obligations
(CDOs) backed by subprime assets. As the declining value of subprime assets reduced the values of these CDOs, AIG was forced to post
more collateral on. the CDS it had written. AIG also held a large portfolio of subprime mortgage-backed securities that were also declining
in value. The collateral calls and losses made AIG insolvent. The
Treasury felt that a default would have disrupted many important money markets. For example, many banks had purchased CDS from AIG,
so AIG's failure would have increased their exposure to loss. To prevent these disruptions, the Federal Reserve first provided $85 billion,
in exchange for 79.9 percent of the company's equity. Subsequently
the loan terms were changed, and the loan value was increased by $26
billion. The Treasury also provided AIG with $40 billion in financing
by purchasing preferred stock.
In September, the FDIC seized Washington Mutual, the nation's largest thrift with $300 billion in assets, and sold its operations to JPMorgan Chase. The demise of Washington Mutual was a consequence of
10
losses on large holdings of Alt-A mortgages. The failure of Washington Mutual was preceded by the FDIC seizure of Indymac, and followed by the FDIC-assisted purchase of Wachovia by Wells Fargo,
and the seizure of Downey Savings and Loans. These failures occurred
because, as part of their mortgage lending business, the banks held
large volumes of subprime or Alt-A assets on their books.
In November, the Treasury and the Federal Reserve intervened to help
Citigroup, one of the largest financial institutions in the U.S. As of the
third quarter of 2008, Citigroup had assets of about $2 trillion, about
$750 billion of outstanding loans, about $277 billion in domestic deposits, and about $500 billion in foreign deposits. The firm also has significant borrowings in the form of commercial paper and long term
debt outstanding. Citigroup has taken extensive asset write-downs because of subprime losses, and it was threatened with debt-holder and
depositor runs because of concerns that it was insolvent. To restore
confidence in Citigroup, the Treasury acquired $20 billion in Citigroup
preferred stock (which was in addition to the $25 billion dollar purchase it had already made using TARP funds). Treasury and the FDIC
agreed to share losses on a pool of $306 billion in primarily mortgagerelated assets held by Citigroup, with government exposure capped at
$15 billion. The Federal Reserve has authorized additional funding if
this loss limit is exceeded.'
As a consequence of these large-scale failures, there is a continuing
crisis in credit markets. The Federal Reserve has taken extraordinary
steps to maintain the operation of these markets. The Federal Reserve
now makes secured term loans to banks, extends- secured overnight
loans to primary dealers, provides dealers with term loans of Treasury
securities, provides support for purchases of assets held by money
market funds, funds bank purchases of asset backed commercial paper
held by money market funds, and buys commercial paper (see Figure
8). As a result, Federal Reserve assets expanded from $902 billion on
August 8, 2007 to $2.3 trillion on December 17, 2008.6 The Federal
Reserve is now contemplating the purchase of other assets, such as
mortgage backed securities issued by the GSEs and longer dated Treasury securities.
U.S. Treasury, Report Pursuant to Section 129 of the Emergency Economic Stabilization Act of
2008 Authonzation to Provide Residual Financing to Citigroup, Inc. For a Designated Asset
Pool.
6 Board of Governors of the Federal Reserve System, Statistical Release H.4.1.
11
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Description
August 7,
2007
Federal
Reserve
Term Discount Window Program
December
12, 2007
Federal
Reserve
Term Auction Facility
$415
billion
($900
billion)
The Fed begins the auction of term
funding to
depository
institutions.
February 13,
2008
Legislation
Economic
Stimulus
Package of
2008
$168
billion
Provides for
tax rebates to
low- and
middleincome taxpayers as
well as tax
incentives to
stimulate
business investment.
March 11,
Federal
Term Securities Lending
$190.2
billion
The Fed announces a
The Fed begins providing depository institutions with
term financing at its discount window. Previously loans
were only
made overnight.
12
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Cost
(max.
exposure)
Program
Description
2008
Reserve
Facility
($250
billion)
rescue package to provide up to
$200 billion
in loans to
banks and
investment
houses and
let them put
up risky
mortgagebacked securities as
collateral.
March 16,
2008
Federal
Reserve
Net Portfolio
Maiden Lane
LLC
$26.9
billion
($28.8
($28.8n
billion)
The Fed
provides a
$29 billion
loan to
JPMorgan
Chase & Co.
as part of its
purchase of
investment
bank Bear
Stearns.
March 16,
2008
Federal
Reserve
___
____ ___
An overnight
loan facility
to provide
overnight
funding to
primary
$92.6
billion
Primary
Dealer Credit
Facility
_
__
___
___
dealers
13
Figure 8. Timeline of Economic Stabilization Actions
Cost
Date of Announcement
Department
r(max
Porm
Description
exposure)
(firms that
trade directly
with the
Fed).
July 11, 2008
FDIC
July 30, 2008
Legislation
Hope for
Homeowners
$300
billion
President
Bush signs a
housing bill
including
$300 billion
in new loan
authority for
the government to back
cheaper
mortgages
for troubled
homeowners.
September 7,
2008
U.S. Treasury Department
Fannie Mae /
Freddie Mac
Conservatorship
($200
billion)
The Treasury takes
over mortgage giants
Fannie Mae
and Freddie
Mac, putting
them into a
conservator-
IndyMac
Bank placed
in conservatorship by
the FDIC.
14
Figure 8. Timeline of Economic Stabilization Actions
Cost
Date of Announcement
Department
Program
(max.
exposure)
Description
ship and
pledging up
to $200 billion to back
their assets.
September
16, 2008
Federal
Reserve
September
16, 2008
Federal
Reserve
September
19, 2008
U.S. Treasury Department
The Fed injects $85
billion into
American
International
Group, one
of the
world's largest insurance
companies.
Credit Extension
The Fed
pumps $70
billion more
into the nation's financial system
to help ease
credit
stresses.
AssetBacked
Commercial
Paper Money
Market Mutual Fund
Liquidity
$61.9
billion
The Treasury temporarily guarantees money market
funds against
losses up to
15
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Description
Facility
$50 billion.
The Fed authorizes
overnight
extensions of
credit to
brokerdealer subsidiaries of
investment
banks as
they transition to becoming subsidiaries of
bank holding
companies.
September
21, 2008
Federal
Reserve
Transitional
Credit Extensions
October 3,
2008
Legislation
Emergency
Economic
Stabilization
Act of 2008
$350
billion
($700
billion)
President
Bush signs
the $700
billion economic bailout package.
Treasury
Secretary
Henry Paulson says the
money will
be used to
buy distressed
mortgage-
16
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Descrption
related securities from
banks.
October 6,
2008
Federal
Reserve
Term Auction Facility
October 7,
2008
Federal
Reserve
Commercial
Paper Funding Facility
LLC
October 8,
2008
Federal
Reserve
Credit Extension
The Fed increases a
short-term
loan program, saying
it is boosting
short-term
lending to
banks to
$150 billion.
$270.9
billion
($1.8
trillion)
The Fed says
it will start
buying unsecured shortterm debt
from companies, and
says that up
to $1.8 trillion of the
debt may
qualify for
the program.
The Fed
agrees to
lend AIG
$37.8 billion
more, bringing total to
17
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Descrpion
about $123
billion.
October 14,
2008
U.S. Treasury Department
TARP- Capital Purchase
Program
October 14,
2008
FDIC
FDIC Liquidity Guarantee
($1.4
trillion)
The FDIC
says it will
temporarily
guarantee up
to a total of
$1.4 trillion
in loans between banks.
October 21,
2008
Federal
Reserve
Money Market Investment Funding Facility
($540
billion)
The Fed says
it will provide up to
$540 billion
in financing
to provide
liquidity for
The Treasury says it
will use
$250 billion
of the $700
billion bailout to inject
capital into
the banks,
with $125
billion provided to nine
of the largest.
money mar-
18
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Description
ket mutual
funds.
November
10, 2008
Federal
Reserve /
U.S. Treasury Department
November
12, 2008
U.S. Treasury Department
The Treasury and Fed
replace the
two loans
provided to
AIG with a
$150 billion
aid package
that includes
an infusion
of $40 billion from the
government's bailout fund.
TARP- Capital Purchase
Program
Secretary
Paulson says
the government will not
buy distressed
mortgagerelated assets, but instead will
concentrate
on injecting
capital into
banks.
19
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
November
17, 2008
U.S. Treasury Department
TARP- Capital Purchase
Program
November
23, 2008
U.S. Treasury Department
Loan Guarantee to Citigroup
Cost
(max.
exposure)
Description
Treasury
says it has
provided
$33.6 billion
in capital to
another 21
banks. So
far, the government has
invested
$158.6 billion in 30
banks.
$249.3
billion
I
_________
The Treasury says it
will invest
$20 billion
in Citigroup
Inc., on top
of $25 billion provided Oct.
14. The
Treasury,
Fed and
FDIC also
pledge to
backstop
large losses
Citigroup
might absorb
on $306 billion in real
L~~~~~~~~~~~
20
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Descnption
estate-related
assets.
($200
billion)
The Fed says
it will purchase up to
$600 billion
more in
mortgagerelated assets
and will lend
up to $200
billion to the
holders of
securities
backed by
various types
of consumer
loans.
November
25, 2008
Federal
Reserve
Term Asset
Backed Securities Loan
Facility
December 2,
2008
Federal
Reserve
PDCF
AMLF
TSLF
Extension of
programs to
April 30,
2009
December
16, 2008
Federal
Reserve
Federal
Funds Target
Rate
Federal
Open Market
Committee
unanimously
votes to reduce the target federal
funds rate to
a range of 0
to 0.25%.
21
Figure 8. Timeline of Economic Stabilization Actions
Date of Announcement
Department
Program
Cost
(max.
exposure)
Description
This is a reduction of
0.75 to 1.00
basis points
from the
previous target rate of
1.00 %
(10/29/2008)
. This is also
the lowest
target rate in
the Fed's
history.
To help the Treasury and the Federal Reserve in their efforts to preserve financial stability, Congress created the Troubled Asset Relief
Program (TARP). TARP provided the Treasury with $700 billion and
broad authority to purchase assets from financial institutions, and provide relief to households in danger of defaulting on their mortgages.
To date, the Treasury has spent $350 billion in TARP funds, much of it
in the form of preferred stock purchases from commercial banks (see
Figure 8). Congressional and Government Accountability Office reviews of the Treasury's use of TARP funds have pointed out that the
Treasury has not yet produced a well-articulated strategy for the use of
TARP funds, or measures for program effectiveness. 7
Oversight Panel for Economic Stabilization (2008) Questions about the $700
Billion Emergency Economic Stabilization Funds, December 10, U.S. Government Accountability Office (2008). Troubled Asset Relief Program Additional Actions Needed to Better Ensure
Integrity, Accountability, and Transparency, December 2008, GAO-09-161
7Congressional
22
Despite these efforts, the interest rate paid on short term Treasury securities remain near zero, credit spreads above Treasury interest rates
remain elevated, commercial banks remain reluctant to lend, and the
atmosphere of crisis persists in financial markets.
The breakdown in credit provision is producing a negative effect on the
real economy. When households and businesses cannot borrow, they
must postpone or forego some of their spending. The reduction in demand reduces output and employment. Moreover, as the incomes of
households and firms are reduced, default rates on existing debt rise,
and potential borrowers become less creditworthy. This causes financial firms to tighten lending even more. Unless this negative feedback
between the real and financial sectors - sometimes called the "financial
accelerator" - can be interrupted, it threatens to intensify the course of
the recession that began in December 2007.8
*
The real economy entered a recession in December 2007, and
the downturn may be more severe than any seen in the postWorld War II period.
The NBER announced on December 1 5' that the economy entered a
recession in December 2007, which means that the current downturn
is already longer than the last two recessions. Only two post-WWII
recessions, the 1973-75 and 1981-82 recessions, were longer than 12
months. When dating business cycles, the NBER looks at changes
in: (1) personal income less transfer payments in real terms; (2) employment; (3) industrial production; and (4) wholesale and retail
sales, adjusted for price changes. The NBER also looks at estimates
of real GDP. In this recession, the NBER noted that real GDP,
which showed increases in the first half of 2008, did not accurately
reflect economic activity due to a statistical discrepancy between reported production and reported income.
As shown in Figure 9, real personal income less transfer payments
reached its peak in the fourth quarter of 2007 and has been declining
through 2008. Given the large declines in employment experienced in
October and November of 2008, real personal income less transfers is
expected to be negative in the fourth quarter of 2008 as well.
Ben S. Bernanke (2007). The Financial Accelerator and the Credit Channel, June 15.
H
http llwww federalreserve gov/newsevents/speech/Bemanke200706l5a htm
23
Figure 9. Real Personal Income Less Transfer Payments
Chained 2l0ODoflars,Q1 2007- Q3 2001
8,550
S,500
98,450
8 2,400
'PeakmQ42007oniads
witb
ba~g of .fii rcm
o,0
8,350
8,300
,..
Q3/2007
8,250
QI/2007
Q2/2007
Q4/2007
QI/2008
Q2/2002
Q3/2008
Soma: U.S. Dpmumet of Comma"
In addition to declines in economic output, the NBER relied on the decline in payroll employment from its December 2007 peak in dating
this recession. Furthermore, exports are no longer a bright spot in the
2008 U.S. economy as the global economic slowdown, exasperated by
the financial crisis, and strengthened U.S. dollar decreased the demand
for U.S. exports. The downward trends in employment and earnings
are expected to continue into 2009, with the U.S. economy shedding
even more jobs. The economy has already lost a net of close to 2 million jobs, with job losses starting in the construction and financial industries, and spreading to the manufacturing and retail sectors of the
economy (see Figure 10).
Figure 10. Total Nonfarm Payrols Decline with Losses Concentrated in
Construction, Manufacturing, Financial Activities and Retail Sectors
so
Seasonan Adjused, Janusm 2007- November 2008
.
a
60
|0|00r_
Nomfnn*
137,500 'r
20
0
.
-20
P
-40
-60
0r
-100
2-120
133,500
. 138,G000
137,000 0
OF
r
0
136,500
136,000
-80
.
aFO-itmm.d)135)500
_
5om~ce:
v.S.Xqmn of La r
Dzmof io
somm U.S.
6
V
z a -o
*Rrbfl T~ir135,000
24
Even those with a job are not working as much as they would like.
Hours worked fell to 33.5 hours per week in November 2008, the lowest on record. There are 2.8 million more people working part-time
than a year ago because they cannot find a full-time job. In November,
the share of the population with a job fell to 61.4 percent, the lowest
level in fifteen years.
The unemployment rate is now 6.7 percent, almost two percentage
points higher than a year ago. Male unemployment was 7.2 percent in
November 2008 and female unemployment was 6.0 percent (women
who maintain families show 9.3 percent unemployment). In November, over 10.3 million people were unemployed, and nearly 6.1 million
of those (58.4 percent) lost their jobs involuntarily. There are over 3.1
million more unemployed workers than there were a year ago. And
these numbers underestimate the number of unemployed people. There
are 608,000 workers who are out of the labor force because they are
discouraged (these are not counted in the unemployment rate) 259,000 more workers than a year ago. Analysts are predicting that
unemployment rates will continue to rise and jobs losses will continue
through 2009.
*
Returning the real economy to full employment will require
massive fiscal stimulus.
The current recession follows the weakest recovery on record, making
prospects for a consumer-led recovery unlikely. Families are more financially constrained than at the beginning of any prior downturn, facing rising unemployment, dwindling assets, historically high debt, and
real income that remains lower than it was eight years ago. With the
weakness of household finances, absent aggressive government action,
the current downturn could be particularly long-lasting and severe.
The 2000s economic recovery was the first since World War II where
the typical household saw net income losses and household income did
not recover to its pre-recession peak. Real household incomes were
$324 lower in 2007 (the last year for which we have data) than they
were in 2000. Increased business investment in response to export demand is also unlikely to spur economic growth in the near term. Export
demand was high in the first half of 2008, but slowed in the second
half of 2008 with the onset of a global economic slowdown.
In order to shorten the duration and reduce the magnitude of this downturn, it is important that government step in and break the current cycle
with a temporary fiscal stimulus designed to support economic activity
25
and household well-being while laying the groundwork for further
economic growth. Economic stimulus is necessary because the prospects for a consumer-led recovery are bleak (see Figure 11). Consumers are the backbone of the U.S. economy; when their financial resources are depleted, the economy falters. In a hearing on October 30,
2008, Dr. Nouriel Roubini testified that because most components of
private aggregate demand are sharply falling right now (private consumption, residential investment, non-residential investment in structures, investment spending by the corporate sector on software and machinery) and direct tax incentives have not been effective at boosting
consumption, a major additional fiscal stimulus is necessary to reduces
the depth and length of the current economic contraction. 9
Figure 11. Mondth Retail Sales and Food Services
Seasonafly.djusted, January 2007 October 2008
415
410
405
o400
390
385
380
375
_ _
Jan
Apr
Jul
Oct
Jan
Apr
Ju
_
_
_
_
_
Oct
Somu: U.S. Depoimt of Comimce.
Recent work by economists at the International Monetary Fund shows
that recessions associated with credit crunches and house price busts
tend to be deeper than other recessions, lasting longer with higher unemployment rates and more severe impacts on growth.'0 In particular,
although recessions accompanied with severe credit crunches or house
price busts last only three months longer, they typically result in output
losses two to three times greater than recessions without such financial
stresses. Recessions with housing busts and equity declines are much
more likely to be severe recessions.
9Dr. Nouriel Roubini, Professor of Economics, Stem School of Business, NYU and Chairman of
Roubini Global Economics, LLC, Written Testimony before the Joint Economic Committee October 30th 2008 Hearing on Faltering Economic Growth and the Need for Economic Stimulus.
"°StijnClaessens, M. Ayhan Kose, and Marco Terrones, "What Happens During Recessions,
Crunches and Busts?" IMF Working Paper, December 1,2008 available at
htp //www imf.orgaextemal/pubs/ft/wo/2008/wD08274.odf.
26
On December 16, 2008, the Federal Open Market Committee lowered
its target range for the federal funds rate to between 0 and 1/4 percent,
indicating monetary policy options are limited."' Economists have
been calling for an increasingly large fiscal stimulus to prevent the
U.S. from slipping into a depression. Fears that expansionary monetary policy and fiscal policy may lead to inflation have been temporarily abated by the price declines currently being experienced (see Figure
12). Dr. Simon Johnson has advocated fiscal stimulus of $450 billion,
or about 3 percent of GDP;' 2 and Dr. Nouriel Roubini has advocated
fiscal stimulus of $500 to $700 billion dollars;' 3 Dr. Paul Krugman has
4
recently advocated stimulus of four percent of GDP.' And recently,
private sector analysts and economists have advocated a stimulus
5
package of between $800 billion and $1.3 trillion." Most economists
are advocating that the new round of fiscal stimulus will have to take
the form of direct government spending on goods and services, preferably productive investment in infrastructures, and fiscal support to
agents in the economy more likely to spend it, such as state and local
governments. 61
2008
1216b.htm
"http://www.federalreserve.gov/newsevents/press/monetary/
Testimony of Simon Johnson before the Senate Budget Committee, Hearing on The Economic
Outlook and Options for Stimulus, November 19,2008
One
'3 Interview with U S News & World Report "The $700 Billion Bailout Isn't Enough" and
Third Probability of a Japanese-style L-shaped Stagnation available at
http /fwww rgemonitor.com/bloglroubini/254836/interview withusnews world reportthe_7
12
00_billionbailoutisntenoughandone
thrtd_probability_ofajapanese-style-l-
shaped stagnation
14 In a recent New York Review of Books, Dr Krugman said," Now, the United States tried a
fiscal stimulus in early 2008; both the Bush administration and congressional Democrats touted it
as a plan to "jump-start" the economy The actual results were, however, disappointing, for two
reasons. First, the stimulus was too small, accounting for only about I percent of GDP. The next
one should be much bigger, say, as much as 4 percent of GDP Second, most of the money in the
first package took the form of tax rebates, many of which were saved rather than spent The next
plan should focus on sustaining and expanding government spendmg-sustaining it by providing
aid to state and local governments, expanding it with spending on roads, bridges, and other forms
of infrastructure " Paul Krugman, "What to Do," The New York Review of Books. Dec 18, 2008
available at http.//www.nybooks.com/articles/22151
15See, eg , Jackie Calmes, "As Outlook Dims, Obama Expands Recovery Plans," New York
Times Dec 21, 2008
16 See, eg, Nounel Roubim Joint Economic Committee Testimony on October 30, 2008; Simon
Johnson Senate Budget Committee Testimony on November 19, 2008. Paul Krugman, The New
York Review of Books, December 18, 2008.
27
Fiure 12. Consumer Price Infhtion Slows to One Percent
6.0
Year/YearPercent Chauge Seasonail
Adjsed, January 2007- November 200
5.0
4.0 [
j
3.0
2.0
1.0
0.0
_
.0
So5m U S. Dqiut
2;.
1
afLabor
-!
ito X
~
o
0 D.
.
.1
D
g
X
C
29
Worsenine Economic Conditions Will Increase Demand for the
State Children's Health Insurance Program and Medicaid
EXECUTIVE SUMMARY
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.
*
Between 700,000 and 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. In the face of the economic slowdown and growing state budget
deficits and because nearly every state is required to balance its budget,
state governments will 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.
ENROLLMENT IN MEDICAID AND CHIP HAS
SHIP To ECONOMIC CONDITIONS
A STRONG RELATION-
Several previous studies have supported a relationship between economic conditions and rates of health insurance coverage (Kaiser Family Foundation, 2002). There is also evidence that rates of Medicaid
and/or CHIP coverage seem to increase during periods of economic
recession (Holahan and Garrett, 2001; Ku, 2002).
30
This JEC study updates and expands upon previous research in two
ways:
1) This study uses state-level administrative data on Medicaid
enrollment, which is more reliable than the survey-based evidence used in previous studies.
2) This study uses the most current data available to examine the
2000-2005 period. Because of Medicaid and CHIP expansions
that took place during the late 1990s, demand for public health
insurance coverage may have a different relationship to unemployment today than it did prior to this decade.
In order to determine the relationship between economic conditions
and Medicaid/CHIP enrollment, JEC staff examined the relationship
between state-level economic conditions (payroll employment levels
and unemployment rates) and enrollment in the state Medicaid program. Separate analyses were run for both children's enrollment and
total Medicaid enrollment. Coverage levels for children sum total
enrollment in both Medicaid programs and separate CHIP programs.
The details of the methodology are described and the underlying statistical results are given in the attached appendix.
The analysis reaches the following conclusions:
*
The association between poor economic conditions and children's enrollment in Medicaid/CHIP was large, consistent, and
statistically significant. A 10 percent decline in state payroll
employment was associated with a 9 to 14 percent increase in
children enrolled in public insurance. All findings were highly
statistically significant and consistent in direction and magnitude across various methodologies.
*
The association between poor economic conditions and total
enrollment in Medicaid/CHIP was somewhat smaller than the
impact on children alone, but it was still sizable. A 10 percent
decline in state payroll employment was generally associated
with a 5 to 9 percent increase in total state Medicaid/CHIP
enrollment. These findings were generally statistically significant, but they were somewhat more variable across differing
methodologies than the findings for children alone.
31
STUDY FINDINGS IMPLY LARGE INCREASES IN MEDICAID/CHIP
DEMAND As ECONOMY SLOWS
If the same relationships observed over the 2000-2005 period continue
to hold, worsening economic conditions will create substantial increases in demand for enrollment in their Medicaid/CHIP programs over the
next few years. Economic trends alone could have a substantial effect
on state Medicaid coverage, even apart from normal trend growth in
public coverage. If employment growth drops from recent levels to the
levels seen in the 2001-2003 period, the point estimates from these regressions imply that:
*
Between 700,000 and 1.1 million additional children will
enroll in Medicaid/CHIP each year due to slowing employment
growth alone.
*
Between 700,000 and 1.5 million total additional persons will
enroll in Medicaid each year due to slowing employment
growth alone. .
Once again, this forecast growth is above and beyond the ordinary
growth in public Medicaid coverage that is due to population growth
and changing trends in private health insurance coverage.
The forecast methodology is described in detail in the attached methodology appendix.
INCREASES IN MEDICAID/CHIP ENROLLMENT COMBINED WITH
FEDERAL FUNDING CUTS COULD CREATE ADDITIONAL PRESSURE
ON ALREADY STRAINED STATE BUDGETS
Budgets in many states are showing signs of strain as the effects of the
real estate slowdown affect the economy:
*
A total of 26 states have expected or projected budget shortfalls for FY 2009 (CBPP, 2007).
*
States have already drawn down their contingency or reserve
funds by $23 billion - or approximately 33 percent -- since
2006. This leaves them with a much reduced emergency funding in case of economic downturns (NASBO, 2007).
32
*
Real state tax revenues (adjusted for changes in rates) showed
a year-over-year decline in the third quarter of 2007, the first
time this has occurred since 2003 (Rockefeller Institute, 2007).
Medicaid/CHIP expenses account for over one fifth of state expenditures (NASBO, 2007). For this reason, increases in the demand for
Medicaid coverage have the potential to significantly increase state
budget deficits and therefore the need for either tax increases or budget
cuts in other areas.
At the same time, the Administration is proposing substantial cuts in
Medicaid/CHIP funding:
*
The President's vetoes of two bipartisan Congressional CHIP
reauthorization proposals necessitated a short-term extension
of the SCHIP program through March 2009. While the extension provides states sufficient funding for short-term, maintenance of existing programs based on the latest state projections
of funding needs, those funding levels may become inadequate
if demand for SCHIP grows significantly due to worsening
economic conditions. This report shows Medicaid/CHIP
enrollment for children could increase well beyond current levels in an economic downturn.
*
Proposed Administration regulations would cut some $13 billion over the next five years from Federal reimbursement for
state Medicaid costs (72 Federal Register). This cost-shift to
states would occur even as the need for Medicaid increases
during an economic downturn
*
The Administration is effectively restricting CHIP and Medicaid income limits that could reduce current CHIP and Medicaid coverage for lower-income children in almost half of U.S.
states. Such states would have to substitute state for Federal
money if they wished to assist these children (Mann and Odeh,
2007).
Given their current fiscal strains, this will leave state governments with
a difficult choice. They will be forced to cut back on health insurance
for children in the face of an economic slowdown, impose tax increases, and/or make budget cuts in other areas. If proposed Administration
33
regulations are finalized, the additional cuts in Federal support will
make the problem even more severe.
CONCLUSION
While a slowing economy will likely lead to substantial increases in
Medicaid/CHIP demand, the Administration is proposing a range of
cutbacks to CHIP and Medicaid funding. These cutbacks will put increased fiscal demands on states at a time when they are ill equipped to
handle them.
These findings suggest several courses of action:
*
Override the President's veto of CHIP reauthorization, and
guarantee sufficient funding levels for the CHIP program to
not only maintain current enrollment levels but to address additional needs among uninsured children, as the Congressional
CHIP bill would do..
*
Delay or cancel proposed regulations that shift Medicaid costs
to states, at least until possible impacts of a slowing economy
are better understood.
*
Increase the Federal Medicaid match percentage (FMAP) to
the states as part of a stimulus package to help buffer the impact of the economic slowdown to preserve Medicaid coverage
as people lose their jobs and health insurance, as was done during the last economic downturn..
REFERENCES
1. Federal Register (2007).
a. "Medicaid Program; Graduate Medical Education", 72
Federal Register 99 (23 May 2007), pp. 28930.
b.
"Medicaid Program; Cost Limit for Providers Operated by Units of Government and Provisions To Ensure
the Integrity of Federal-State Financial Partnership",
72 Federal Register 102 (29 May 2007), pp. 29748.
c. "Medicaid Program; Coverage for Rehabilitative Services", 72 Federal Register 155 (13 August 2007), pp.
45201.
34
2.
d.
"Medicaid Program; Elimination of Reimbursement
Under Medicaid for School Administration Expenditures and Costs Related to Transportation of SchoolAge Children Between Home and School", 72 Federal
Register 173 (0 September 2007), pp. 51397.
e.
"Medicaid Program; Optional State Plan Case Management Services", 72 Federal Register 232 (4 December 2007), pp. 68077.
f.
"Medicaid Program; Elimination of Reimbursement
Under Medicaid for School Administration Expenditures and Costs Related to Transportation of SchoolAge Children Between Home and School", 72 Federal
Register 248 (28 December 2007), pp. 73635.
Grinnell, Alison J (2007). State Tax Revenue Falters Again.
Rockefeller Institute. Available at
http://www.rockinst.org/WorkArea/showcontent.aspx?id= 1349
4
.3. Kaiser Family Foundation (2002). Rising Unemployment and
the Uninsured. Available at
http:H/www.kff.org/uninsured/upload/Brief-PolicvAnalysis.pdf
4.
Ku, Leighton (2002). New CDC Data Show the Importance of
Sustaining Medicaid and SCHIP Coverage as Private Health
Insurance Erodes in 2002. Available at
http://www.cbpp.orgl9-24-02health.htm
5.
Mann, Cindy and Odeh, Michael (2007). Moving Backward:
Status Report on the Impact of the August 17 SCHIP Directive
To Impose New Limits on States' Ability to Cover Uninsured
Children. Available at
http://ccf.georgetown.edu/pdfs/movingbackward 1212.pdf ppl
6.
McNichol, Elizabeth C. and Lay, Iris (2008). 14 States Face
Total Budget Shortfall Of At Least $29 Billion In 2009; 12
Others Expect Budget Problems. Center on Budget and Policy
Priorities. Available at http://www.cbpp.org/1-15-08sfp.htm
7.
National Governors Association and National Association of
State Budget Officers (2007). The Fiscal Survey of States.
Available at
http://www.nasbo.org/Publications/PDFs/Fiscal%20Survey%2
Oof/o20the%2OStates%20December%202007.pdf
35
METHODOLOGICAL APPENDLX
The JEC study was performed using administrative data from the Medicaid Management Information System (MMIS), which is managed
by the Center for Medicare and Medicaid Systems (CMMS) at the
Federal Department of Health and Human Services.
The MMIS collects data from all states on the number of unique individuals who are enrolled in Medicaid and CHIP programs in that state
over the course of a year.
The JEC analysis combines MMIS data on Medicaid/CHIP enrollment
with information on the number of payroll jobs in each state, drawn
from the Census Bureau's Current Employment Survey (CES). CES
payroll jobs data was used instead of survey data on unemployment
because it is more reliable at the state level. The CES survey sample is
roughly 600 times larger than the sample used in the Current Population Survey (CPS), and it is therefore significantly less variable for
smaller states.
The reported results are based on a set of regressions in which MMIS
data on changes in annual state-level Medicaid enrollment are used as
the dependent variable, while CES data on changes in annual statelevel payroll job levels are the key independent variable. The regressions were run for annual changes over the 2000-2005 period, resulting
in 305 state/year observations. All regressions were weighted by state
population to make results representative for the national population.
Because of the relatively limited time period, dummy fixed effects for
each state were used to adjust for unchanging demographic differences
between states over the 2000-2005 period.
36
Table 1: Average Effect of Employment Change on Children's
Medicaid/CHIP Enrollment
Dependent Variable: Annual log change in state Medicaid enrollment,
children, 2000-2005
3
4
1
2
coef
coef
coef
coef
(se)
(se)
(se)
(se)
Annual log change in
state payroll
0.875
1.448
1.427
1.328
*
*
*
*
(0.16
9)
(0.17
8)
(0.17
7)
(0.41
2)
0.003
Linear year trend
*
(0.00
1)
State dummies
No
Yes
Yes
Yes
Year dummies
No
No
No
Yes
Number of observations
305
305
305
305
0.079
0.238
0.247
0.266
Adjusted R-square
level.
*Statistically significant at 1%
NOTE: All observations weighted by state population in 2000 decennial Census.
Table I shows the relationship between employment change and the
combined Medicaid and CHIP enrollment of children (aged 0-18). Because the natural log of variables is used, results can be interpreted in
37
percentage terms, so the model in column 1 finds that a 10 percent increase in payroll jobs leads to an 8.9 percent decline in children's Medicaid enrollment.
These regression results were used to forecast potential changes in Medicaid/CHIP enrollments if payroll employment levels decline and the
relationships remain as they are calculated in the table.
The forecast assumes that payroll employment growth declines from
the 1.6 percent annual growth rate seen over the 2004-2007 period to
the -.7 percent annual growth rate seen during the 2001-2003 recession.
These payroll employment growth levels were substituted into the regressions in Column 1 and Column 2. (Because we did not wish to
make an assumption on future time trends, the models in Columns 3
and 4 could not be used).
Using the central point estimates shown in Column 2 as an example
results in forecast Medicaid/CHIP enrollment growth rates for children
of 6.8 percent for the recession scenario vs: 3.4 percent based on current levels of employment growth. Applying these growth rates to the
estimated Medicaid enrollment level for children of approximately 32
million in 2007 leads to an estimate of approximately 1.I million additional children enrolling in Medicaid each year.'7
Table 2 shows the same estimates for total Medicaid/CHIP enrollment
of all persons, including children.
Table 2: Effect of Employment Change on Total Medicaid Enrollment
Dependent Variable: Annual log change in state Medicaid enrollment,
all ages, 2000-2005
4
2
3
1
Coef
coef
coef
coef
(se)
(se)
(se)
(se)
Annual log change in state
payroll
0.485
0.924
0.865
*
*
*
(0.22
(0.25
(0.25
0.11
0
(0.58
17 The 32 million enrollment in Medicaid and CHIP was estimated by taking
the 2005 enrollment level of almost 30 million from the MMIS system, and
adding two years of growth at the 2003-05 growth rate of 3.7 percent annually.
38
5)
7)
0)
3)
0.008
Linear year trend
*
(0.00
2)
State dummies
No
Yes
Yes
Yes
Year dummies
No
No
No
Yes
Number of observations
305
305
305
305
0.11
Adjusted R-square
0.012
0.041
0.095
6
*Statistically significant at I percent level.
NOTE: All observations weighted by total state population in 2000
decennial Census.
The forecasts for total enrollment were performed using the same methodology as that described above for children's enrollment.
As can be seen from the regression results, the impacts are smaller for
total enrollment than they are for children. In addition, total enrollment
results are not statistically significant when individual year dummies
are included. This indicates that it is difficult to separate the effects of
national trends operating in particular years from the effect of statelevel economic situations.
These regressions do not adjust for state-level changes in Medicaid
policy that may have been influenced by the fiscal difficulties experienced by the states in the early recession years. These state policies
could introduce bias away from finding an effect of employment declines on Medicaid enrollment, since poor economic times can force
states to cut back on Medicaid programs. This effect would have been
buffered by Federal assistance to states toward the end of the recession.
JEC staff will continue investigating these issues using additional data
sources and control variables, which may lead to more detailed understanding of these issues.
39
High Oil Prices Have Significant Effects on
Consumers and the U.S. Economy
This analysis estimates the impact of sustained high oil prices on consumers and the U.S. economy. Since 2002, real oil prices have risen
dramatically. Recently, oil futures traded for more than $100 a barrel.
Crude oil prices for January 2008 were $92.95/barrel, and monthly
prices are.rapidly closing in on the all-time inflation-adjusted high of
$98.94/barrel, which was reached in April 1980. There are numerous
causes for the recent rise in oil prices, including decisions made by
OPEC and other oil-producing countries, stagnant production in Iraq,
and ongoing concerns about political and supply stability in a number
of oil-producing countries. However, it is the longer-term structural
factors in the rise in oil prices, most notably greatly increased demand
in developing countries such as China and India, which have led many
experts to believe that we are likely to have sustained high oil prices
for the foreseeable future.'
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200
2003
Energy analysts generally agree that due to increases in energy efficiency and the changing composition of output, the U.S. economy is
less vulnerable to high oil prices than it was during the oil shocks of
the 1970s. However, a growing number of economists have concluded
that the mild effects of recent oil price increases have depended on a
variety of other factors, including monetary policy decisions and the
absence of concurrent price shocks.2 It is therefore not certain that the
economy will continue to shrug off increases in the price of oil in the
future.
40
In fact, given the current weak state of the U.S. economy, the risk that
increasing oil prices will produce significant negative consequences is
rising. Even in a robust economy, sustained high oil prices can produce undesirable effects on aggregate output, employment, and inflation. When economic growth is weak, and inflation rates are high, rising oil costs add to the drag on output and employment, and can help
push price inflation even higher.
In addition, rising oil prices will increase wealth transfers to oilexporting countries, which may or may not be friendly to the U.S.
They also will continue to hit consumers in their pocketbooks, imposing a disproportionate burden on low-income consumers and some regional economies.
IMPACT OF HIGH OIL PRICES ON ECONOMIC GROWTH AND EMPLOYMENT
Oil price increases can reduce economic growth because of their
effects on consumer spending and producer costs. Rising oil
prices raise the price of domestic goods and services. As the prices
of gasoline and heating oil rise, so do the prices of goods and services that use oil products as inputs. Since the majority of U.S. oil
is purchased from other nations, an increased oil price means higher revenues for the oil producers. Unless this increased oil revenue
is recycled as demand for U.S. goods and services, higher oil prices lead to lower overall demand, which reduces domestic output
and employment. In addition, cost increases that cannot be passed
along as price increases may make it unprofitable to produce certain products.
The Energy Information Agency has estimated that a sustained ten
percent increase in the price of oil results in a loss of real U.S.
GDP in the range of 0.05 to 0.1 percent.3 Assuming this EIA rule
of thumb is correct, a $10 per barrel increase in the price of oil
would reduce U.S. GDP by approximately $6.9 to $13.8 billion in
current dollars. 4
41
IMPACT OF HIGH OIL PRICES ON CONSUMERS AND HOUSEHOLDS
Crude oil prices affect the prices of gasoline and diesel fuel, which
are central to transportation in the U.S., and can cause significant hardships for American consumers. In the U.S., higher
gasoline prices are generally seen during the summer driving season. But this year, we have seen substantial increases during the
winter time. During last winter's heating season, U.S. gasoline
prices ranged from $2.17/gallon to $2.61/gallon. This winter, prices have already ranged from $2.76/gallon to $3.13/gallon. 5
Prices for diesel fuel have also increased in recent months. These
increases will start to have an impact on food and other consumer
goods, because the costs to transport those goods to markets will
increase. In 2006, diesel prices ranged from $2.44/gallon to
$3.07/gallon (with peaks during the summer driving season). In
2007, diesel prices ranged from $2.41/gallon to $3.44/gallon, with
prices steadily increasing through the winter months.6 So far in
2008, diesel fuel prices have ranged from $3.26/gallon to
$3.55/gallon.
Crude oil also affects prices paid by households who depend on
fuel oil to heat their homes.
Based on its oil price forecast, the Energy Information Administration (EIA) currently predicts that on average United States home
heating costs will be 33.7% higher for homes heated with heating
oil, 5.6% higher for those using natural gas, and 2.3% higher for
those using electricity, when compared to last year's heating season.8 If crude oil prices remain higher than EIA forecasts, winter
home heating costs are also likely to exceed the substantial increases already predicted in EIA's Short-Term Energy Outlook. 9
EIA has made regional predictions of winter heating cost increases:
1. In the Northeast, this winter's home heating costs were predicted to
exceed last winter's cost by $57 for natural gas users, $500 for fuel oil
users, and $51 for electricity users.
2. In the Midwest, this winter's home heating costs were predicted to
exceed last winter's cost by $56 for natural gas users, $429 for fuel oil
users, and $50 for electricity users.
42
3. In the South, this winter's home heating costs were predicted to exceed last winter's cost by $33 for natural gas users and $295 for fuel oil
users. Electricity users saw a modest decline of $2 in their expenditures.
4. In the West, this winter's home heating costs were predicted to exceed last winter's cost by $37 for natural gas users, $313 for fuel oil
users, and $34 for electricity users.
HIGH O.L PRICES CAN LEAD TO INFLATION
Because the cost of oil affects the cost of transportation, power
generation, chemicals, and other products, increases in the
price of oil can lead to inflation. For example, in November
2007 the Consumer Price Index for All Urban Consumers (CPI-U)
rose sharply, at a seasonally adjusted annual rate of 10 percent.
About 70 percent of the overall increase in the CPI-U was a result
of energy price increases.
Persistent energy price increases can also translate into core PCE
increases. When making inflation related policy decisions, the
Federal Reserve focuses its attention on the so-called "core" Personal Consumption Expenditures (PCE) deflator, which excludes
the costs of food and energy. The Fed does so because both food
and energy prices are volatile, and it wants to adjust policy to respond to meaningful underlying trends. However, increases in the
price of energy inputs can raise the cost of other goods and services, and they also can change the expectations of firms and households, who may respond by increasing prices or money wage demands in anticipation of future price changes.
When the PCE deflator or inflation expectations are affected,
the Fed may respond by raising interestrates. While the resulting
reduction in output and employment may help contain inflation,
the short term consequences for firms and workers are negative.
OIL-RELATED TRANSFERS OF WEALTH
An increase in the price of oil produces a direct transfer of wealth
from U.S. consumers to foreign oil producers. Moderate
changes in the price of oil can have large effects on the size of
these transfers. For example, the Joint Economic Committee estimates that the Iraq war has added $5.00 per barrel to the cost of oil.
43
Between 2003 and 2008, this will lead to an estimated net transfer
of $124 billion's out of the United States.
Oil-related wealth transfers have helped create growing sovereign
wealth funds in many of the oil exporting nations, including
countries such as the UAE, Saudi Arabia, and Venezuela.
These funds are impacting capital markets and may allow their
governments to purchase strategically significant firms in whole or
part in many countries, including the United States. While some of
the largest sovereign wealth funds are operated by countries that
are not primarily natural resource exporters (e.g. China and Singapore), the top ranks are dominated by the oil-rich countries, such as
the United Arab Emirates, Saudi Arabia, Kuwait, Russia, Brunei
and Qatar.
Top 10 Sovereign Wealth Funds
(Source of Funds: Natura Resources)
0
100
200
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END NOTES
' See, e.g., Energy Information Administration, International Energy Outlook. 2007 available at
http://www.eia.doe.eov/oiaf/ieo/world.html; Intemational Energy Agency, World Energy Outlook
2007 - China and India insights.
2 See Olivier Blanchard and Jordi Gali (August 2007), The Macroeconomic Effects of Oil Price
Shocks: Why are the 2000's So Different From the 1970's, Massachusetts Institute of Technology Working Paper 07-21.
3 This is relative to a baseline without the price increase. See Govemment Accountability Office
(August 2006), Strategic Petroleum Reserve, GAO-06-872, p. 58. This rule of thumb was derived
by EIA using a macroeconomic model that accounts for the direct effects of oil price increases on
consumption, as well as indirect effects on investment demand, employment, personal income and
financial markets
44
' With oil near $100 per barrel, a $10 price increase is approximately a 10 percent increase, Since
in 2007 nominal GDP was $13 8 trillion, the rule of thumb gives the GDP reduction of approximately $6.9 to S13 8 billion cited in the text
5See weekly retail regular gas prices and diesel (all types) at Energy Information Administration,
Department of Energy (all prices are inclusive of taxes)
http://tonto eia.doe.eov/dnav/vetfoet pri gnd a epmr pte cpeal w.htm.
6Some of the observed price increase is due to new requirements that diesel fuel contain less than
15 ppm of sulfur ("ultra low sulfur" diesel) Previously, diesel could contain up to 500 ppm of
sulfur.
7
Outside of the transportation sector, distillate fuel oil is mostly used for home heating, primarily
in the Northeast Nationwide, distillate fuel oil accounted for only 8 percent of the energy delivered to the residential sector in 2006, but 76 percent of that consumption occurred in the Northeast. There are large sunk costs involved in switching home heating fuel, and because the costs in
the Northeast of heating homes using fuel oil have historically been lower than costs of heating
using other fuels, a large number of homes are still heated using fuel oil.
' Table WFOL Selected 11 S Average Consumer Prices and Expenditures for Heating Fuels
During the Winter, February 2008, available at httnp//www eia.doe eov/emeu/steo/pub/wftable.pdf
9According to EIA, heating oil prices paid by consumers are determined by the cost of crude oil,
the cost to produce the product, the cost to market and distribute the product, as well as the profits
(sometimes losses) of refiners, wholesalers and dealers. In 2005, crude oil accounted for 58 percent of the cost of a gallon of heating oil The next largest component, distribution and marketing
costs, accounted for approximately 21 percent of the cost of a gallon of heating oil Lastly, refinery processing costs accounted for another 21 percent
"°See Joint Economic Committee Majority Staff (November 2007), War At Any Price? The Total
Economic Costs of the War Beyond the Federal Budget, available at
htn:HIwww jec senate gov/Documents/Reports/l 1.13 071raaEconomicCostsReoort pdf
45
Paid Family Leave at Fortune 100 Companies: A Basic Standard
but Still Not the Gold Standard
EXECUTIVE SUMMARY
Employers and employees are searching for ways to balance the competing demands of work and family. As a guide for policymakers, this
report examines how firms design their paid leave policies. The majority staff of the Joint Economic Committee asked Fortune 100 companies about the length of paid leave that they provide for new parents.
Among the firms that responded, about three-quarters offer mothers a
specific parental leave program, either through paid family or disability
leave and the median length of leave for mothers is six to eight weeks.
However, less than one-third of firms report that they offer fathers paid
parental leave and the median length of leave for fathers is only two
weeks.
Many Fortune 100 firms allow their employees to use a mix of different kinds of leave when they have a child, which significantly increase
the number of weeks available to new parents. Most Fortune 100 firms
(75 percent) allow employees to use accrued sick days to care for a
new child. Combining paid leave from all sources-family leave,
pregnancy-related disability leave, and the allowable use of paid sick
days-firms offer mothers a median of 12 weeks and fathers six weeks
of paid leave. Among our sample, nine-out-of-ten firms report offering
some kind of paid leave-family leave, pregnancy-related disability
leave, or allowed use of accrued paid sick days-for the birth of a
child.
Of the Fortune 100 respondents who offer paid leave, a significant
share also provide employees with unpaid leave beyond that required
by the Family and Medical Leave Act (FMLA) for the birth of a child.
Overall, 40 percent of Fortune 100 firms provide both some type of
paid leave alongside additional weeks of unpaid leave. Among the
firms offering additional weeks of unpaid leave, the median length of
leave offered on top of the 12 weeks of unpaid FMLA leave is 14
weeks. Thus, employees in these firms have access to six months (26
weeks) of unpaid, job-protected parental leave, on top of any paid
leave that their finr offers.
As policymakers work to implement paid leave policies, Fortune 100
companies provide a good model. Nearly all of these firms offer parents paid time off when they have a new child. However, while these
firms offer more leave than typically provided by other U.S. companies, the length remains far below the leave policies implemented in
the European Union or nearly all other advanced economies. Further,
46
this leave is usually cobbled together from various programs and, especially for fathers, is based on using accrued sick days rather than having access to paid family leave.
INTRODUCTION
The difficulties that workers encounter when faced with the competing
demands of family and work responsibilities are well known. Employers and employees alike are searching for ways to get the job done,
while also ensuring that families are cared for. Unlike a generation ago,
most U.S. families do not have the option of a stay-at-home parent to
provide care for children, the elderly, or the sick, and therefore these
responsibilities fall on family members who work outside the home.
The federal Family and Medical Leave Act (FMLA) provides jobprotected, unpaid leave for eligible workers in covered establishments
who are new parents or who have a serious health condition or have an
immediate relative with a serious health condition. However, FMLA is
not available to everyone and it is unpaid, significantly limiting its usefulness for many workers who cannot afford to take unpaid time off
work.
There is bi-partisan interest at both the federal and state level in establishing paid family leave as a minimum employment standard. As policymakers consider introducing paid family leave, a central question is
what is an appropriate length of leave? There are several models to
look to.
To retain workers and reduce turnover, the European Union, and a
handful of states have each implemented some form of paid family
leave, ranging from 14 weeks in Europe to five weeks in California.
Further, U.S. federal lawmakers themselves typically offer paid leave:
Congressional offices each set their own leave packages and most include paid parental leave, with the average length being six to eight
weeks. 1
An alternative method to guide the length of paid family leave is to
look to the standards currently in place among the U.S. firms that offer
it. To this end, the JEC requested information from firms that are the
most likely to offer paid leave: the top 100 U.S. companies, as listed in
Fortune magazine's 2007 list of the Fortune 500.2 The JEC Questionnaire asked whether these firms offer male and female employees paid
leave upon the birth of a child and the duration of the leave. The results
show that these firms overwhelmingly offer women paid leave for the
birth of a child and the leave is typically six to eight weeks long.3
Background: The Need for Family Leave is a New Workplace Reality
47
Family leave has become an increasingly important workplace policy
because most families no longer have a stay-at-home parent to provide
care for a new child or a seriously ill family member. Over the past
generation, there has been a significant increase in the employment of
mothers outside the home: between 1975 and 2006, the labor force participation rate for mothers rose from 47.4 to 70.6 percent.4 The majority (68.0 percent) of children in married-couple families are being
raised without a stay-at-home parentS and 18.4 percent of children are
living in working, single-parent families.6 The literature on maternal
and infant health indicates that while the optimal length of parental
leave varies according to a wide range of factors, including the preferences of the parents, whether both parents are involved in primary
care, and the difficulty of the pregnancy and childbirth, the length of
leave is best measured in months, rather than weeks or days.7 With
both parents typically working, this means that families with a new
child need a considerable amount of time away from work, which may
be difficult for the family to access if that time is unpaid. Research has
found, however, that employers that accommodate working parents and
provide paid time off are rewarded with lower turnover and higher
productivity.
FAMILIES NEED TIME TO CARE
Having access to paid, rather than unpaid, leave is a necessity, not a
luxury, for working families. Two-parent families typically need to
have both parents working. The typical working wife brings home over
a third (35 percent) of her family's total income.8 The long-term
trends in family income show that the inflation-adjusted income of
married-couple families with stay-at-home wives is the same today as
it was in 1979 and it is only families with working wives who have
seen any real income gains.9 Because both parents work-and in many
cases, need to work-paid leave has taken on increased importance.
Paid leave has been shown to promote maternal employment and job
retention, increasing the long-term employment and earning prospects
of working parents, compared to unpaid leave. 10 Paid leave also improves children's health by giving mothers time to breastfeed, reducing
the risk of infections, and increasing the likelihood that children are
taken to the doctor to receive the full battery of immunizations. 11
However, even though paid leave is increasingly a necessity for working families, it remains relatively uncommon in our country and workers typically only have the option of taking unpaid leave.12 The Department of Labor reports that while eight percent of private-sector
48
employers offer paid family leave, 82 percent offer unpaid leave. The
wide availability of unpaid leave is due to the 1993 FMLA, which established a minimum standard that allows eligible employees to take up
to 12 weeks per year of unpaid, job-protected leave upon the birth or
adoption of a child, or to care for qualifying family members or themselves in the event of a serious health condition. A majority (61.7 percent) of public and private sector workers are eligible to take unpaid
leave under the FMLA, but many families cannot afford to take it. 13
Most (77.6 percent) of those who do not exercise their right to leave
under the FMLA report that one reason they did not take leave was
because they could not afford to go without pay. 14
Besides being unpaid, and thus unaffordable for many families, the
FMLA does not cover the entire workforce. FMLA does not apply to
private companies with fewer than 50 employees, which categorically
excludes just under one-third of the labor force. 15 Further, to be eligible for leave, employees must have been with a single employer for at
least a year and logged over 1,250 hours in the past year, equivalent to
working an average of 24 hours per week. The job tenure requirements
leave out many young workers who are most likely to be in need of
parental leave since the median age of first birth is 25 years. 16 Among
parents aged 18 to 25 with a child under the age of two, 43.3 percent of
women and 31.2 percent of men have been with their current employer
for less than a year and therefore are categorically excluded from taking leave under FMLA. 17
THE BUSINESS CASE FOR PAID FAMILY LEAVE
There is solid evidence that paid leave policies are good for employers,
as well as employees. The clearest benefit to employers is reduced employee turnover, but there is also evidence of improved productivity:
workers who can meet their family responsibilities and are feeling
healthy are less-stressed and better able to focus on their jobs while at
work, and are thus, more productive. Research shows that businesses
that offer paid family leave benefit from increased productivity and
morale, reduced absenteeism, and lower turnover and training costs. 18
Firms can see the benefits of paid family leave most directly in terms
of reduced employee turnover. Women who had access to leaveeither paid or unpaid-at the birth of their first child are more likely to
go back to their job after childbirth. 19 Research further confirms that
paid leave is a better retention policy than unpaid leave because the
probability of returning to the same employer after having a child is 5.4
percentage points greater for women who received paid maternity
leave compared to those who received unpaid maternity leave.20
49
Women report that access to workplace flexibility, including paid
leave, is of particular importance in their decision to stay on the job,
rather than quit altogether.21
Lowering turnover rates can reduce costs significantly for employers.
The average cost of turnover for an employer is about 25 percent of an
employee's salary.22 To get a good estimate of costs, we need to include not only the costs to search for a new employee, but also training
costs. Estimates are that it takes six weeks for a new staffer to learn
their job and achieve the productivity of the person that they replaced.23 One study in New Jersey found that in the private sector, the
full cost of turnover, which includes the costs of hiring, comprehensive
recruiting, screening, interviewing, and training, has been found to
range from $6,495 for a worker in the leisure and hospitality industry
to $18,615 for a worker in the information industry. Depending on the
rate of turnover and cost of replacing new workers, a small company
might spend over $15,000 annually while a larger one (more than
1,000 employees at one site) could spend more than $180,000.24 The
savings that employers could accrue by offering paid leave can more
than offset costs of hiring temporary workers or paying overtime to
current workers.25
Private Sector Response to Work-Family Balance: The Fortune 100
This report looks to the Fortune 100 to see what length of leave is typical among firms that offer paid leave for the birth or adoption of a
child. The Fortune 100 is a list of the largest U.S.-based corporations,
based on revenue calculated from publicly available data. This is a
good sample to use because large firms such as these are far more likely than smaller firms to offer paid leave and, further, many of the Fortune 100 firms have established programs to recruit and retain valuable
female employees. A quarter of these firms appear on the Working
Mother list of the "100 Best Companies" that provide policies aimed at
balancing work and family.26 Therefore, this sample of firms is likely
to have implemented the most generous paid leave policies of any U.S.
employers.
DATA AND METHOD
From September through November, the Joint Economic Committee
asked the Fortune 100 companies to respond to a simple set of questions:
Do they offer paid maternity or paternity leave for the birth or adoption
of a child and, if so, for how many weeks each? If maternity leave is
provided, is this through a disability leave program?27
50
Do they offer unpaid maternity or paternity leave for the birth of a
child on top of the 12 weeks required by FMLA and, if so, for how
many weeks each?
Do they allow employees to use accrued sick leave to care for a new
child and, if so, how many weeks?
The typical leave package offered at Fortune 100 firms was derived by
examining the 53 responses received. The respondent and nonrespondent firms represent similar industries limiting the possibility of
response bias, although respondent firms were more likely to be on the
Working Mother list. (See Appendix for more information on the JEC
Questionnaire.) Many firms responded with a minimum and maximum
number of weeks of paid leave, depending on the employee's job category or tenure or other requirements and our analysis provides measures of both the minimum and the maximum weeks provided. (The
Appendix contains the sample means.)
Most firms reported that they offer employees several different kinds
of leave that they can combine when they have a new child. The three
specific types of leave that we include are paid family leave, paid
pregnancy-related disability leave, and the allowable use of accrued
paid sick days. Each of these leaves is designed to serve a distinct purpose:
Paid family leave is often modeled on the uses set out in the FMLA
and provides weeks of leave for parents to care for a new child and
may also provide leaves for serious health conditions.
Pregnancy-related disability leave is leave for the mother to recover
from childbirth. According to the Pregnancy Discrimination Act of
1978, employers must treat pregnant workers the same as other employees with temporary medical disabilities in all conditions of employment, such as pay and fringe benefits, including paid sick days,
health insurance coverage and temporary disability insurance. Therefore, if a firm has a disability plan, then they must cover pregnancy and
recovery from childbirth under this plan.
Paid sick days cover short-term illnesses, such as colds and flu, and
regular doctor visits, alongside being available for health emergencies.
Many firms allow employees to bank their accrued sick days for use
when they have a child. This policy, however, means that employees
do not have this time available for unanticipated short-term illnesses if
it is used for family and medical leave.
Firms may also allow employees to use accrued vacation to care for a
new child, but that was outside the scope of our questionnaire and may
lead us to understate the overall findings. We refer to "paid leave" generically when we include all three kinds of leave, but this report also
51
clearly distinguishes among firms that have a specific parental leave
policy or offer pregnancy-related disability leave, and those that only
allow employees to use accrued sick days.
FINDINGS
Fortune 100 firms overwhelmingly offer some paid time off to care for
a new child and recover from childbirth. Among the companies in the
Fortune 100 that responded to the JEC questionnaire, three-quarters
(73.6 percent) offer mothers either paid family or disability leave.
Firms are more likely to offer paid family leave to mothers than to fathers as only 32.1 percent report offering paid family leave to fathers.
However, most (75.5 percent) firms allow employees to use accrued
sick days, and among our sample, nine-out-of-ten (88.7 percent) report
offering some kind of paid leave-family leave, pregnancy-related disability leave, or allowing the use of accrued paid sick days-for the
birth of a child.
Types of Leave
Most firms offer some type of paid leave, but a handful offer no paid
leave of any kind. Figure I shows the distribution of different kinds of
leave offered by Fortune 100 companies. Over one-third (35.9 percent)
only provide pregnancy-related disability leave, and another 15.1 percent provide both disability and paid family leave. Just 13.2 percent of
firms offer only paid family leave for the birth of a child and 15.1 percent offer employees only the use of accrued sick leave. One-in ten
(9.4 percent) provide both paid leave (either pregnancy-related disability or paid family leave) as well as additional weeks of unpaid leave
above and beyond that required by FMLA. Among the respondents, 7.6
percent report that they offer no leave above and beyond that required
by FMLA.
52
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Length of Leave
Table 1 breaks down the typical weeks of leave offered to employees at
the responding Fortune 100 companies. In terms of paid family leave,
firms typically offer mothers six weeks and fathers two weeks of paid
leave. If we include the maximum number of weeks they could receive
(often, but not always, tied to seniority), firms offer mothers a median
of eight weeks, but continue to offer fathers a median of two weeks. In
terms of maternal disability leave, Fortune 100 companies who offer
this kind of leave typically provide six to eight weeks, where the range
is usually based on the time necessary to recover from a vaginal or
Caesarian childbirth, respectively. Among those firms that allow employees to use accrued sick days, employees are typically offered six to
eight weeks of leave. Combining leave from all three sources (and accounting for whether the employer noted whether the leaves could be
taken sequentially), the median number of weeks available to new
mothers rises to 12, and the median of the maximum number -ofweeks
rises 14. Fathers are offered a median of six weeks of leave.
53
TABLE 1. WEEKS OF PAID LEAVE FOR
THE BIRTH OF A CHILD
Median
Weeks of
Paid Leave
Offered
Maximum
Weeks of
Paid Leave
Offered
Mothers
6.0
8.0
Fathers
2.0
2.0
Maternal disability leave
6.0
8.0
Allowed use of paid sick days only
6.0
8.0
Mothers
12.0
14.0
Fathers
6.0
6.0
Paid family leave
Combined weeks of paid leave available
Source: 2007 JEC Questionnaire of the Fortune 100.
Note: Nine firms that reported allowing
employees to use sick days did not report
the actual number of days available.
Figures 2a and 2b show the distribution of minimum weeks of paid
family leave offered by Fortune 100 companies in our sample to mothers (including maternal disability) and fathers, not including the use of
accrued sick days. The number of paid weeks offered to mothers is
clustered around six to eight weeks as three-fifths (61.5 percent) of
Fortune 100 companies offer leave in this range. By contrast, nearly
two-thirds (64.7 percent) of firms offer only one or two weeks of leave
54
to fathers.
Figures 3a and 3b show the distribution of minimum weeks of paid
leave offered by Fortune 100 companies combined from all three
sources: family leave, pregnancy-related disability leave, and the allowable use of paid sick days. There is wide variety in the lengths of
total leave possible: more than half (55.8 percent) of firms offer mothers at least 12 weeks of paid leave, but a third (34.9 percent) offer less
than eight weeks. For fathers, there are fewer weeks available: 62 percent of firms offer fathers less than eight weeks of paid leave. However, a significant share of firms (18.9 percent), offer 26 weeks of paid
leave or more to fathers, roughly the same offered to mothers.
Figure 2a. Weeks of Paid Family & Disability Leave for Mothers
0
so
1
0
45
35
40
30
25
1520
Mother's weeks of paid leave (disability or family)
10
Source
w07 JEC CuestIonawe o the Forfh 100
50
55
Figure 2b. Weeks of Paid Family Leave for Fathers
S
E
8
C4
EIn
I 0n
2,
I
0
I
5
I
10
15
20
25
30
35
40
45
Number of paid weeks for father after birth of dlid
D Sowte 2007 JEC Ousboime oftet Fortm 100
I
50
lure 3a. Weeks of Combined Paid Leave for Mothers
0
_LO
E ow
90
LL
la4
9
Mother's weeks of paid leave (famTly, disability, or sick)
Note The e kim offeiing moleman
26 weeks odpaid lewe are coded as ofderM 26 weeks.
Soim: 2007 JEC Queslomare odthe Forture 100
56
Father's weeks of paid leave (family or sick)
Note The six firms offering more than 26 weeks of pad leave are coded as offering 26 weeks.
Souce 2007 JEC Quesbonnaire of the Fortune 100
As shown above in Figure 1,3.8 percent of firms offer only unpaid
leave and 9.4 percent offer a combination of either pregnancy-related
disability leave or paid family leave and unpaid leave above that required by the FMLA. However, many firms who allow employees to
use paid sick days also provide unpaid leave beyond that required by
FMLA and when we include these firms, a total of 39.6 percent of
firms offer both paid and unpaid leave beyond FMLA. Among firms
offering unpaid leave above and beyond the 12 weeks required by the
FMLA, the median number of weeks is 14.
Gender Gap in Access to Paid Family Leave
There is a clear gender gap in access to paid family leave. While mothers and fathers typically are allowed to use the same number of sick
days and receive the same amount of unpaid family leave, many firms
continue to offer a specific paid parental leave program only for mothers, most often in the form of pregnancy-related disability leave. The
equality in the availability of sick days and unpaid family leave does
not make up for the lack of fathers' access to paid family leave. Fathers
(and mothers) may need their sick days to help care for a sick child or
their own illness. Further, in two-thirds of two-earner couples, the husband earns more than the wife28 and therefore, for many families, it is
harder for the father to take unpaid time off work because it costs the
family more in terms of lost wages. Moving towards greater equality in
access to paid family leave would enable more fathers to bond with and
care for their new children, while continuing to recognize that childbirth requires recovery for the mother.
57
PAID LEAVE FOR ADOPTIVE PARENTS
The JEC Questionnaire also asked whether paid or unpaid leave was
provided for adoptive parents. Fortune 100 firms offer adoptive parents
less leave, primarily because much of the leave for mothers is through
paid disability programs that only apply to the biological mother. Figure 4 shows the distribution of leave available to adoptive parents.
Nearly half (43.4 percent) of Fortune 100 firms offer adoptive parents
no leave when they adopt their child above the unpaid leave required
by FMLA. A quarter (24.5 percent) of firms offer only paid family
leave at the time of adoption, 17.0 percent offer only unpaid family
leave (above that required by FMLA), and 15.1 percent offer both paid
and unpaid family leave. Firms offering paid leave typically offer
adoptive mothers 4.0 weeks and adoptive fathers 3.0 weeks. The small
fraction of firms that offer unpaid leave above and beyond the 12
weeks required by FMLA to adoptive parents typically offer parents 14
weeks of leave, giving these employees access to six months of unpaid
leave.
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245
PART-TIME WORKERS
Most Fortune 100 companies (82.1 percent) report that paid parental
leave is available to both full- and part-time employees. The typical
threshold for part-time workers to receive benefits is set at 20 hours per
week. Because full-time workers are nearly twice as likely as part-time
58
workers to have paid family leave, the Fortune 100 companies appear
to be ahead of their counterparts on coverage.
FORTUNE 100 FIRMS' PAID LEAVE: LESS THAN IN EUROPE, BUT
MORE THAN IN MOST STATES
With a median of six to eight weeks of leave for new mothers and two
weeks for new fathers, the Fortune 100's policies put them far behind
the European Union (EU). The EU requires that member countries offer a minimum of 14 weeks of paid maternity leave as a basic employment standard, but most countries offer more than the minimum.29
Fortune 100 companies' policies on paid leave are, however, broadly
consistent with recent experiments in paid family leave at the state level.30 California and Washington, recently passed paid family leave,
and on March 4, 2008, New Jersey's paid family leave bill passed the
Senate and it is anticipated that it will easily pass in the General Assembly in coming weeks and be signed by the Governor. California
and New Jersey's plan builds on the state's longstanding temporary
disability insurance (TDI) program. In 2004, California extended their
TDI program to offer six weeks of comprehensive partial wagereplacement family leave, on top of up to ten weeks of pregnancyrelated leave (four weeks before and six weeks after the birth3 1), consistent with what the JEC Questionnaire found that Fortune 100 firms
offer mothers and fathers.32 New Jersey's bill also provides six weeks
of partial wage-replacement. There are three other states (Hawaii, New
York, and Rhode Island) that have TDI programs, and across all five
TDI states (including California and New Jersey), mothers are granted
a minimum of six weeks of leave to recover from childbirth, which is
consistent with the length of pregnancy-related disability leave offered
by Fortune 100 firms.33
New York also has a bill pending that would expand their TDI program
with much longer paid family leave than offered by Fortune 100 firms.
The New York state Assembly passed the Working Families Time to
Care Act on June 22, 2007 and it awaits movement in the state Senate.
This bill provides 12 weeks of paid leave to care for a new baby or a
newly placed adopted child, or for a seriously ill family member, including a spouse, parent, in-law, sibling, child or domestic partner on
top of the existing TDI benefits for birth mothers.
Other states are starting from scratch to establish paid family leave and
these states are offering shorter leaves than the typical Fortune 100
firm. In May 2007, Washington became the first state to pass paid family leave as a new, stand-alone program. This legislation provides five
weeks of partially paid leave and the financing mechanism remains to
59
be worked out.34 In Illinois, the Family Leave Insurance Program has
been introduced, which would allow for four weeks paid family and
medical leave with the financing shared between employers and employees.
IMPLICATIONS FOR FEDERAL POLICYMAKING
At Fortune 100 companies that offer paid leave for a new child, women
typically receive six to eight weeks of paid family leave, while men
receive just two weeks. For mothers, this length of leave is consistent
with recently passed legislation in California, Washington. and New
Jersey as well as some proposed federal legislation.
Many Fortune 100 employees have the option of patching together
leave from a variety of programs: family leave, pregnancy-related disability leave, and the allowable use of paid sick days. This patchwork,
however, leads to two problems. Fathers are not offered very much
leave, because they are ineligible for disability leave for childbirth, and
employees who use up their sick days must hope that they-or their
new child-does not get sick later on. Paid parental leave would address the former problem as it would be available to both mothers and
fathers, but employees also need access to sick days if they or their
children get sick. This is addressed in separate legislation-the Healthy
Families Act (HR-I 542 and S-9 10)-that aims to provide every worker
with at least seven paid sick days. (The JEC will publish the findings of
the Fortune 100 Questionnaire on paid sick days in coming months.)
Lawmakers have introduced a number of paid family leave bills in the
110th Congress (Table 2). Only two of these bills would provide paid
leave to all workers (S- 1681 and HR-3 192), while the other three are
models that would start by providing paid leave to either federal employees or Senate employees. Each of these bills offers mothers eight
weeks of leave, which is higher than the median length of paid leave
offered by Fortune 100 companies. Two bills, however, S-80 and S880, provide fathers with only a week of leave, which is far below that
typically offered by Fortune 100 companies. S-1 68 1, HR-3 192 and
HR-3799 (which would cover workers for our nation's largest employer, the federal government) allow mothers and fathers the same length
of leave, encouraging fathers to be active participants in their childrens' new lives. Further, this gives families the option of sequencing
leave, so that the mother can take the first months off to recover from
childbirth and care for the new baby, then the father can take off time
after the mother goes back to work.
Table 2. Selected Congressional Legislation on Family-Friendly
Workplace Policies
60
Sponsor
Brief Description
Bill Number
Title
S. 1681
Family Leave
Sen. Chris
S. 1681 would provide
Insurance Act of Dodd and Sen. up to 8 weeks of paid
leave to new parents or
Ted Stevens
2007
those caring for seriously ill family
members.
H.R.3799
Federal EmRep. Carolyn
ployees Paid Pa- Maloney, Rep.
rental Leave Act Danny Davis,
Rep. Steny
Hoyer, Rep.
Tom Davis,
and Rep.
George Miller
H.R. 3799 would require that 8 of the 12
FMLA weeks, that are
available to federal
workers, be paid.
H.R. 3192 Paid Family and
(introduced Medical Leave
in l09'
Act of 2005
Congress)
Rep. Stark
H.R. 3192 would establish a nationwide
insurance program to
pay 55 percent of earnings for 12 weeks of
family leave to all
workers.
S.80
Executive
Branch Family
Leave Act
Sen. Ted Stevens, Sen.
Lisa Murkowski, and
Sen. Kay Bailey Hutchinson
S. 80 would provide
Executive branch employees 8 weeks of
paid maternity leave,
and 5 days of paternity
leave following the
birth of a child.
S.880
Senate Family
Leave Act
Sen. Ted Stevens, Sen.
Robert Byrd,
and Sen. Da-
S. 880 would provide
Senate employees 8
weeks of paid maternity leave and 5 days of
paid paternity leave
61
niel Inouye
following the birth of a
child.
Source: Congressional Research Service.
Note: This list does not include all workplace-flexibility legislation.
Conclusions
Fortune 100 firms overwhelmingly offer paid leave to new mothers, in
addition to paid sick days. Among our sample, three-quarters offer
mothers either paid family or disability leave and less than one-third
report offering paid family leave to fathers. While mothers need more
time to recover physically from the rigors of childbirth and to breastfeed, fathers are also needed at home to help care for the new child.
New paid family leave policies should follow the FMLA and allow
both mothers and fathers similar lengths of time to care for and bond
with a new child.
Fortune 100 firms offer a basic set of leave policies, which are consistent with the lengths of leave being proposed in the states and offered
by Congressional offices, although they are far less generous than in
Europe. Research shows that the companies that offer paid leave benefit because they have increased employee retention, which can significantly reduce turnover costs, as well as higher productivity and improved employee morale.
Fortune 100 companies' policies should offer a model for implementing paid family leave as a basic employment standard for all workers in
the United States, in addition to paid sick days. Paid parental leave is
part of a broader set of new workplace policies that Americans need to
meet the competing demands of work and family.
End Notes
'U.S Congressional offices each set their own leave policies and most offer paid family leave.
House offices, of which 80 percent offer paid leave, typically provide 7 6 weeks of paid family
leave and Senate offices, of which 96 percent offer paid leave, typically provide 6.1 weeks Senate
Compensation Survey, 2006 and House Compensation Study, 2006.
2
See http //fortunel00s.com/fortunel00/, for the Fortune 100 listing
3
The JEC Questionnaire included questions on Fortune 100 firms paid sick days policies and we
will be releasing those findings in a separate report
4
Bureau of Labor Statistics, Women in the Labor Force. A Databook, Table 7, page 18 (September 2007)
62
sAuthor's calculations from Bureau of Labor Statistics data and Women in the Labor Force A
Databook, Table 16 (September 2007)
Supple6
U S Census Bureau, Current Population Survey, 2007 Annual Social and Economic
ment. Table POV13. httpll/pubdb3 census gov/macro/032007/pov/newl3_100_01 htm
for
7
Galtry, Judith, and Paul Callister 2005 "Assessing the Optimal Length of Parental Leave
26
Issues
Family
of
Journal
Policy?"
Inform
Research
Can
How
Well-Being
Child and Parental
(2)219-46
8
Bureau of Labor Statistics, Women in the Labor Force A Databook, Table 24, page 67 (September 2007)
'Heather Boushey, "Perspectives on Work/Family Balance and the Federal Equal Employment
Opportunity Laws," Testimony before the Equal Employment Opportunity Commissions, April
17, 2007.
'0Lawrence M. Berger, Jennifer Hill, and Jane Waldfogel, "Maternity Leave, Early Matemal
Employment and Child Health and Development in the US," The Economic Journal, February
2005, 115(501) F29-F47; Heather Boushey, "Family Friendly Policies Helping Mothers Make
Ends Meet," Review of Social Economy, forthcoming 2008, and Australian Equal Opportunity
Business Case, 2003
for Women in the Workplace, Paid Maternity Leave-the
www eowa.gov au/Developing a Workplace Program/Emp loyment Matter Resources/EM 5 R
esources/EOWA Paid Mat Leave Info/The Business Case htm.
"Lawrence M Berger, Jennifer Hill, and Jane Waldfogel, "Maternity Leave, Early Maternal
Employment and Child Health and Development in the US," The Economic Journal, February
2005, 115(501) F29-F47.
"Parental leave includes both maternity and paternity leave See Bureau of Labor Statistics,
National Compensation Survey: Employee Benefits in Private Industry in the United States,
March 2007, www bIs gov/ncs
i3Westat, Balancing the Needs of Families and Employers. Family and Medical Leave Act Surveys,2000 Update, Report for the U S Department of Labor, 2001, Table A2-3.I
' 4Westat, Balancing the Needs of Families and Employers. Family and Medical Leave Act Surveys,2000 Update, Report for the U.S. Department of Labor, 2001, Table 2 17
'5 Small Business Administration, Employer Firms, Establishments, Employment, and Annual
Payroll Small Firm Size Classes, 2005, available at
http.//www sbagov/advo/research/usOSss pdf
'6Data are for 2005 National Center for Health Statistics, National Vital Statistics Reports, Volume 56, Number 6, Tables 10 and 14, available at
http //www cdc.gov/nchs/data/nvsr/nvsr56/nvsr56 06 pdf
"Heather Boushey, "Job Tenure and Firm Size Exclude Many Young Parents from Family and
Medical Leave," Washington, DC Center for Economic and Policy Research, June 2007.
"8Jane Waldfogel, "The Impact of the Family Medical Leave Act," Journal of Policy Analysis and
Management, vol 18, Spring 1999; Christine Siegwarth Meyer, Swat Mukerjee, and Ann Sestero, "Work-Family Benefits Which Ones Maximize Profits?" Journal of Managerial Issues,13(l) 28-44, Spnng 2001, Families and Work Institute, Business Work-LifeStudy, 1998,
available at http./www familiesandwork org/summary/worklife pdf, Children's Defense FundMinnesota, Parental Leave in Minnesota: A Survey of Employers, Winter 2000, http //www cdfmn org/PDF/Publications/ParentalLeave pdf, and "Limits of Family Leave," Chicago Tribune,
May 4, 1999
'9Ruhm, Christopher. "The Economic Consequences of ParentalLeave Mandates Lessons from
Europe" Quarterly Journal of Economics, 285-317 (1998), Heather Boushey, "Family Friendly
Policies Helping Mothers Make Ends Meet," Review of Social Economy, forthcoming 2008.
20
Heather Boushey, "Family Friendly Policies Helping Mothers Make Ends Meet," Review of
Social Economy, forthcoming 2008.
21
Williams, Joan Jessica Manvell, and Stephanie Bomstein, "Opt-out or Pushed Out?. How the
Press Covers Work/Family Conflict University of California, Hastings College of the Law, 2006,
p. 39.
22Employment Policy Foundation, Factsheet: Turnover Costs (Washington, DC, Oct 2004)
'3 Holterman, S. All Our Futures, Barkingside: Bamardo's, 1995, p. 102-112
2
'Appelbaum, Eileen, and Ruth Milkman "Achieving a Workable Balance New Jersey Employer's Experiences Managing Employee Leaves and Turnover" Center for Women and Work,
School of Management and Labor Relations, Rutgers, The State University of New Jersey, New
Brunswick, NJ 2006, p 17-19
63
"Appelbaum, Eileen, and Ruth Milkman "Achieving a Workable Balance New Jersey Employer's Experiences Managing Employee Leaves and Turnover" Center for Women and Work,
School of Management and Labor Relations, Rutgers, The State University of New Jersey, New
Brunswick, NJ 2006, p i
26
However, as noted in Vicky Lovell, "Maternity Leave in the United States," Washington, DC
Institute for Women's Policy Research, many of the firms on the Working Mother list actually do
not provide paid family leave http /Iwww.iwpr orgtpdf/parentalleaveAt3 I pdf
2"We did not ask the Fortune 100 firms what share of employees use paid leave, nor whether the
leave is available to every employee Given that most responses indicate that paid leave is primarily available for women through a short-term disability program, this is more than likely to be
available to all workers.
"Bureau of Labor Statistics, Women in the Labor Force: A Databook, Table 25, page 68 (September 2007)
29Janet Gomick and Marcia Meyers, 2003 Families That Work. Policies for Reconciling Parenthood and Employment, Russell Sage Foundation
"Labor Project for Working Families, Paid Leave Activity in Other States, available at
http://www paidfamilyleave org/otherstates html
"State of California Employment Development Department, Disability Insurance Frequently
Asked Questions, available at httM://www edd ca gov/direp/difugl .htm#Pregnancv
32The law was passed in September 2002 and became effective on January 1, 2004, with benefits
payable for leave commencing on or after July 1, 2004. California's paid family leave is not a
form of job protection. The program does not guarantee an employee the right to take leave, nor
does it require an employer to hold an employee's job open while the employee is on leave Paid
leave can be taken all at one time, or intermittently-i.e , in hourly, daily, or weekly increments.
While the previously existing State Disability Insurance benefit provides partial wage replacement
to individuals who cannot work because of their own illness or injury, the new paid family leave
benefit provides partial wage replacement to individuals who must take time off from work to
care for a seriously ill family member or new child Workers who take leave under the paid family
leave program receive approximately 55 percent of their wages, subject to a statutory cap Only
workers who pay into the State Disability Insurance system-i e, almost all private sector employees and some public sector employees-are eligible for paid leave The paid family leave law
does not require an employee to work a minimum number of hours or days before becoming
eligible for paid family leave benefits Georgetown University Law Center, Laws Impacting
Workplace Flexibility, available at
http //www law georgetown edu/workplaceflexibilitv20 10/law/ca cfm, U S Government Accountability Office, Women and Low-Skilled Workers Other Countries' Policies and Practices That
May Help These Workers Enter and Remain in the Labor Force, GAO-07-8 17, June 2007, footnote 7
33Hawaii, New York, and Rhode Island offer mothers longer leaves as necessary to recover from
childbirth In New York, the length is capped at 26 weeks and in Rhode Island, the cap is 30
weeks
3"Beginning in October 2009, parents of newborn and newly adopted children who have worked
680 hours or more in the prior year will be able to take up to 5 weeks off work with a benefit of
$250 per week, pro-rated for part-time workers While the leave was initially funded through an
employee-paid payroll tax, the bill that passed establishes ajoint legislative task force to recommend, among other things, a funding source for the program before January 1; 2008 The Washington law does provide some employees who take leave with job protection Economic Opportunity Institute, Our Successes available at
hgtp //www econop org/about us/our successes.html#paid family leave, U.S Government Accountability Office, Women and Low-Skilled Workers. Other Countries' Policies and Practices
That May Help These Workers Enter and Remain in the Labor Force, GAO-07-8 17, June 2007,
footnote 8
"See http://fortunelOOs.com/fortunelO0/, for the Fortune 100 listing.
Questionnaire Responses from the Fortune 100
The companies in the JEC questionnaire were taken from the top 100
companies on Fortune magazine's 2007 list of the Fortune 500.35 Each
APPENDIX:
64
year, Fortune Magazine publishes the list of the U.S.-based corporations with the largest revenue. Fortune 100 companies disproportionately come from the insurance and financial services sector, the health
care and pharmaceuticals industry, the defense and manufacturing sector, the oil industry, and the telecommunications industry.
We attempted to make contact with each of the Fortune 100 companies
to determine whether they would be receptive to receiving and filling
out the family-leave questionnaire. Only one company did not respond
to our phone inquiries; therefore we sent questionnaires to 99 of the
Fortune 100. Of those 99, four formally declined to participate. Of the
remaining 95, 53 completed the JEC Questionnaire.
Any questionnaire may have "response bias," where the respondents
differ greatly from the total population. Table Al looks at one factor in
possible response bias: do the responding firms come from different
industries than the non-responding firms? We find that the companies
that responded to the JEC Questionnaire do not appear to come from
different industries than those who did not. Thirty-four percent of the
respondents were from the insurance and financial services sector.
Along with companies from the oil, retail, and defense and manufacturing sectors, they constituted sixty-four percent of the respondents. Other respondents were from health services, technology and telecommunications industries. Of the 42 companies that did not respond to the
questionnaire, 27 of them (64 percent) were from the insurance and
financial services, health care services and pharmaceuticals, defense
and manufacturing, and telecommunication industries. However, the
Fortune 100 companies who responded to our survey may be more inclined to care about work/life issues. Eighteen of the companies that
responded were on the Working Mothers list of 'Best Companies for
Women for 2007,' compared to six of the non-responding companies.
Thus, although the respondent and nonrespondent companies represent
similar industries, limiting the potential for response bias, respondents
are more likely to care about work/life issues in general.
Table Al. Fortune 100 Industry Groups by Response Table Al. Fortune 100 Industry Groups by Response
Type of Company
Respondents
Nonrespondents
65
Insurance/
18
8
4
9
Defense-related/ Manufacturing
6
5
Oil
5
3
Telecommunications
3
5
Computer/
4
3
Retail
5
1
Misc.
8
8
Financial Services
Health Care Services/
Pharmaceuticals
Technology
Note: 'Misc.' includes motor vehicles, chemical, beverage, agricultural
and grocery, shipping, and chemical companies.
Question
Sample (Participate=l,
Observations
Mean
Std.
Dev.
Min
Max
57
0.930
0.258
0
I
66
Decline to
Participate=O)
1. Does your
company
provide any
paid leave for
parents following the
birth or adoption of a
child?
(Yes=1,
No=O)
53
Ifprovided,
concurrent
withfamily
leave
7
1.000
0.000
I
I
Ifprovided,
concurrent
with sick
leave
2
1.000
0.000
1
I
12.750 12.828
6
52
0.792
0.409
0
I
Ia. If yes,
could you
please tell us
how many
days or
weeks of paid
leave (reported as
weeks) you
offer for:
Mothers after
the birth of a
12
67
child for disability leave:
Ifprovided,
minimum
weeks for
disability
leave
16
6.000
0.000
6
6
Ifprovided,
maximum
weeks for
disability
leave
16
8.250
1.000
8
12
Mothers after
the birth of a
child for parental leave:
10
Ifprovided,
minimum
weeks for
maternity
leave
3
4.667
If provided,
maximum
weeks for
maternity
leave
3
14.00
0
Fathers after
the birth of a
child:
Ifprovided,
minimum
weeks for
paternity
14
2
7.660
3.686
5.000
4.826
0.6
13
2.309
2
6
10.39
2
8
26
0.6
13
2
8
4.235
4.243
68
leave
Ifprovided,
maximum
weeks for
paternity
leave
2
Mothers after
the adoption
of a child:
19
Ifprovided,
minimum
weeks for
adoption
leave
1
Iffprovided,
maximum
weeks for
adoption
leave
I
Fathers after
the adoption
of a child:
18
4
12
0.5
13
8.000
8
8
12.00
0
12
12
8.000
5.321
4.339
5.657
3.935
3.747
0.5
13
Ifprovided,
minimum
weeks for
adoption
leave
2
5.000
4.243
2
8
If provided,
maximum
weeks for
adoption
leave
2
8.000
5.657
4
12
69
lb. Which
employees
are eligible
for this paid
leave? Fulltime only or
all? (Fulltime only=l,
AIl=2)
38
1.184
0.393
1
2
17.5
22
Ifprovided,
threshold
for eligibility in
hours
18
I c. Do employees have
the option of
taking the
leave either
consecutively
or spread
through the
year?
(Yes=l,
No=0)
39
0.487
0.506
0
1
37
0.378
0.492
0
I
Id. Is there
any limit on
the number
of times an
employee can
take paid
leave
19.84
4
0.826
70
(beyond the
12 weeks
provided under the federal Family and
Medical
Leave Act)?
(Yes= 1,
No=0)
If provided,
threshold
for leave in
weeks
7
36.42
9
2. Does your company provide
any job-protected unpaid leave for
parents following the birth or
adoption of a child beyond the 12
weeks required under the federal
Family and Medical Leave Act
(FMLA)? (Yes=l, No=O)
20.14
8
52
8
0.503
51
0.451
Mothers after the birth of a child:
____
weeks
18
27.056 21.883
Ifprovided, minimum weeksfor
maternity leave
2
0
I
4
92
2a. If yes, could you please tell us
how many days or weeks (reported as weeks) of job-protected
unpaid leave you offer beyond
FMLA to:
13.00
0
1.41
4
12
1
4
71
Ifprovided, maximum weeks for
maternity leave
Fathers after the birth of a child:
weeks
Ifprovided, minimum weeksfor
paternity leave
Ifprovided, maximum weeksfor
paternity leave
Mothers after the adoption of a
child:
weeks
2
15
40.00
0
0.00
0
25.400 22.583
40
4
4
0
92
2
13.00
0
1.41
4
12
I
4
2
40.00
0
0.00
0
40
4
0
15
25.400 22.583
4
92
Ifprovided, minimum weeks for
adoption leave
2
13.00
0
1.41
4
12
1
4
Ifprovided, maximum weeksfor
adoption leave
2
40.00
0
0.00
0
40
4
0
Fathers after the adoption of a
child:
weeks
15
25.400 22.583
4
92
72
2
13.00
0
1.41
4
12
I
4
2
40.00
0
0.00
0
40
4
0
2b. Which employees are eligible
for this unpaid leave? Full-time
only or all? (Full-time only-l,
All=2)
23
1.043 0.209
Ifprovided, thresholdforeligibility in hours
6
2c. Do employees have the option
of taking the leave either consecutively or spread through the year?
(Yes= 1, No=0)
24
If provided, minimum weeks for
adoption leave
Ifprovided, maximum weeks for
adoptionleave
19.74
4
0.625
0.39
7
0.495
1
19.23
1
0f
2
2
0
1
73
2d. Is there any limit on the number of times an employee can take
unpaid leave (beyond the 12 weeks
provided under the federal Family
and Medical Leave Act)? (Yes=l,
No=0)
23
Ifprovided, limitsfor leave in
weeks
1
3. Does your company provide any
paid sick leave? (Yes=l, No=0)
51
If specified, other leave that employees can substitutefor paid
sick days (DisabilityLeave=-2,
PaidTime Off=-3)
12
0.348 0.487
0
8.000
0.902
I
8
0.300
-2.417
0.515
3a. If yes, could you please tell us
how many days of paid sick leave
you offer?
34 98.147
126.669
8
0
1
-3
-2
5
365
Ifprovided, minimum days
6
14.500
9.050
6
30
Ifprovided, maximum days
6
46.333
42.945
15
130
43
0.907
0.294
0
1
3b. Can employees use paid sick
leave following the birth or adop-
74
tion of a child? (Yes=1, No=O)
Ifprovided, number of days
22
89.409
118.842
5
365
Ifprovided, minimum days
8
26.875
8.839
5
30
Ifprovided, maximum days
8
48.750
33.568
20
130
0.886
0.493
-2
I
3c. Is paid sick leave offered for a
qualifying medical conditions under FMLA, other than the birth of
adoption of a child? (Yes-1,
44
No=0)
Ifprovided, days
25
124.800
125.306
5
365
Ifprovided, minimum days
4
11.750
12.203
5
30
Ifprovided, maximum days
4
75.250
63.221
20
130
1.136
0.347
1
2
17.5
34
3d. Which employees are eligible
for this paid leave? Full-time only
or'all? (Full-time only=1, AlI=2)
If provided, thresholdforeligibility in hours
20
20.473
3.318
75
A Good Job Is Hard To Find: Evidence for Extending Unemplovment Insurance Benefits Already Exists
EXECUTIVE SUMMARY
The most recent employment report by the Bureau of Labor Statistics
showed widespread weakness in the labor market. The unemployment
rate rose sharply in March and, for the first time since 2003, there was
a third straight month of falling employment. Unemployment typically
only rises like this when we are in a recession. Job losses are no longer
contained in sectors associated with the housing bust, but are now
spreading throughout the economy. The current labor market slowdown comes on the heels of the weakest jobs recovery in over seventy
years.
Evidence is mounting that labor market conditions are already as bad
as or worse than when Unemployment Insurance (UW) benefits were
extended in previous recessions:
Long-term unemployment is at recession levels and already higher
than when Congress extended UI benefits in the 2001 and 1990-91 recessions. Currently, there are 1.3 million unemployed workers who
have been out of work and searching for a new job for at least six
months.
* The number of unemployed claiming UI benefits recently rose above
400,000 per week, a level at which economists typically consider the
labor market to be in a recession.
* The share of the U.S. population with ajob never fully recovered
from the 2001 recession and is lower now than it was last time Ul benefits were extended.
*The share and number of UI beneficiaries exhausting their benefits is
already higher than at the beginning of the 2001 and 1990-91 recessions.' More than one-in-three unemployed workers (35.6 percent) exhausted their Ul benefits last quarter.
*Over 1.3 million workers will exhaust their UI benefits between January and June 2008 and 10 states and the District of Columbia have
exhaustion rates higher than 40 percent (FL, NJ, CA, NE, AZ, NM,
NC, CO, LA and IN).
Many indications exist that the unemployed are having difficultly finding ajob. Currently, there are 4.2 million unemployed workers who
lost theirjobs involuntarily and the unemployment rate would be close
76
to twice as large if we included everyone who wanted, but did not
have, a full-time job.
Families are ending this recovery having made very little economic
progress. The 2000s recovery will most likely be the first in many decades where at the end of the recovery, real family income is $1,000
lower than it was at the last economic peak. Families have very little
savings and, on top of this, the collapse of the housing market and the
credit crunch mean that families are increasingly unable to tap into
home equity or sell their home to move to find better employment opportunities. Recent estimates are that, depending on the severity of the
recession, families may lose an additional $2,000 to nearly $4,000 in
income per year over the current recession.
Economists agree that, dollar for dollar, Ul benefits are one of the most
effective means of economic stimulus. Extending UI benefits now will
not only help working families maintain income stability in the face of
a challenging labor market, but may also help many to avoid having to
foreclose on their homes in a market already glutted with unsold houses. Extending UI benefits is one the most effective forms of economic
stimulus and given the potentially protracted nature of the current economic downturn, there is no reason to wait to extend benefits.
INTRODUCTION
The March employment report showed widespread weakness in the
labor market including, for the first time since 2003, a third straight
month of falling employment. After months of job losses being contained in sectors associated with the housing bust, the economy is now
showing losses in a wide array of industries. At the same time, unemployment is rising and jobs are harder to find. The labor market is
trending downwards: in testimony before the Joint Economic Committee on April 4, 2008, the Commissioner of the Bureau of Labor Statistics reported that "labor market conditions started to weaken more than
a year ago."2 Based on the labor market data, the slowdown in economic growth for the fourth quarter, falling home prices, and the ensuing
crisis in the credit markets, most economists now believe we are in a
recession.
Conditions have deteriorated to the extent that on March 13, 2008, the
Wall Street Journal reported that 71 percent of economic forecasters
77
now believe that we are in a recession and about half of them think it
could be worse than the one in 200 1.3 A day later, Prof. Martin
Feldstein, President of the National Bureau of Economic Research,
said that we are in a recession that could be "substantially more severe"
than recent ones.4 Even Federal Reserve Chairman Ben Bernanke, in
testimony before the JEC on April 2, said that a recession is now possible. He said it is now "likely that real gross domestic product (GDP)
will not grow much, if at all, over the first half of 2008 and could even
contract slightly."
Earlier this year, Congress passed and the President signed an economic stimulus package designed to forestall an economic downturn. This
package included rebates to more than 130 million Americans of up to
$600 per individual and $1,200 per married couple, plus $300 per
child, increases in the loan limits for large ("jumbo") mortgages, and
an acceleration of the depreciation allowed for small businesses.
Extending UI has been the common policy response to signs of recession. Congress has extended benefits in each of the last five economic
recessions and this recession should be no exception. Typically, an extension allows unemployed workers to claim benefits for an additional
13 weeks-or 26 weeks in high unemployment states-beyond the current 26 weeks maximum. Extending UI would clearly provide muchneeded assistance to the unemployed, while also providing targeted
stimulus to the economy.
Even so, some are questioning whether it is too early in this economic
downturn to extend UI. Some economists have pointed to the relatively
low unemployment rate as an indication that extending UI benefits is
unnecessary at this time.
Extensive evidence already exists that unemployed workers are having
a difficult time finding a new job. Although the unemployment rate is
still relatively low in historical terms, this should not be viewed as the
only-or even most important-indicator of the tightness of the labor
market. Other labor market data-in particular, the relatively large
share of the unemployed who are currently long-term unemployed, the
rate of people who are exhausting their Ul benefits, and the relatively
low employment rate-provide a more important indication of how
well millions of workers are faring in today's labor market. Given
economists' concerns about the potential severity of this recession,
combined with the fact that this will be the first recovery in decades in
78
which family income did not recover before the next recession began,
the evidence for extending UI benefits already exists.
UNEMPLOYMENT IS BEGINNING TO RISE AND ONE-IN-SIX UNEMPLOYED WORKERS HAS BEEN OUT OF WORK FOR AT LEAST SIX
MONTHS
In March, the official unemployment rate rose to 5.1 percent and an
additional 434,000 workers joined the ranks of the unemployed. The
unemployment rate's one-month increase of three-tenths of a percent
was relatively large; unless the economy is entering a labor market recession, the unemployment rate tends to move slowly, typically by a
statistically insignificant one-tenth of a percent in a given month. Given the downward trends in the labor market, this recent rise in unemployment may not just be a one-month statistical aberration.
There are many other indicators of problems in the labor market. The
BLS's March employment report showed that of the total unemployed,
1.3 million-or one-in-six (16.7 percent)-were "long-term unemployed," that is, out of work and searching for a new job for at least six
months (27 weeks or longer).5 The mean duration for unemployment
spells was 16.2 weeks. 6 The six-month mark is important because this
7
is the maximum number of weeks for collecting regular UI benefits.
The share of the unemployed who are long-term unemployed is much
higher now than at the beginning of the 2001 and 1990-91 recessions
(Table I and Figure 1).8 In March 2001 and in July 1990, there were
nearly 700,000 long-term unemployed, just over half as many as there
are today. In March 2001 and July 1990, the share of the unemployed
who were long-term unemployed was roughly one-in-ten (11.1 percent
and 9.8 percent respectively), compared to nearly one-in-six today. 9
Table 1. Long-term Unemployed
Share of the unemployed who are
long-term
Number of the unemployed who
are long-term
Jul-90
Mar-01
Mar-08
9.8%
11.1%
16.7%
688,000
696,000
1,282,000
79
Source: Bureau of Labor Statistics
Notes: The long-term unemployed are people who are out-of-work and
seeking employment for at least 26 weeks.
Workers who are long-term unemployed are disproportionately likely
to be older and African American. Younger workers are less likely to
be long-term unemployed and have shorter median weeks of unemployment. In 2007, only 17.2 percent of workers aged 25 to 34 were
long-term unemployed, compared to 23.6 percent among workers aged
45 to 54."°
MORE UNEMPLOYED WORKERS ARE EXHAUSTING THEIR UI BENEFITS
In the last week of March, the number of new applications for UI benefits rose above 400,000, a level that economists typically associate with
a recession. At the same time, there are now greater numbers of unemployed workers exhausting their UI benefits. Regular Ul benefits are
typically cut off after 26 weeks and those who receive Ul benefits for
six months without finding a new job "exhaust" their UI benefits.' 1
According to the Department of Labor, over a third of those on UI in
80
the fourth quarter of 2007 (35.6 percent) exhausted their benefits, leaving 665,000 unemployed workers without access to UI even though
they have been unable to find a job (Table 2).12 This is higher than the
share and number of UT beneficiaries exhausting their benefits at the
beginning of the 2001 and 1990-91 recessions.
Table 2. UI Recipients Exhausting Benefits
Share of UI recipients exhausting
benefits
Number of UI recipients exhausting benefits
1990 Q3
2001 Q1
2007 Q4
28%
32%
36%
565,478
595,090
664,751
Source: Department of Labor
Based on fourth quarter UI exhaustion rates, over 1.3 million workers
will exhaust their UI benefits between January and June 2008. Many
states have relatively high rates of exhaustions: the highest is the District of Columbia where 54.5 percent of those on UT exhaust their benefits, and a total of ten states (and the Virgin Islands and Puerto Rico)
have exhaustion rates higher than 40 percent (FL, NJ, CA, NE, AZ,
NM, NC, CO, LA and IN).13
EMPLOYMENT IS LOW-AND FALLING-AND JOBS ARE HARD TO
FIND
Federal Reserve Chairman Ben Bernanke noted that the appropriate
indicator of the health of the labor market was perhaps not the unemployment rate, but the employment rate.'4 During the 2000s economic
expansion, the employment rate-the share of the U.S. population with
a job-never fully recovered to its pre-recession peak of 64.7 percent
(Figure 2). If the employment rate had recovered to its pre-recession
peak, there would have been 4.9 million more people at work in March
2008. The lower employment rate indicates overall weakness in the
labor market, which is not necessarily being picked up by the unemployment rate.
Over the past year, the employment rate has been falling. The employment rate hit a high of 63.4 percent fifteen months ago and has
since fallen to 62.6 percent (Figure 2). The employment rate is lower
81
now than it was at the beginning of the 2001 recession and lower than
in early 2002 when Congress last extended Ul benefits to the longterm unemployed.
There are also many other indications that people are being laid off and
having a hard time finding a new job or having to take a part-time job
instead of a full-time one. Half of the unemployed (53.7 percent), equal
to 4.2 million workers, lost their job involuntarily.' 5 One-fifth (20.2
percent) of those employed part-time report that they would prefer fulltime work, but this was all they could find.' 6 The unemployment rate
would have been 9.1 percent if it included those who worked part-time
for economic reasons as well as those who were marginally attached to
the labor force.' 7
The weak labor market is hardest on particular sub-groups of the population. In particular, teen workers have already seen sharp declines in
employment and rising unemployment.
Do the Unemployed Not Seek Employment?
Some economists argue that extending Ul will only increase the duration of
unemployment spells as workers who would otherwise find a new job instead choose to continue to receive benefits. 18 Recent research rebuts this
hypothesis: David Card, Raj Chetty, and Andrea Weber find that the way
unemployment spells are measured affects the spike in exits as the benefit
deadline approaches. When measured correctly, the modest spike in reemployment rates implies that most job seekers do not wait until their Ul
benefits are exhausted to return to work: less than one percent ofjobless
spells have an ending date that is manipulated to coincide with the expiration of UI benefits. 19
Further, economists argue that the economic research that is sometimes cited to support this view is not applicable during a recession. Under
questioning by Senator Paul Sarbanes at a hearing before the Joint Economic Committee on November 13, 2002, former Federal Reserve Chairman Greenspan said that "when you get into a period where jobs are falling, then the arguments that people make about creating incentives not to
work are no longer valid and hence, I have always argued that in periods like this the economic restraints on the unemployment insurance system almost surely ought to be eased to recognize the fact that people are
unemployed because they couldn't get ajob not because they don't feel
like working."
82
UT IS AN EFFECTIVE ECONOMIC STIMULUS
Temporarily boosting unemployment insurance - through either increasing benefit levels or extending benefits to the long-term unemployed - is among the most effective forms of economic stimulus because it targets resources directly toward people who will spend the
money.
Prior research confirms that extending UI is an effective economic stimulus:
*Mark Zandi of economy.com estimated that each additional dollar of
expanded unemployment insurance benefits leads to $1.64 increased in
20
aggregate demand, much more than other stimulus proposals.
*The Department of Labor found that each dollar of benefits increased
GDP by $2.15 and that at their peak, UT benefits saved an average of
130,000 jobs annually.2 '
*Peter Orszag, Director of the Congressional Budget Office, recently
testified that increasing the value or duration of UI benefits would be
among the most effective economic stimulus plans.2 2
LACKLUSTER RECOVERY LEAVES FAMILIES LESS ABLE TO DEAL
WITH UNEMPLOYMENT
Extending UI benefits to the long-term unemployed is especially important in today's economy because the lackluster recovery has left
83
families less prepared than in recent decades for a bout of unemployment.
Weak Labor Market Recovery
The current labor market slowdown comes on the heels of the weakest
job recovery in over seventy years. Over the economic recoveries of
the 1980s and 1990s, the economy added 234,000 and 205,000 jobs per
month on average. However, over the 2000s recovery, the economy
added half as many jobs (102,000) each month on average (Figure 3).
Wage growth has also been lackluster over the 2000s economic recovery. From the peak in 1989 through the next peak in 2000, real weekly
full-time earnings grew by 7.7 percent, over twenty times as much as
they grew from the peak in 2000 through 2007, the likely peak year of
the 2000 recovery. Inflation-adjusted wages and weekly earnings are
now both lower than they were over a year and a half ago and median
household income is nearly $ 1,000 lower than it was in 2000.
Given recent trends in wages and employment, the 2000s economic
recovery likely will be the first one in many decades where family income does not fully recover from the prior recession. This means that
in 2007, inflation-adjusted median family income will remain lower
than it was in 2000. On top of this low baseline, families will see in-
84
come losses over the course of any recession. Given trends in prior recessions, recent estimates are that by 2010, families will see a $2,000
decline in income (in 2006 dollars) if we have a mild-to-moderate recession or $3,750 decline (in 2006 dollars) if we have a severe recession.23
Little Savings, FallingHome Values
For many families, this is the worst of times to be facing unemployment. The national savings rate is close to zero and the typical family
does not have sufficient savings to get them through an extended period of unemployment. Without UI benefits, families experiencing extended unemployment may end up losing their homes, only adding to
the glut of unsold homes and further deepening the housing crisis. Extending Ul benefits to the long-term unemployed would not only help
these individual families, but will be good for the overall economy. 2 4
For many families, tapping into home equity or moving to find better
employment opportunities are becoming increasingly limited due to the
collapse of the housing market. As home values decline across the nation, homeowners are increasingly unable to borrow against their home
equity during a period of unemployment. Further, the decline in prices
and the high numbers of homes already on the market means that if a
family is forced to sell their home due to unemployment, they will be
doing so in the worst seller's market in decades. Many may not even be
able to sell their homes: a recent New York Times article points to an
emerging trend that homeowners looking to move to places with better
employment opportunities may be trapped by an unsold home.2 5
Besides cash savings and home equity, the other source of available
savings for families is a 401(k) plan, but even these have seen losses in
the past year. There is already evidence that families are tapping into
their retirement savings in higher numbers.
OPTIONS FOR EXPANDING UNEMPLOYMENT COMPENSATION
Many unemployed workers are eligible for unemployment compensation when they lose their job. The program is funded by a payroll tax
on employers. UI is an "automatic stabilizer," because it provides cash
income to workers who are no longer employed. When the unemployment rate rises, the program spends more money, but when unemployment falls, the program's payments fall.
85
There are three specific ways to expand unemployment insurance:
*Provide extended benefits to workers whose regular unemployment
compensation has expired;
- Supplement the amount of benefits paid to unemployment compensation recipients; and
*Modernize the Ul system to cover more unemployed workers, including more part-time and low-wage workers.
Extending Ul benefits to the long-term unemployed will directly help
the workers who are exhausting their UI benefits. The key to this policy is to target benefits to workers who are having an exceptionally difficult time finding reemployment. There are two mechanisms to extend
Ul benefits to the long-term unemployed and both should be enacted.
First, Congress should extend benefits for an additional 13 weeks to
those exhausting their benefits without finding a new job, as Congress
typically has done during recessions. Second, Congress should take
steps to improve the process by which extended benefits automatically
kick-in. 2 6 Reforming the trigger mechanism to effectively target benefits to those most in need would automatically extend UI benefits in
states with the weakest labor markets without waiting for Congress to
act.2 7
Supplementing the amount of benefits will put more money in the
hands of unemployed workers who need income and will spend it immediately. Nationwide, benefits are typically equal to just over onethird of pre-unemployment wages. There are two ways to supplement
benefits: Congress could raise the benefit amount or cover some or all
of UT recipients' COBRA co-payments for health insurance coverage.
COBRA, the 1985 Consolidated Omnibus Budget Reconciliation Act,
allows workers and their families to continue on their previous employer's group health insurance plan for at least 18 months after a job
loss, but the worker is responsible for the full cost of the coverage.
Many workers find that COBRA co-payments eat up a large share of
their Ul benefits, but they need COBRA to ensure that they and their
families have access to health insurance.
Modernizing the UI system to cover more part-time and low-wage
workers would increase the counter-cyclical nature of the UI program
by providing valuable benefits to workers who need the income. Eligibility rules for the unemployment insurance system are set at the state
level, but typically, to be eligible a person must have worked four out
86
of the last five calendar quarters, met minimum earnings and hours
requirements, and have lost their job through no fault of their own (i.e.,
they cannot have been fired). Nationwide, less than four-in-ten unemployed workers actually receive unemployment compensation. 2 8 The
problems with eligibility stem from the design of the program. Since
the 1930s when the program was created, there have been shifts in the
labor market and the economy that have left some workers out of the
system that have been paying into it. This now means that many women do not qualify for UI, even when they have lost their job through no
fault of their own. All states should be given the financial incentives
and tools necessary to achieve the best innovations in-the system as
called for in the Unemployment Insurance Modernization Act; this
would go a long way towards ensuring that more of the unemployed
are eligible for Ul.
CONCLUSION
Given the weakness in the labor market, an extension of UI benefits
should now be a top priority for policymakers. A consensus is emerging that a recession is virtually unavoidable, so Congress and the Administration should continue to focus on economic stimulus, as well as
bolster the incomes of those directly affected by the downturn and help
unemployed families continue to maintain their spending on basic living expenses. Extending UI benefits will provide much-needed relief to
unemployed families, provide economic stimulus, and. may help already-strapped families avoid defaulting on their mortgages.
END NOTES
'UI benefits are typically available for 26 weeks and unemployed workers who receive benefits
for 26 weeks and still have not found ajob leave the Ul system having "exhausted" their benefits.
2 Keith Hall, "Commissioner's Statement on the Employment Situation News Release," in Testimony before the Congressional Joint Economic Committee, April 4, 2008
' Phil Izzo and Sudeep Reddy, "Most Economists in Survey Say Recession Is Here," Wall Street
JournalMarch 13, 2008.
4Ros Krasny, "U S. faces severe recession. NBER's Feldstein," Reuters, March 14, 2008
5Bureau of Labor Statistics, Employment Situation, Table A-9
6 Bureau of Labor Statistics, Employment Situation, Table A-9
' Less than 40 percent of the unemployed actually receive Ul.
'The greater share of the unemployed who are long-term unemployed reflects a long-term shift in
the economy Academic research finds that this is due to survey changes and the passage of baby
boomers into their prime working years, after accounting for these, the remainder of the increase
in long-term unemployment isconcentrated among women, who are now more likely to remain in
the labor force rather than exit upon becoming unemployed. See, for example, Katherine Abraham and Robert Shimer, 2001 "Changes in Unemployment Duration and Labor Force Attachment," Cambridge, MA National Bureau of Economic Research, Working Paper No. 8513
9 Bureau of Labor Statistics, Employment Situation, Table A-9.
87
`0 U S Department of Labor, Bureau of Labor Statistics, Household Data Annual Averages, Table
31
" U.S Department of Labor, Employment and Workforce Training, Unemployment Insurance
Data Summary.
12 U S Department of Labor, Unemployment Insurance Data Summary
3 U.S. Department of Labor, Unemployment Insurance Data Summary.
' Ben S Bemanke, "Monetary Policy and the Economic Outlook 2004," Remarks at the Meetings of the Amencan Economic Association, San Diego, California, January 4, 2004
<http.//www federalreserve gov/boarddocs/speeches/2004/20040104/default htm>
t" Bureau of Labor Statistics, Employment Situation, Table A-8.
16 Bureau of Labor Statistics, Employment Situation, Table A-5
' Bureau of Labor Statistics, Employment Situation, Table A-12.
IsRobert Moffitt, "The Temporary Assistance for Needy Families Program," Cambndge, MA
National Bureau of Economic Research, Working Paper No. 8749, February 2002. Available at
https://www.nber.org/papers/w8749
'9 David Card, Raj Chetty, and Andrea Weber, "The Spike at Benefit Exhaustion Leaving the
Unemployment System or Starting a New Job?"" Cambridge, MA: National Bureau of Economic
Research, Working Paper No 12893, February 2007
20 The tax rebates, for example, are estimated to only add $1.26 in aggregate demand for every
dollar spend Mark M. Zandi, "Washington Throws the Economy a Rope," Dismal Scientist,
January 22, 2008
<htp.//www.economv com/dismal/article free asp?cid=102598>
21 Chimerine, et al., 1999 "Unemployment Insurance as an Economic Stabilizer Evidence of
Effectiveness Over three Decades," U.S. Department of Labor, Unemployment Insurance Occasional Paper 99-8.
22 Congressional Budget Office Testimony of Peter Orszag on Options for Responding to the
Short-Term Economic Weakness before the Committee on Finance, US Senate, January 22, 2009
www.cbo gov/ftpdocs/89xx/doc8932/01 -22-TestimonvEconStimulus.pdf
23 John Schmitt and Dean Baker, "What We're In For: Projected Impact of the Next Recession,"
Washington, DC Center for Economic and Policy Research, January, 2008.
2A Jonathan Gruber, "The Consumption Smoothing Benefits of Unemployment Insurance " American Economic Review, Vo. 87, No. 1, March 1997, 192-205
25 Louis Uchitelle, "Unsold Homes Tie Down Would Be Transplants," New York Times, April 3,
2008.
26 There is already in place a federal-state Extended Benefits program that extends 13 weeks of
benefits to the long-term unemployed, with the cost split between the state and federal govemments, however the program does not work effectively The Extended Benefits program is triggered when a state's 13-week average insured unemployment rate reaches 5 percent and this is a
120 percent increase from the same 13-week period in the last two years. Most states have also
adopted a second trigger when 13-week average insured unemployment rate reaches 6 percent In
either case, weekly benefits are identical to those in the regular Ut program
There are a number of proposals to fix the trigger mechanism See, for example, Jeffrey Wenger
and Matthew Walters, "Why triggers fail (and what to do about it) An examination of the unemployment insurance extended benefits program," Journal of Policy Analysis and Management,
Vol. 25, Issue 30
23 Data from the Department of Labor, Unemployment Insurance Data Summary
http //workforcesecurity.doleta gov/unemploy/content/data asp
27
2007
State
Real "chan House rrkes
2009
2008
n
0
Per ,cent
Cha,
2007
2009
2008
107 .
5249,185
5249,344
$250548
rkansas
5137,899
S137,891
S137,900
Clifomnia
S473,122
S420,936
S393,146
S328,695
$310,130
$287,028
$380.117
$365.384
S351,588
Alaska
ennltICAt
0
n
0
4,994
L't->
laware
Totali
r:S
,9x
fo
IVC
I.
S22J,3
135
.nu
a*zlO
_-
;:--
$195,291
S197,641
S199,785
S425,655
$394,690
$365,607
0
69
$1,401,690,141
H A iA if '
S2,140,084,993
IF-`r
PZml
S1,150,026,656
8AI
00
00
Real Median House Prices
State
Uhange in Housing Wealth
Percenta
Chan
'07 - 'I
2007
2008
2009
New Hampshire
S243,690
S230.466
$221,411
-9.14
New Mexico
$211,489
$204930
$195912
-737
New York
$259,010
$242,971
$227,860
-12.03
Oklahoma
$128,673
$129,214
$129.230
0.43
Pensylvania
$274,621
$270,292
$266,096
-3.31
SM9,120
-0.21
-
South Carolina
:W~~~~~~~~~~~~~~~~i,
$
194,526
S194,085
2007
1230S,25
LtD
26
-5,31 8,355,507
57,8L33Y3
-$16,068,269,614
SI16,314,3385
-$15,573,452,043
$2,903,151,97
-$36,960,077,164
00
ivmi'4
59,035 5971,28
-Sl 3,160,918,249
-$14,444,555,219
-$1859,876.3411
-$319,982,030
-$1,835,403,162
-Sl.595.800,861
-S3.751.16,05
-1-----1------1--.-----.
-
-11-
AWAMVPLA ffi-NAIVEL-i6i;-- 2M
Ili .;-Cse.-.
II
s76n7tt
t7str.7R
""
'''
-I..I.Ub3s
y
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.c-t
lfin
-o
r
ta - .s. .1-----1-,~~~~~~~~~~~~~~~~~~.
. .7.6 .-s -9 ..--
..-
. - ---I
.r.I
Prepared by theJoint Economic Commitee staff basedondata available asof April 2008.
Sources: Median home pnces calculated using FederalHousing FinanceBoard datafor singlefamily homes;historical homepriceindices from theOffice of FederalHousing Enterprise Oversight (OFHEO); forecastsof OFllEO price indices from Moody's Economy.com; statehousehold quantities from the U.S.CensusBureau;and Congressional Budget Office (CBO) forecastsof personalcortumption expenditure deflaton.
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2008 - 2009
(February 2008 dollars)
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(February 2008 Dollars)
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64,679
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258,328
$163,668
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S27,805,034 $18,586,625
S9,218,900
95,206
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14331
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1550014691
$133,767,007
S3,973.224
S3.204,937
S768,28t
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1500,038,455 S128,984,839
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1539,557,652 S170,110.38
134,596,404
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Comnruitcc
staffbasrd or dataatailbIc anofApril 2008.
Sources:Nombcrof outstanding
subrimnc
mortgagcs
aadccrrol subpritc ferrcbuor rarcnnmotMortgageBankersAssociatiron
sin data.aseragc
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theOfficeaf Pcdcr H.l..ngEnterprisc
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Officc(CBO)forecasts
afpersonalaosuoprtion-expc.ditradelfato.s:starepropcny taxratesfarmU.S.Ccns. BarracandtheTaxFourdalion: state
houschold deiscs, by MSA,from theU.S.Census
Boreara.
;-
92
Extending the Bush Tax Cuts is the Wrong Way to Stimulate the
Economy
The Bush tax cuts, which disproportionately benefited the wealthiest
Americans, were justified with a series of claims about their economic
effectiveness. Seven years after the first tax cuts were passed, the evidence is clear that these claims were false, and in reality, these tax cuts
have been bad economic policy. They have done little to stimulate the
economy. The economic expansion earlier in the Bush administration
was one of the weakest on record, and the economy has once again
fallen into recession. While having limited economic effect, the tax
cuts led to massive increases in the national debt and created an
enormous windfall for the very wealthiest Americans at the expense of
the middle class and future generations. Making the Bush tax cuts permanent would compound these long-term structural problems while
doing nothing to address the immediate problems of the economy.
FACTS ABOUT THE BUSH TAX CUTS:
Through 2008, the federal government has borrowed $1.6 Trillion to
pay for the Bush tax cuts.
Even the Chairman of the President's Council of Economic Advisors
said he "would not claim that tax cuts pay for themselves."
The tax cuts are heavily tilted to the wealthiest Americans. In 2007,
one third of the total benefits of the tax cuts went to the top one
percent of households.
Approximately 20 percent of total benefits went to 0.3 percent of
households earning $1 million or more per year. These households
received an average tax cut 103 times larger than that of middleincome households.
Investment and economic growth in this business cycle have been
lower than average, indicating that the tax cuts have not had strong
economic effects.
IF THE BUSH TAX CUTS WERE MADE PERMANENT:
Making the cuts permanent would cost the federal government an
additional $3.4 Trillion over the next decade, if they were funded
93
by borrowing.
*Permanent tax cuts would create revenue losses over three times
larger than the long-term Social Security funding gap. The windfall received by the top one percent of taxpayers alone would be
sufficient to close the Social Security funding gap through 2075.
*Using optimistic assumptions, the Administration's estimates of the
possible long-term economic benefits of the tax cuts find that they
would boost economic growth by a negligible four one-hundredths
of one percent per year. These long-term growth benefits would
only occur if tax cuts are funded through reductions in Federal
spending.
*If tax cuts were funded by spending cuts, they would actually reduce
net after-tax income for almost 75 percent of American households, while income among households earning $1 million per yeai
or more would increase by almost 8 percent.
THE TAX CUTS HAVE NOT INCREASED ECONOMIC GROWTH NOR
STIMULATED INVESTMENT.
*The Bush administration has claimed that its tax cuts drive investment and therefore create jobs and growth in Gross Domestic
Product (GDP). As Chart I demonstrates, however, the economic
expansion following the Bush tax cuts has showed substantially
lower growth in GDP, employment, and investment than previous
economic expansions.
Chri 1: The Besh
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In fact, the Bush tax cuts have been followed by markedly low in-
94
vestment growth. Chart 2 shows that growth in investment during
the Bush economic expansion was much lower than during the expansion of the 1990s. This is despite the fact that the 1990s economic expansion was not marked by tax cuts, but actually featured
a tax increase.
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levels of employment growth than the brief expansion period following the Bush tax cuts.
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95
ANY LONG-TERM EFFECTS OF THE TAX CUTS ON FUTURE GDP
GROWTH WILL BE SMALL AT MOST, AND COULD BE NEGATIVE.
1. MAJOR STUDIES HAVE FOUND THAT THE LONG-TERM GROWTH
EFFECTS OF THE TAX CUTS RANGE FROM NEGATIVE TO SMALL.
Expert analyses by the non-partisan Congressional Budget Office and
the Joint Committee on Taxation, as well as those by outside organizations, have found that under many sets of assumptions the
long-term growth effects of the tax cuts would be negative, and
will at most be quite small (CEA, 2008; JCT, 2006; CBO, 2004;
Labonte, 2008; Auerbach, 2002; Elmendorf and Reifschnyder,
2002).
The Bush Administration's own Treasury Department found that
even under the most optimistic assumptions, the tax cuts would at
best only increase annual economic growth by a miniscule 0.04
percent (CEA, 2008; Furman, 2007; Treasury, 2006).
*The effects of the tax cuts cannot be directly observed in the economy, and thus must be simulated in complex models that are heavily
reliant on assumptions (Labonte, 2008).
2. SO FAR, THE TAX CUTS HAVE BEEN FINANCED WITH BORROWED
MONEY. ANY POSITIVE GROWTH IMPACTS DEPEND ON PAYING FOR
TAX CUTS WITH SPENDING CUTS.
Tax cuts that are deficit-financed will likely lead to negative longterm impacts on economic growth (Gale and Orszag, 2005). Any
positive economic effects found in the studies cited above were
based on the assumption that tax cuts would eventually be financed
through government spending cuts.
*However, if tax cuts are financed through spending cuts, the majority
of Americans would likely experience a net loss in income (Gale,
Orszag, and Shapiro 2004). This issue is discussed further below.
96
THE TAX CUTS UNFAIRLY FAVOR THE WEALTHIEST AMERICANS.
1. TAX CUT BENEFITS ARE HEAVILY WEIGHTED TOWARD THE
WEALTHY.
In 2007, one-third of the total benefits of the tax cuts went to the top
one percent of households. Approximately 20 percent of total benefits went to the top 0.3 percent of households earning $1 million
or more per year (TPC Tables T07-0077, T07-0078).
In 2007, families making $50,000-$75,000 per year got a total tax cut
of $1,100, while families earning $1 million or more per year got a
total tax cut of $120,000 - over one hundred times higher (TPC
Table T07-0077).
*Chart 4 shows that middle- and low-income families experience
small income gains when the tax cuts are in effect through 2012.
Households in the top one percent income bracket - all of whom
earn well over $1 million per year - increase their income by 7.7
percent, almost four times the 2 percent rise in middle- and lowincome incomes.
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2. TAX CUTS MAY END UP REDUCING MIDDLE-CLASS INCOMES IF
THEY ARE FINANCED BY REDUCTIONS IN SPENDING.
These tax cuts are financed with borrowed money - a loan from future generations to today's taxpayers. Depending on how this loan
is repaid, the net effect of fully-funded tax cuts would likely reduce
most middle-class incomes.
97
*Administration estimates of the long-term impacts of the tax cuts assume that in the long run, tax cuts will eventually be-paid for
through large cuts in government spending. Unlike the tax cuts,
Federal spending provides more income to the middle-class than
the wealthy.
*If this tax cut-related debt is offset by across-the-board spending cuts,
the after tax income for 75 percent of American households will be
reduced (Gale, Orszag, and Shapiro, 2004; Furman, 2007).
*Only the wealthiest households benefit from the Bush tax cuts, even
using the Treasury Department's estimates for long-run growth effects, as show in Chart 5.
Chart Sk
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THERE is No CREDIBLE EVIDENCE THAT THE TAX CUTS WILL
EVEN COME CLOSE TO "PAYING FOR THEMSELVES."
1. ECONOMISTS AND ANALYSTS AGREE THAT ANY REVENUE FEEDBACK EFFECTS FROM THE TAX CUTS WILL BE SMALL COMPARED TO
THE DIRECT COSTS OF TAX CUTS.
*Simulation studies by non-partisan tax analysts at the Congressional
Research Service, the Congressional Budget Office, and the Joint
Committee on Taxation all show small revenue feedback effects
from the tax cuts (Gravelle, 2006; CBO, 2005; JCT, 2006). These
studies almost always find that any pro-growth effects of the tax
cuts would offset 10 percent or less of the revenue losses due to the
tax cuts. Even under the most optimistic possible assumptions,
98
growth effects from the tax cuts could offset no more than 30 percent of the total revenues lost.
The current chairman of the President's Council of Economic Advisors, Edward Lazear, stated in testimony before the Joint Economic
Committee that "I certainly would not claim that tax cuts pay for
themselves" (Lazear, 2006).
* Greg Mankiw, the former chairman of the Bush Council of Economic
Advisors, wrote in his macroeconomic textbook that there is "no
credible evidence" that tax cuts pay for themselves, and that an
economist who makes such a claim is a "snake oil salesman who is
trying to sell a miracle cure" (Mankiw, 2001).
2. BECAUSE ANY OFFSETTING REVENUE GROWTH IS SMALL, THE
BUSH TAX CUTS HAVE AND WILL GENERATE MASSIVE COSTS TO THE
FEDERAL GOVERNMENT. THESE MUST BE EITHER BORROWED OR
PAID FOR THROUGH CUTS IN OTHER SPENDING.
* The Bush tax cuts have so far increased Federal borrowing by $1.6
trillion through 2008, and will cost an additional $3.4 trillion over
the next decade if they are made permanent.! The great majority of
this $5 trillion in lost Federal revenue would not be offset.
Over the long run, the revenue losses due to making the tax cuts permanent would be enormous. For example, through 2075 these revenue losses would be more than three times greater than the
amount necessary to close the long-term funding gap in Social Security. Just the revenue losses resulting from the tax cuts given to
the top 1 percent of taxpayers alone would be sufficient to close
the entire Social Security funding gap through 2075 (Cox and Kogan, 2008).
Federal revenues as a percentage of the economy remain far below
the level they reached prior to the passage of the tax cut, and significantly below the level necessary to fund government spending
(OMB, 2008).
EXTENDING THE TAX CUTS WOULD NOT STIMULATE THE ECONOMY, AND COULD ACTUALLY WEAKEN IT.
99
1. BECAUSE TAX CUT EXTENSION WILL NOT TAKE PLACE UNTIL
2011, MAKING THE TAX CUTS PERMANENT WILL HAVE NO IMMEDIATE STIMULUS EFFECT AND MAY BE COUNTERPRODUCTIVE.
Policy changes that increase long-run government deficits can potentially increase long-term interest rates, which can counteract
growth effects of tax cuts (Gale and Orszag, 2005). Making the tax
cuts permanent will be a strong signal that the government intends
continued borrowing which create long-run deficits, while it would
have no immediate effect on tax rates.
Former Treasury Secretary Lawrence Summers recently agreed that
permanent tax cuts could easily create a drag on the economy by
driving up long-term interest rates in anticipation of future increases in government debt (Summers, 2008).
2. IF THE TAX CUTS ARE EXTENDED AFTER 2011, THEY WOULD
HAVE A MUCH SMALLER STIMULUS EFFECT THAN POLICIES THAT
WERE BETTER TARGETED TO THE MIDDLE CLASS.
It is well known that fiscal stimulus measures vary with respect to
their "multiplier" or "bang for the buck." Stimulus that is targeted
to income-constrained or credit-constrained households is most
likely to be spent rapidly, producing a proportionately larger effect.
For this reason, government payments to high-income households
produce little stimulus effect (Johnson, Parker, and Souleles, 2006;
CBO, 2008B).
Since the tax cuts are targeted heavily on higher income households,
with one-third of benefits going to the top 1 percent of taxpayers,
they will therefore produce only a limited stimulus effect stimulus
effect.
REFERENCES
Auerbach, Alan J., 2002 The Bush Tax Cut and NationalSaving, June, available at
htp /l/www.econ.berkelev.edu/-auerbachlbushtaxcut.pdf
Congressional Budget Office (CBO), 2004. An Analysis of the President'sBudgetary Proposals
for Fiscal Year 2005, March, available at http.//www cbo.gov/ftpdocs/5Ixx/doc15 1/03-08PresidentsBudget.odf
-
2005 Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in In-
come Tax Rates, December 1, available at
http:Hwww cbo.gov/fipdocs/69xx/doc6908/12-01 -I OPercentTaxCut ndf.
-
2008A. The Budget and Economic Outlook Fiscal Years 2008 to 2018, " January,
100
available at httR://www.cbo gov/ftodocs/89xx/doc8917/01-232008 BudgetOutlook.ndf. See p 12 for revenue estimate.
2008B. Testimony of Director Peter R Orszag before the Senate Committee on
Finance, January 22, available at http://www.cbo. ov/flpdocs/89xx/doc8932/01-22TestimonvEconStimulus.vdf
-
Council of Economic Advisors (CEA), 2008. Economic Report of the President, February, available at htt://www.whitehouse.Rov/cea/pubs.html
Cox, Kris and Richard Kogan, 2008 "Long-Term Social Security Shortfall Smaller than Cost of
Extending Tax Cuts for Top I Percent," Center on Budget and Policy Priorities, March 31, available at http.//www cbpp org/3-31-08socsec htm
Elmendorf, Douglas W. and David L. Reifschneider, 2002. "Short-Run Effects of Fiscal Policy
with Forward-Looking Financial Markets " National Tax Journal 55:357-386, September
Furman, Jason, 2007 "The Effect of the 2001-06 Tax Cuts on After-Tax Incomes," Testimony
before the U.S. Committee on Ways and Means, September 6, available at
haptH/www3 brookings edu/views/testimonv/furman/20070906 pdf.
Gale, William G. and Peter R Orszag, 2005 Deficits, Interest Rates and the User Cost ofCapital
A Reconsideration of the Effects of Tax Policy on Investment, August, available at
http //www urban orgfUploadedPDF/3 1121 ITPCDiscussionPaper 27 pdf
Gale, William G and Peter R Orszag, and Isaac Shapiro, 2004 DistributionalEffects of the 2001
and 2003 Tax Cuts and Their Financing,June 3, available at
http.//www.urban ore/uploadedpdf/411018 tax cuts.ndf
Gravelle, Jane G, 2006 "Revenue Feedback from the 2001-2004 Tax Cuts," Congressional Research Service, RL 22673, September 27, available at
http.//www congress.gov/erm/rl/odf/RL33672 pdf.
101
Your Flight Has Been Delayed Aeain:
Flight Delays Cost Passengers, Airlines, and the U.S. Economy Billions
EXECUTIVE SUMMARY
The economic costs of air traffic delays to the U.S. economy are large
and far-reaching. As air traffic has grown over the last two decades,
the number of domestic flights and air flight delays has reached record
levels. Increasing flight delays and cancellations are placing a significant strain on the U.S. air travel system and costing both passengers
and airlines billions of dollars each year.
For this report, the majority staff of the Joint Economic Committee
(JEC) used U.S. Department of Transportation data to analyze more
than 10 million individual U.S. domestic scheduled flights in 2007.
These passenger flights were operated by more than 400 different carriers - both national and regional - and traveled through more than
1I,100 airports. The JEC found that:
l] The total cost of domestic air traffic delays to the U.S. economy
was as much as $41 billion for 2007.
o Air-traffic delays raised airlines' operating costs by $19 billion.
With each delayed flight, airlines paid extra for crew, fuel, and
maintenance costs while planes sat idle at the gate or circled in
holding patterns.
o Delays cost passengers time worth up to $12 billion. Delayed
travelers, their employers, and others lost productivity, business opportunities and leisure activities when air travel took
extra time. Costs cascaded when delayed flights resulted in
other late flights. These costs to passengers could be even
higher than JEC estimates, as a result of missed connections,
cancelled flights, disrupted ground travel plans, forgone prepaid hotel accommodations, and missed vacation times.
o Indirect costs of delay to other industries added roughly $10
billion to the total burden. In particular, industries that rely on
102
air traffic, such as food service, lodging, general retail, and
public transportation suffered.
L Delayed flights consumed about 740 million additional gallons of
jet fuel.
o Delayed flights cost the airlines (and customers) an additional
$1.6 billion in fuels costs, assuming an average wholesale
price of $2.15 per gallon in 2007.
o Burning fuel during flight delays released an additional 7.1
million metric tons of climate-disrupting carbon dioxide into
the atmosphere.
f:1Almost 20 percent of total domestic flight time in 2007 was
wasted in delay.
o In 2007, flight arrivals were delayed by a total of 4.3 million
hours, after accounting for padding in airline schedules. These
delays cost travelers 320 million hours of lost time delays.
o Planes arrived later than their scheduled arrival by more than
2.8 million total hours; however, because airlines have built
the most predictable delays into their schedules calculating delays with respects to schedules significantly underestimates the
problem. In fact, when padding is removed from the analysis,
total delays are actually 57 percent higher than the airlines report.
o Flight delays were longest during months when many people
take vacations. Flight delays during the months of June, July
and August - popular vacation months - averaged approximately 414,000 total hours of delay per month. Flights during
December - the height of holiday traveling - totaled almost
438,000 hours of delay.
E Seventy-eight percent of flight delays in 2007 occurred before
take-off. Almost 60 percent of flight delays occurred at the gate,
and 20 percent of delays occurred during the taxi to the runway.
Airborne delays, the most costly for airlines accounted for 15 percent of all delays.
U Delays at the nation's largest airports disproportionately contributed to total passenger delays in 2007. Flights to and from the
35 largest U.S. airports accounted for about half of the total passenger delays, even though flights in and out of these airports accounted for only 33 percent of the flights in this study. Passengers
103
departing from airports in the Northeast and Midwest experienced
the longest per passenger delays.
Certainly, some air traffic delay is unavoidable. Flights can and should
be delayed if safety issues arise due to severe weather or mechanical
problems. However the staggering levels of delays experienced in 2007
and the significant costs these delays had on the U.S. economy are
troublesome.
As air travel is expected to increase - the Federal Aviation Administration forecasts that the number of U.S. air travelers will grow by at least
2.7 percent per year through 2025, from more than 689 million passengers today to more than 1. I billion in 2025 - delays will continue to
worsen without important reforms to the system.
INTRODUCTION
Air travel delays in the U.S. are at record levels and getting worse.
With the exception of a dip in travel following the September 11, 2001
attacks, the number of domestic flights has steadily grown over the last
two decades, leading to increased air congestion and delays. As a result, flight delays and subsequent cancellations are costing both passengers and airlines billions of dollars each year. With the Federal Aviation Administration (FAA) predicting that the number of paying U.S.
air passengers will likely increase through 2025 at an annual rate of at
least 2.7 percent,' the costs to passengers, airlines, and the overall
economy can only be expected to rise in the coming years. To alleviate
the growing costs of congestions and delays, it is clear systematic
reform is needed.
To help policy makers understand the true economic ramifications of
delayed flights in the United States, the majority staff of the Joint Economic Committee (JEC) has estimated the total costs of air travel delays to the U.S. economy in 2007. To compute the total cost of delay,
the JEC estimated the operating costs of airlines, the value of delayed
passenger time, and the spillover costs to other industries. The JEC
also estimated the environmental ramifications ofjet fuel wasted as a
result of delay. The JEC used U.S. Department of Transportation
(DOT) data to analyze more than 10 million individual U.S. domestic
scheduled flights in 2007. These passenger flights were operated by
more than 400 different carriers - both national and regional - and traveled through more than 1,100 airports. This report excludes the costs
104
of delay for international, freight, military, and general aviation flights,
including corporate non-commercial flights. Additionally, this report
excludes the costs of cancelled or missed connecting flights due to the
delay of an initial leg of a flight. Cost estimates in this report are based
on airline delays only and do not include the additional lost passenger
time spent getting through security. Finally, this cost estimation accounts for expected delays built in to airline schedules. The appendix
provides an in-depth explanation of the scope and methodology used
for this analysis.
AIR TRAFFIC DELAYS COST THE U.S. ECONOMY UP To
LION IN 2007
$41 BIL-
The economic costs of air traffic delays to the U.S. economy are vast
and far-reaching. Delayed flights affect not only the airline industry
and the traveling public, but also businesses that depend on air traffic
to generate revenue. In addition to the economic costs of delay, burning jet fuel during delays emits climate-disrupting carbon dioxide and
local air pollutants. Delayed passenger flights in 2007 emitted an additional 7.1 million metric tons of carbon dioxide into the atmosphere. In
total, the JEC found that delayed domestic passenger flights cost the
U.S. economy close to $41 billion in 2007 alone.
FIGURE 1: AIR TRAFFIC DELAY COSTS TOTALED UP TO $41 BILLION IN 2007
Airline
Operating
Costs
Value of
Passenger
Time
Spillover Costs to the
Economy
Total
$19.1 Billion
$12.0 Billion
$9.6 Billion
$40.7 Billion
Of the 10 million domestic scheduled passenger flights analyzed, the
JEC found that delays accounted for 19.5 percent of total flight time,
measuring from scheduled departure to actual arrival. The JEC calculated that planes arrived later than their scheduled arrival by more than
2.7 million total hours. However this measure of delay significantly
underestimates the true burden of growing congestion. As delays have
become routine, airlines have changed published schedules to include
predictable delays. After accounting for the padding in schedules for
105
routine congestion by measuring delays relative to estimated flight durations in uncongested conditions, the JEC found that delay is actually
57 percent higher, or more than 4.3 million hours in total. These delays cost travelers 320 million hours of lost time. To account for all
delays in its cost estimates, the Committee calculated total economic
costs by incorporating schedule padding into its calculations.
DELAYED FLIGHTS COST AN ALREADY STRUGGLING AIRLINE INDUSTRY As MUCH As $19 BILLION IN ADDITIONAL OPERATING
COSTS
Air-traffic delays raised airlines' operating costs by $19 billion.2 With
each delayed flight, airlines paid extra for crew and fuel while planes
sat idle at the gate. Airborne delays added to airplane maintenance
costs and increased depreciation as planes circled in holding patterns.
System-wide delays also boosted requirements for aircraft, personnel,
and other factors that enable the airlines to provide a given level of
transportation services. Additionally, delays resulted in airlines incurring broader costs, such as the opportunity cost of the delayed aircraft
and extra personnel. These costs accrued most directly to airlines, but
ultimately passengers have likely borne them through higher ticket
prices or reduced service.
PASSENGERS AFFECTED BY DELAYED FLIGHTS LOST TIME VALUED
AT OVER $12 BILLION
Delays cost passengers time worth up to $12 billion. Delayed travelers,
their employers, and others lost productivity, business opportunities
and leisure activities when air travel took extra time. Delay costs cascaded when flights resulted in other late flights. Costs were likely
higher due to missed connections, cancelled flights, disrupted ground
travel plans, forgone pre-paid hotel accommodations, and missed vacation times.
Analysts of air traffic delay costs have used a number of approaches in
accounting for the value of travelers' time since the value of passenger
time is revealed through travelers' choices rather than market prices.
Different travelers may have different valuations for their time and indeed, the same traveler may value his or her time differently depending
on the purpose of the travel, work conditions, or other factors affecting
the burden of delays. 3 In calculating the economic cost of passenger
time, the JEC followed the guidance DOT uses for its policy analysis
and applied a value of $37.60 per passenger per delay hour. JEC calcu-
106
rations do not include delays to passengers who missed connecting
flights, delays resulting from cancelled flight, or delays from postSeptember 1 1"' security procedures. 4
OTHER INDUSTRIES THAT RELY ON THE AIRLINE INDUSTRY SUFFERED AS THE RESULT OF DELAY-BY AS MUCH AS $10 BILLION
Indirect costs of delay to other industries added another $10 billion to
the total burden. In particular, delays raised production costs and lowered demand for food service, lodging, retail, and ground transportation, which purchase or otherwise rely on air travel for supplies or customers. To calculate the total costs to other industries, the JEC applied
macroeconomic modeling results that estimate an additional $0.50 effect on gross domestic product.5 These calculations did not include
delays in air cargo shipments although delays in this segment are likely
costly to manufacturing and other industries.
JET FUEL CONSUMED AS A RESULT OF DELAY COST MORE THAN
$1.6 BILLION IN 2007
The JEC found that airlines consumed an additional 740 million gallons ofjet fuel in 2007 as a result of airline delays. At an average
wholesale price of $2.15 per gallon in 2007, the delay-induced fuel
consumption cost more than $1.6 billion. This report calculated the
excess fuel bum for each flight by applying a known rate of fuel bum
by the aircraft type during the phases of flight in which each minute of
delay occurred.
The report finds that air traffic delay-related burn of jet fuel led to the
emission of about 7.1 million metric tons of carbon dioxide, or about 5
percent of the 142.1 million metric tons of carbon dioxide from domestic commercial aircraft in 2006.6 To put this figure in context, according to Toyota, the aggregate C0 2 emissions reductions resulting from
the one million Prius hybrid automobiles sold so far is 4.5 million metric tons, or 63 percent of JEC estimates for delayed passenger aircraft
in the U.S. in one year. 7
107
FIGURE 2: EXCESS JET FUEL CONSUMED DURING DELAYS IN 2007
COST THE ECONOMY $1.6 BILLION
CO2 Emissions
Excess Jet Fuel
Consumption
Cost of Excess Jet Fuel
Consumption
7.07 million
metric tons
740 million gallons
$1.6 billion
AS THE NUMBER OF FLIGHTS HAS INCREASED. FLIGHT DELAYS
HAVE REACHED RECORD LEVELS
With the exception of a small dip in airline travel following the attacks
of September 11, 2001, the number of passengers and domestic flights
has steadily increased over the last two decades. According to DOT
Bureau of Transportation Statistics reports on flights by carriers with
more than $100 million in annual revenue, domestic air traffic volume
increased by more than 2.2 million flights in the past 19 years -jumping from just 5..2 million domestic passenger flights in 1988 to more
than 7.4 million domestic passenger flights in 2007. The FAA forecasts
that this trend is likely to continue and predicts a steady growth in the
number of paying U.S. air travelers through 2025 at an average annual
growth rate of at least 2.7 percent from 689 million passengers today to
over 1.1 billion in 2025. Although airlines can accommodate some of
these travelers with larger or fuller planes, some increase in air traffic
is inevitable as the number of travelers rises.
108
FIGuRE 3: THE TOTAL NUMBER OF DOMESTIC FLIGHTS HAS INCREASED BY 43 PERCENT SINCE 1998
TotI Number of FMghts 19U-2007
7~AMMN
uSomM~C~mf
is"
121
1VJ4
Wmf
Wm
to"20
8
w
Not surprisingly, as the volume of air traffic has increased, total delay
and the average delay per flight have also increased. According to the
Bureau of Transportation Statistics, domestic passenger flights were
delayed by more than 1.8 million total hours and average delays were
up to 16 minutes per flight in 2007.8 These figures account only for
delays as measured against scheduled arrival times, and therefore do
not account for expected delays that airlines have incorporated into
their schedules. Because these numbers do not account for routine airline delays, these figures underestimate the true amount of time air travel passengers were delayed in 2007.
109
FIGURE 4: INDIVIDUAL AND TOTAL FLIGHT DELAYS HAVE INCREASED OVER THE LAST 20 YEARS
WE Ttal Afrial Del
2,000,W0
1,800.X00
I-
1 .5O0O00O
U'
in Haurs
Average Arrival
Delay Minutes
1,400,000
a 1.200.000
= 18000,000
I-
7
0
C
500,000
18.0
160>
I 6.0>
140
12.0
10.0w
50 5
ll'
400,000
4-04fo
a
200,00
2.0
0
D~o
^
s
Is
o
-O
teua
Source: Bureau af Tramsportation Statistics
06ource1,
a
Although there was a small decrease in delays following September 11,
2001, total delays and average delays per flight now exceed preSeptember 11 numbers. The figures show that the post-September 11
drop in delays was proportionately greater than the drop in the total
number of flights. This finding suggests that congestion delays are
quite sensitive to changes in traffic levels, and thus future expected
increases in total number of flights will negatively impact total delays.
110
FLIGHT DELAYS PEAKED DURING THE BUSIEST TRAVELING SEASONS
When analyzing total hours of delay across the year, the JEC found
that the periods with the largest total delays corresponded to periods
when many people take vacations. Flight delays during the busy summer vacation months of June, July and August averaged approximately
414,000 total hours of delay per month. Flights during December - the
height of holiday traveling - totaled almost 438,000 hours of delay.
FIGURE 5: FLIGHT-DELAYS IN 2007 PEAKED DURING THE BUSY,
SUMMER TRAVEL SEASON
500,000
450,000
400,000
PI
350.000
04 300,000
I,0 250.000
VI 200.000
h1 150.000
01 100,000
50,000
,4A A
t>*
AN *
A A*
A 4.
A
Source: JEC Asllysis based on Data
MOST AIR TRAFFIC DELAY OCCURS ON THE GROUND
The vast majority of air-traffic delays in 2007 occurred before airplanes took off for flight. Almost 60 percent of delays occurred at the
gate, while 20 percent of flight delays occurred while taxiing out to the
runway. Only about 15 percent of the JEC estimated total delay occurred during airborne minutes. Airborne delays, the most costly delays to airlines because of high rates of fuel consumption and greater
Ill
wear and tear to the airplanes, include time to circumvent storms or
congested airspace and time upon arrival to await landing approval
from air traffic controllers. Less than 10 percent of all delays occurred
after airplanes had landed.
FIGURE 6: ALMOST 60 PERCENT OF ALL FLIGHT DELAYS OCCURRED AT THE GATE
Tori in do,~
Sm
JjEC imaps
1
o
Do
fui
the D1W0
DELAYS PERSIST FROM COAST TO COAST
Delays at the nation's largest airports disproportionately contributed to
total passenger delays in 2007. While delays are not confined to the
largest airports, delayed flights there affect relatively more passengers.
Flights to and from the top 35 U.S. airports represented about 33 percent of the sample and 34 to 37 percent of the total hours of delayed
planes. However, given the relatively larger planes involved, the
flights to and from large airports comprised about half of the total pas-
112
senger delay hours.
Airport
Total Est.
GroundBased Passenger Delay
Hours (Includes Arrival Delay)
Total Est.
Domestic
Departing
Passengers
Est. Minutes of
Departure
Delay Per
Passenger
Atlanta Hartsfield-Jackson
International, GA (ATL)
18,996,152
41,945,140
16.15
Chicago O'Hare International, IL (ORD)
17,749,859
32,705,606
21.25
Dallas-Fort Worth International, TX (DFW)
12,628,406
27,370,009
15.03
New York John F. Kennedy International, NY
(JFK)
10,408,536
13,808,842
26.83
Denver International, CO
(DEN)
9,364,240
24,909,795
13.72
Philadelphia International,
PA (PHL)
9,084,470
15,375,846
24.98
Newark Liberty International, NJ (EWR)
9,022,480
13,722,618
26.16
Los Angeles International,
CA (LAX)
8,689,587
24,029,982
10.58
Las Vegas McCarran International, NV (LAS)
8,382,613
22,856,398
11.36
New York LaGuardia, NY
(LGA)
7,762,236
12,683,010
29.66
113
Phoenix Sky Harbor International, AZ (PHX)
7,584,878
21,731,487
11.07
Charlotte-Douglas International, NC (CLT)
7,213,054
17,450,847
16.85
George Bush Intercontinental, TX (IAH)
6,883,717
18,015,101
15.71
Minneapolis-St Paul International, MN (MSP)
6,628,018
16,494,770
14.94
Detroit Metropolitan, MI
(DTW)
6,575,147
16,529,991
15.48
Orlando International, FL
(MCO)
5,516,367
16,822,329
9.93
San Francisco International, CA (SFO)
5,228,316
14,353,465
12.82
Boston Logan International, MA (BOS)
5,171,799
12,526,880
18.11
Seattle-Tacoma International, WA (SEA)
4,634,625
13,897,447
10.76
Washington-Dulles International, VA (lAD)
3,878,318
9,466,094
22.73
Miami International, FL
(MIA)
3,824,975
8,853,130
12.33
Salt Lake City International, UT (SLC)
3,687,805
12,119,469
12.77
Chicago Midway, IL
(MDW)
3,623,353
9,856,776
15.31
114
Baltimore-Washington
International, MD (BWI)
3,557,716
11,204,172
12.33
Ronald Reagan National,
DC (DCA)
3,537,532
9,658,749
16.88
Fort LauderdaleHollywood International,
FL (FLL)
3,514,704
9,869,811
11.16
Tampa International, FL
(TPA)
2,537,263
9,442,762
10.20
Cincinnati-Northern Kentucky, KY (CVG)
2,465,634
8,317,864
18.52
San Diego International
Lindbergh, CA (SAN)
2,398,449
9,445,349
9.24
Lambert-St. Louis International, MO (STL)
2,219,283
7,706,011
14.95
Memphis International,
TN (MEM)
1,925,259
6,464,272
15.99
Cleveland-Hopkins International, OH (CLE)
1,903,652
5,784,726
20.13
Greater Pittsburgh International, PA (PIT)
1,665,284
5,098,282
19.61
Portland International, OR
(PDX)
1,589,843
6,844,396
9.82
Ted Stevens Anchorage
International, AK (ANC)
1,478,319
4,557,154
14.43
Honolulu International,
HI (14NL)
1,355,836
7,768,547
5.60
115
Indianapolis International, IN (IND)
1,354,713
4,399,702
16.18
General Mitchell International, WI (MKE)
1,234,556
3,766,407
24.69
Louis Armstrong New
Orleans International, LA
(MSY)
1,066,618
3,969,953
10.93
Bradley International, CT
(BDL)
1,035,060
3,379,491
15.29
Albuquerque International, NM (ABQ)
939,548
3,849,373
10.49
Providence-T.F. Green,
RI (PVD)
815,605
2,599,242
17.13
Eppley Airfield, NE
(OMA)
722,452
2,421,203
20.07
Manchester-Boston Regional, NH (MHT)
674,788
2,062,983
21.17
Will Rogers World, OK
(OKC)
581,742
2,106,883
15.00
Birmingham Intemational, AL (BHM)
546,202
2,077,098
17.33
Charleston International,
SC (CHS)
415,478
1,341,750
18.33
Little Rock National, AR
(LIT)
374,764
1,304,548
18.75
Portland International
Jetport, ME (PWM)
370,825
902,630
27.77
116
Burlington International,
VT (BTV)
357,556
833,780
28.55
Des Moines International,
IA (DSM)
341,441
1,031,752
24.22
Boise, ID (BOI)
326,798
1,477,663
11.81
Wichita Mid-Continent,
KS (ICT)
252,865
826,375
22.49
Jackson-Evers International, MS (JAN)
210,439
840,039
15.25
Sioux Falls Regional, SD
(FSD)
156,926
462,617
19.61
Hector International, ND
(FAR)
116,600
344,136
20.11
Jackson Hole, WY (JAC)
109,312
313,853
18.05
Yeager, WV (CRW)
102,424
370,116
28.90
Billings Logan International, MT (BIL)
98,005
427,808
12.10
New Castle, DE (ILG)
11,223
30,926
55.13
When measuring delays per airport per passenger, the JEC found that
those passengers departing from airports in the Northeast and Midwest
experienced the longest delays. Passengers departing from New Castle
Airport in Delaware experienced the longest per passenger delays at
approximately 55 minutes per passenger, while travelers departing
from Honolulu International airport experienced roughly a 6 minute
per passenger delay on average.
117
FIGURE 8: AVERAGE FLIGHT DELAYS PER PASSENGER WERE
LONGEST IN THE NORTHEAST AND MIDWEST
7;7
'.c;
.
-J
1
fl'
'F
*
-
t-V
cN' 4 'A'J12
1$
p.
f
-'
Ft
VI F
.
-C
: .
~~~~~~~,
i'S
p..
THE VAST MAJORITY OF FLIGHT DELAYS RESULT FROM SYSTEMIC
PROBLEMS IN THE AIRLINE INDUSTRY
According to the DOT Bureau of Transportation Statistics, the top rea-
118
son that flights were delayed - accounting for almost 40 percent of all
delayed flights - was that other flights arrive late, creating a cycle of
delay that leaves passengers distressed and airlines in deeper financial
difficulty. Other top reasons for delay point to a system under strain.
Circumstances within the airlines' control, such as baggage handling
and fueling account for 29 percent of delayed flights, and problems
within the aviation system such as air traffic congestion and disruption
from non-extreme weather conditions comprise another 28 percent.
Accounting for less than 6 percent of total delays, extreme weather was
a tiny and declining reason for flight delays in 2007.9
FIGURE 9: MOST FLIGHT DELAYS WERE CAUSED BY OTHER
FLIGHTS ARRIVING LATE
Extreme
National
A
Security Delay,
0.2%
Weather, 5.7%
J
Source: Bureau of Transportation Statistics
NEGLECTED
U.S. AVIATION SYSTEM NEEDS REFORM
119
Seven long years of laissez-faire government policies have left the U.S.
aviation system in need of significant improvements and reform; exacerbating the number of flights delayed and the total cost to the U.S.
economy. Inaction by the administration has only worsened the problem. Failure to fund equipment upgrades, particularly new air traffic
control systems, such as Next Gen, which would convert the nation's
radar-based aviation tracking system to a satellite based one, has added
to the volume of flight delays. Additionally, the administration has
failed to act upon the recommendations of the New York Aviation
Rulemaking Committee, 0 which among other things, called for an
opening of 15-20 mile band of air space directly off the coast of the
eastern seaboard that is currently used for military training purposes.
Opening up a portion of this underutilized space would allow commercial airlines to avoid congested areas over New York City, Washington, Atlanta and Florida or bypass bad weather when it arises on the
east coast, thus significantly reducing delays.
CONCLUSION
Certainly, some air traffic delay is unavoidable. Flights can and should
be delayed if safety issues arise as a result of severe weather or mechanical problems. Additionally, some level of air traffic congestion is
desirable, particularly at "hub airports," to allow airlines to cluster arrival and departure times to offer passengers the most efficient connections.'" However the staggering levels of delays experienced in 2007
and the significant costs associated with these delays are clearly troublesome and suggest substantial room for cost effective improvements.
As the number of traveling passengers and air traffic congestion is expected to continue to increase, steps must be taken to alleviate pressures on the U.S. air traffic system. Government inaction over the last
eight years has left the U.S. aviation system in need of reform. Without
such reform, the total costs to the U.S. economy of air traffic delay including costs to the airline industry, the flying public, the environment, and travel dependent businesses - are sure to increase.
WORKS CITED
'U.S Department of Transportation, FAA Aerospace Forecast Fiscal Years 2008-2025, Table 5,
p. 64. Available at http//www faagov/data statistics/aviation/aerospaceforecasts/20082025/media/Forecaste/o20Tables pdf
'The S19 billion represents 19.5 percent of the S97.7 billion in total estimated operating costs of
domestic scheduled passenger services in 2007
3Kenneth A Small, Urban Transportation Economics, in Fundamentals of Pure and Applied Eco-
120
nomics, Jacques Lesoume and Hugo Sonnenschein (eds ), Harwood Academic Publishers, 1992.
4
Researcher has estimated security-related travel time costs to be $25 billion annually, assuming
travelers arrive at the airport an hour earlier than before new security measures were imposed
Steven A. Morrison and Clifford Winston (2008), "Delayed! U.S Aviation Infrastructure Policy
at a Crossroads," in Aviation InfrastructurePerformance, Clifford Winston and Gines de Rus
(eds.), Brookings Institution Press.
5
DRI-WEFA, Inc "The National Economic Impact of Civil Aviation" p 13 Table 5 July 2002
6Environmental Protection Agency "Inventory of U S Greenhouse Gas Emissions and Sinks
1990-2006,"'p 309 Available at
httip//www epa gov/climatechanee/emissions/downloads/08
fuel and aviation gasoline
CR Pdf Includes consumption ofjet
7
Yun Kageyama, "Toyota Prius sales top one million units" available at
http://an.google com/article/ALegM5iewrO6Uxvluc ggx8prrcZa7sioeD90M I LU81
'The DOT Bureau of Transportation Statistics report analyzed fewer flights than the JEC analyzed
in calculating total hours of flight delay
9
Understandmg the Reporting of Causes of Flight Delays and Cancellations,
http I/www.bts govlhelp/aviation/htmiunderstanding html. Figures do not add to 1000/c due to
roundmg
"Aviation Rulemaking Committee, "New York Aviation Rulemaking Committee Report," December 2007, available at hlt, //www.dot gov/affairs/FinalARCReport.rdf
"Christopher Mayer and Todd Sinai, "Network Effects, Congestion Externalities, and Air Traffic
Delays. Or Why Not All Delays Are Evil," American Economic Review 93, No 4 (2003) pp
1194-1215. Available at
http://www2.gsb columbia.edu/facultv/cmaver/Paoers/Air Traffic Delavs.Pdf
TECHNICAL APPENDIX
Measuring Air Travel Delay
To measure delay, one must compare an actual elapsed flight time
against some alternative trip duration we deem to be "not delayed."
While seemingly a simple concept, reasonable choices of how to do
this abound, and the results can vary dramatically across different reasonable approaches. Further, one can aggregate:the delays of individual flights to get a total across carriers, airports, or the whole system in a
number of ways.
For example, the Bureau Transportation Statistics (BTS) measures
flight delay relative to the airlines' scheduled times of departure and
arrival. The BTS also characterizes flights arriving less than 15 minutes beyond scheduled arrival as "on time" in its computation of performance metrics, so delay could be measured against a 15 minute
grace period.
Delays measured relative to scheduled arrivals are increasingly poor
121
measures for assessing the costs to the economy of delays in the air
traffic system as airlines add more time to their schedules to account
for predictable delays, for example in peak travel periods and at chronically congested airports. Schedule adjustments are necessary to give
travelers more realistic estimates of the duration of the trip and arrival
times. The adjustments also improve airlines' measures of on-time
performance. However, the full cost of air traffic delays includes even
predictable delays. Indeed, routine delays may be a large share of
overall delays in the system. Thus, to measure delay properly one must
compute them relative to travel durations that would be reasonable in
the absence of undue delay in the system. These alternative unimpeded
travel times are called "nominal" travel times.
Delay measures relative to nominal travel times provide better information for policymakers than delays relative to scheduled arrival times.
For example, investments to reduce routine delays (such as building a
new runway) could produce real benefits that might not be captured by
assessments that measure delay only relative to published schedules.
Researchers of air traffic delay have computed delay relative to nominal travel times in a number of ways, but generally have not examined
how their results differ from delays relative to scheduled arrivals. The
JEC offers just such a comparison below.
Although more useful for policymakers, delays relative to nominal travel times are necessarily more subjective than delays relative to scheduled arrival times. Nominal travel times should exclude systematic
and preventable delays, but at the same time not be so tight that only
flights with perfect conditions are deemed on time. Analysts studying
delay have used a number of approaches. For example, Mayer and
Sinai (2003) define a "minimum travel time" for a flight segment as the
shortest observed total travel time on a given nonstop route in a particular month.' Using the absolute minimum observed travel time as the
nominal travel time makes the results sensitive to measurement error in
the data and registers all but the very fastest trips as delayed. Other
analysts measure delays in each phase of flight (at gate, taxiing, and
airborne) and sum them to determine the total delay. Morrison and
Winston (2007), for example, measure delay as the sum of delays within different phases of flight.
Delays at the gate are straightforward; the ideal departure time is the
scheduled departure time, and the gate delay is the difference the scheduled time and the actual time. Delays during taxi are a little more
122
challenging. Morrison and Winston (2003) measure taxi times relative
to the lowest observed taxi times by a given carrier in a given season.
Again the minimum approach biases the results towards positive delay
and makes the results sensitive to measurement error in the taxi times.
Another approach would be to use FAA estimates of nominal, uncongested taxi times. FAA experts estimates different values for taxiing
out from the gate to the runway and taxiing in from the runway to the
gate upon arrival, taking into account things like carrier gate locations
and de-icing upon winter departure at northern airports. In the nominal
taxi times, FAA experts include sufficient time for a plane to wait for
one aircraft ahead in the takeoff queue. Thus planes may beat nominal
taxi times in completely uncongested conditions.
The least straightforward phase of flight in which to measure delay is
in the air. Airborne times naturally vary due to weather, wind, and airspace congestion conditions. One could measure delay against the
shortest observed airborne time for a given segment in a given month,
but then the basis of comparison is a flight that likely had unusually
good conditions, such as a strong tailwind. One could measure actual
airborne time relative to the flight plan, but the available flight plan
data for estimated airborne minutes is from the final flight plan, after
updates during the flight. 2 Thus the flight plan may already incorporate airborne delays. Indeed, on flights with large airborne delays the
flight plan's estimated airborne minutes can be larger than the entire
scheduled time for the flight.
Mindful of these issues, the technical appendix shows the delays of
individual flights in four ways: one relative to airlines' scheduled arrival times (Measure A) and three relative to different estimates of how
long the flight "should" take in the absence of undue congestion
(Measures B, C, and D). Figure Al summarizes them.
Given that it misses predictable delays, Measure A results in the lowest
estimate of total delay. Measures B, C, and D are higher by an amount
that approximates those routine delays already built into the published
flight schedules. Measure B compares flight times to the 5th percentile
of all observed total travel times for a given segment in each month.
Using the 5th percentile rather than the absolute minimum makes the
measure more robust to measurement error, and excludes comparison
to flights that had very unusually good conditions. However, using the
5th percentile as the nominal travel time ensures that 95 percent of
flights will register at least some positive delay. Measure B represents
123
an upper bound on delays, and the JEC presents the results as a sensitivity test for these measures.
Measures C and D add up delays for each phase of flight in which delay occurs, but apply different measures of delay for the airborne portion of the trip. Measure C estimates airborne delay using information
from the flight plan and the published schedule. The nominal airborne
time in Measure C is the minimum of two estimates of airborne time:
(1) the estimated airborne minutes from the flight plan; and (2) the
scheduled block (gate to gate) time minus the nominal taxi times. Either measure alone might be on the high side. The flight plan's estimated airborne time, having been updated during the flight, may already incorporate some airborne delays, and the scheduled block time
minus the nominal taxi times can include schedule padding for routine
congestion. However, the minimum of the two is likely to be reasonable, particularly in aggregate across many flights.
Measure D uses a tighter measure of nominal air time, computing airborne delay relative to the fifth percentile of the observed airborne time
for the segment for the given month. As Measure B does for the entire
travel time, Measure D represents an upper bound on airborne delay.
For all measures of delay, the JEC zeroed out negative values, so that
flights traveling faster than nominal times do not net out delays from
flight traveling slower than the nominal time. For Measures A and B,
that means flights with total travel times less than the basis of comparison have zero delay. For Measures C and D, only non-negative delays
within each phase of flight appear in the total delay sum. This approach means that the JEC is implicitly assuming that flights traveling
unusually fast do not produce economic benefits that offset the economic costs of flights that are delayed.
In this report, the JEC emphasizes the results for Measure C, the most
moderate approach. In this technical appendix, we focus attention on
two of the measures of delay: Measure A, which for descriptive convenience we hereinafter refer to as "Arrival Schedule Delay Measure",
and measure C, referred to as "JEC Inclusive Delay Measure". However, for completeness, values derived from the other potential measures of delay, Measures B and D, are also reported.
Figure Al: Measures of Delay
124
Description
Measure of
Delay
Basis of corparison
A - Arrival
Schedule Delay Measure
B
Scheduled Arrival
Actual arrival time - scheduled
arrival time.
Nominal Total
Travel time
Actual elapsed time - 5th percentile of observed elapsed time for
given segment in a given month
C - JEC Inclusive Delay
Measure
Nominal Travel
Times by Phase
of Flight
delay leaving the gate + delays
during taxi (relative to FAA nominal taxi times) + (airborne
delay relative to smaller of flight
plan and block time minus nominal taxi times)
D
Nominal Travel
Times by Phase
of Flight
delay leaving the gate + delays
during taxi (relative to FAA nominal taxi times) + (airborne
delay relative to 5th percentile of
observed airborne time for given
segment in a given month)
Previous Studies of Air Traffic Delay
The degree to which airlines pad their schedules to account for predictable delays is not well-documented, but some evidence suggests that
schedule padding increased substantially in the years before 9/11 and
again in the years since. Thrasher and Weiss3 estimate schedule padding for flights between Laguardia and Boston in the springs of 1998 to
2001. They compare the shortest scheduled trip time (gate to gate) to
the longest for the segment and found that while the minimum rose by
7 minutes, the maximum rose by 24. They find that the apparent improvement in on-time arrival (late flights were down from 16 percent
to 5 percent from 1998 to 2001) was due to longer scheduled trip times
rather than lower travel times.
125
Increases in scheduled travel times probably offer a reasonable measure of systematic delays, even though airlines might be accused of
over-padding to improve their on-time statistics. Airlines compete in
part by offering shorter travel durations. Further, although many travelers prefer not to arrive late, excessive earliness is undesirable, too.
Thus in setting schedule times airlines must strike a balance between
better on-time performance statistics and lower published travel times.
Aircraft delay minutes andpassengerdelay minutes
The JEC reports two categories of delay for each flight: the number of
minutes the plane is delayed and the plane delay times the estimated
number of passengers aboard. Some costs of delay, such as the airline's crew and maintenance cost per minute, are not a function of the
number of passengers but rather a function of the type of aircraft. In
contrast, the overall cost to passengers' time is very much a function of
how many passengers are delayed. Some costs are semi-fixed. For
example, jet fuel use by an aircraft per minute is influenced by the total
weight hauled, which is in turn a function of the number of passengers.
To simplify the analysis we assume fuel burn is independent of the
number of passengers on each flight.
FLIGHT DATA AND MEASURES OF TOTAL DELAY
DataSourcesfor Measures ofDelay
The JEC analyzed individual flights recorded in the FAA's Enhanced
Traffic Management System. The data include schedule and flight
plan information, along with FAA estimates of nominal taxi times out
and in for each flight. The observations in the JEC data included over
10.01 million individual scheduled domestic passenger flights in 2007.
The data include flights through over 1,100 U.S. airports with over 30
different kinds of aircraft flown by over 400 different major, national,
and regional carriers. Given the size of the dataset, the JEC analyzed
each month within 2007 separately and then totaled the results.
The ETMS flight data do not include information on the number of
passengers transported, a key factor for assessing delay costs to travelers. To estimate the number of passengers on each scheduled passenger flight, the JEC turned to BTS's Form 41 Air Carrier Statistics T100 Domestic Segment Schedule, which includes monthly data on the
total number of passengers carried by each carrier on each flight segment (an origin/destination pair) with each kind of aircraft. The T-100
126
includes information by aircraft type, service class, available capacity
and seats, and aircraft hours gate-to-gate and airborne, covering a wide
range of carriers.
The JEC matched month, carrier, airport, and equipment codes in the
two data sets and merged them, then divided the total number of passengers traveling per month from T- 100 (on a given carrier on a given
aircraft type on a given segment) by the number of such flights in that
month from the ETMS. This approach populated about half of all the
flights in the ETMS with an estimated number of passengers. One limitation to a merge like this is that the BTS and the FAA use different
aircraft equipment codes that do not translate directly.
For the remainder of flights not populated directly by the T- 100 data,
the JEC imputed an estimated number of passengers by matching as
many of each flight's characteristics to data in the T- 100 as possible.
For example, the JEC filled in some missing passenger data by assuming that such flights had the same number of passengers as other flights
on that segment on that carrier in the same month. For remaining missing values, the analysis imputed passengers by taking the average passengers per flight by segment and month only, or by carrier, equipment
type, and month only. The JEC bounded all estimates by the total
number of seats on the aircraft. This approach produced an estimate of
the number of passengers aboard almost all of the 10.0 million commercial passenger flights in the 2007 data.
Delays not analyzed by the JEC
The JEC included in its analysis only completed scheduled passenger
flights between two U.S. airports on U.S. carriers. 4 This approach captures the majority of commercial flights in the U.S., but may leave out
economically important sectors. For example, international flights are
a small share of total flights landing or departing in the U.S., but
represent an important profit center for airlines. Thus, JEC may underestimate the delay costs to the U.S. economy by excluding the costs to
U.S. airlines and U.S. travelers of delays in international flights.
Likewise, the JEC analysis excluded cancelled, military, freight, and
general aviation flights, all of which may be affected by congestion and
delays and contribute to economic costs accordingly. For example,
controllers may require general aviation flights to travel circuitous
routes to avoid high traffic areas. Congestion and delays may also
127
raise costs for or otherwise impede overnight and same-day cargo services. Further, the JEC has not considered the effects of delayed mail
and cargo aboard the delayed passenger flights in its data. However,
some air taxi firms may actually benefit from congestion and delays at
major hubs because the hassle there leads business customers to unscheduled air transport services from convenient secondary airports.
JEC estimates leave out some important costs to passengers of the congested system. The data on individual flight segments do not capture
delays to passengers who miss connecting flights, and data also exclude delays from post-9/1 I security procedures. 6 Further, the JEC
includes only flights that actually travel; the share of scheduled flights
that are canceled has risen from 1.2 percent in 2002 to 2.2 percent in
2007.
PlaneDelays
Figure A2 shows the total delay across all of the flights in the JEC data
as measured against scheduled arrival, Measure A, and with the JEC
Inclusive Delay Measure, Measure C. The JEC finds that measuring
delays with respect the published schedule (Measure A) significantly
underestimates the true burden of growing congestion. In 2007, planes
arrived later than their scheduled arrival by over 2.7 million total
hours. After accounting for the padding in schedules for routine congestion, the JEC finds that delay is actually between 57 and 96 percent
higher, or between 4.3 and 5.3 million total hours. Measure B reports
plane delay of 4.9 million hours (1.8 million for the top 35 airports),
and Measure D reports plane delay of 5.3 million hours (2.0 for the top
35 airports). Measure C, the preferred JEC estimate, reports plane delay of 4.3 million hours, with 1.6 million of those at the top 35 airports.
Figure A2 Plane Delay, in millions of hours, 2007
Hours of Delay, All Airports:
10.01 mil-
Arrival Schedule
Delay Measure
JEC InclusiveDelay Measure
2.75
4.3
0.94
1.6
lion flights
Hours of Delay, Top 35
Airports 14:
3.26
million flights
128
Most Delays are on the Ground
JEC Inclusive Delay Measure, Measure C, sums delays across the four
phases of flight: at the gate, taxiing out to the runway, in the air, and
taxing into the gate upon landing. Figure A3 shows that a large majority of the total delay occurs on the ground, with the largest component
(58 percent) being delay leaving the gate. Flights leaving the gate late
(either because the plane or crew were late arriving) would be consistent with BTS statistics that show that the largest cause of delay is other delayed aircraft. Taxi out delays are significantly larger in aggregate
than taxi in delays (20 percent of the total compared to 8 percent of the
total), in part reflecting longer queues waiting for takeoff.
The composition of delays for Measure D is different than for the JEC
Inclusive Delay Measure, Measure C, in precisely the way one would
expect given its tighter measure of nominal airborne time. Airborne
delays are 15 percent of the total for Measure C but 30 percent of the
total for Measure D.
Figure A3 Plane Delays by Phase of Flight
Sam d
eC
D"pby Pmmof 1ilit
Thl mtdduy.
One might be concerned that measures of delay that sum delays across
phases of flight may overestimate total delays by not offsetting delays
in one phase with faster performance in other phases. Our data suggest
129
that delays across phases of flight are uncorrelated, and that while
cross-phase delay offsets are common, they are not systematic. The
correlation coefficients between delays in different phases of flight all
fall below 0.1 in absolute value. This independence suggests airlines
do not generally make up delays at the gate or during taxi by flying the
plane faster. It also suggests that leaving the gate late does not generally make a taxi delay more likely. One way to gauge the magnitude of
cross-phase delay offsets is to compare the results of Measure B with
those from Measure D. Measure B amalgamates delays in all phases
and allows cross-phase offsets, while Measure D does not. This explains why Measure D is about 10 percent higher than Measure B.
Plane Delays as a Share of Total OperatingTime
The JEC summed the entire operating time for flights in 2007, measuring each flight from the scheduled departure time to the time of actual
arrival. Total delay as a share of total operating times appears in Figure A4. Measuring delays relative to schedule arrival (Measure A)
suggests delays only comprise 12.4 percent of the total operating time.
However, results from Measure C suggest that 19.5 percent of the
flight duration is squandered in delay. The other delay measures report
upper bounds of 22.2 percent (Measure B) and 23.9 percent (Measure
D).
Figure A4 Delay as a Share of Total Operating Time
Share of Delay in Total Operating Time
Arrival Schedule
Delay Measure
JEC Inclusive
Delay Measure
12.4%
19.5%
Results: PassengerDelays
Using JEC estimates for the number of passengers aboard each delayed
flight, the JEC calculated the number of passenger delay hours. See
Figure A5.
Figure A5 Passenger Delay, in millions of hours, 2007
Arrival Schedule
JEC Inclusive
Delay Measure
Delay Measure
130
Hours of Passenger Delay,
196.2
319.9
96.6
160.6
All Airports
Hours of Passenger Delay,
Top 35 Airports
The results in Figure A5 show that delay is not confined to just the
largest airports, but delayed flights there carry relatively more passengers, inflicting a disproportionate share of the burden on travelers.
Flights to and from the top 35 U.S. airports represented about 33 percent of our sample and 34 to 37 percent of the total hours of delayed
planes. However, given the relatively larger planes involved, the
flights to and from large airports comprised about half of the total passenger delay hours.
Measures B and D produced higher estimates of passenger delay by an
amount reflecting the higher levels of plane delay. Measure B reported
367.2 million hours of passenger delay (186.0 million at the top 35 airports), and Measure D reported 400.8 million hours of passenger delay
(205.7 million at the top 35 airports).
Delays Vary by Month
Figure A6 shows plane delay by month through 2007, with scheduled
arrival delays (in black) falling consistently below the JEC Inclusive
Delay Measure. On the right hand axis the chart reports the total number of observed flights in the month. One might expect total number of
flights and total delay to track each other quite closely, both because
high traffic causes more congestion and delays and because greater
traffic means more flights that can be delayed. The data show a more
complicated relationship. For example, in February the number of
flights dipped relative to the month before, but delays rose. Delays fell
from April to May, while the number of flights climbed. Weatherrelated delays could partly drive the results for ice and thunderstorm
seasons.
131
Figure A6 Plane Delays by Month
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Figure A7 shows passenger hours of delay by month, predictably
tracking the pattern of plane delays in Figure A6. However, it shows
that passenger delays are more variable than plane delays, which is
expected since they include both variation in plane delays and variation
in the average number of passengers per plane. The higher amplitude
of the graph suggests that the average number of passengers per plane
is correlated with (but does not necessarily cause) higher levels of delay.
132
Figure A7 Passenger Hours of Delay by Month
-
Arcm Schedule Dely Measure V
JEIC Incholse Delay
re (C
------- ToalI Fghts
2
40
-e
S25
-
-20
20,000
-
60.0000
-50.000
X4.000
1S5
10
-
-
N
300,000
-100.000
THE ECONOMIC COSTS OF DELAY
The JEC computed the costs of delays to the economy as the sum of
three values: the operating costs of airlines during the delays; a multiplier on those operating costs to account for spillovers to other industries; and the value of passengers' time.
Analysts of air traffic delay costs have assessed these costs in a variety
of ways. A common approach is to follow the guidance the DOT provides to its regulatory agencies for analyzing policies that can affect air
travel costs and time. In general the JEC followed this guidance, but
in certain instances departed from it to test the sensitivity of results to
assumptions and to examine certain cost components in more detail.
Direct OperatingCost to Airlines
Each minute a plane is delayed can result in extra fuel, crew time, and
aircraft maintenance, and the magnitude of those costs can depend on
whether the delay occurs at the gate, on the tarmac, or in the air. DOT
guidance cautions that in some studies incremental costs are more appropriate for economic analysis than average costs.8 This may be particularly applicable to estimating the incremental cost associated with
an additional minute of delay. On the other hand, widespread delays
can raise airlines' fixed costs by requiring more aircraft, more employees, and more gates to provide a given level of service. Thus look-
133
ing only at incremental costs by flight likely understates the burden of
delays.
Some studies of the cost to airlines of delays combine the variable
costs and fixed costs into an average cost per minute of delay. For example, the Air Transport Association (ATA) calculates that the average
cost per minute of delay to major airlines (including fuel, crew, maintenance, and ownership) totaled $60.46 in 2007.9 The two largest
components of the ATA measure are variable costs: $27.86 per minute
for fuel and $12.71 per minute for crew.
To span the range of reasonable estimates, the JEC used two quite different approaches to estimate the increased airline operating expenses
as a result of delay. The first approach estimates, by flight, the incremental costs for fuel, crew salaries, and maintenance costs strictly applicable to the minutes of delayed operation. The second, much more
inclusive, approach first calculates the share of total operating time that
was spent in delay. The JEC then applied that proportion to the total
domestic passenger-related operating costs of airlines for the year.
Given the data demands, only the JEC Inclusive Delay Measure
(Measure C) and Measure D are suitable for computing the narrowest
measures of operating costs. That is because Measures C and D break
down total delay into delays at the gate, on the tarmac taxiing, and in
the air. The phase of flight is critically important for fuel costs and can
affect other costs such as depreciation and maintenance of the aircraft.
To calculate the pilot salary, maintenance, and depreciation costs of
flight delay, the JEC used data from Schedule P-5.2 from the BTS's Air
Carrier Financial Reports (Form 41 Financial Data). The JEC included
P-5.2 Schedule information on quarterly aircraft operating expenses for
large certificated U.S. air carriers such as flying expenses (including
payroll expenses for pilots but not flight attendants), direct expenses
for maintenance of flight equipment, and equipment depreciation costs.
JEC applied crew salary data to delays during all phases of flight, but
maintenance and depreciation applied only to airborne minutes of delay. Since the P-5.2 does not include data on the total number of flight
hours (gate-to-gate), the JEC supplemented the P5.2 data with total
gate-to-gate times from Schedule T-2 from the Form 41 data.
This analysis presented some of the same challenges of merging BTS
data with FAA data that arose in estimating the number of passengers
134
aboard each flight. So the JEC matched characteristics as closely as
possible. First, the JEC estimated operating expenses per minute in the
ETMS data using the relevant costs for the same carrier on the aircraft
in the same quarter, or failing that the same aircraft on other carriers in
the same quarter. Where an aircraft type match was not possible, the
JEC made an estimate of operating costs by matching with costs in the
same quarter for aircraft with a similar number of seats. Since fourth
quarter data were not available, the JEC assumed third quarter costs
applied in the fourth quarter. This is likely reasonable given that fuel
costs, which rose most in 2007, were estimated with other data.
To account for flight attendant expenses, the JEC estimated the number
of flight attendants on each flight using information on the number of
seats on each delayed aircraft, FAA rules about how many attendants
are required for a given number of seats, and information on median
hourly wages for flight attendants.' 0
To calculate fuel expenditures, the JEC used data from the FAA for the
jet fuel burn and CO 2 emissions per minute by type of aircraft by the
phase of flight (on tarmac and at altitudes over 3000 ft). The FAA derived the fuel burn data using its Aviation Environmental Design Tool
System for Assessing Aviation's Global Emissions, analyzing flights in
2004.11 For each 2007 flight, the JEC applied the applicable fuel burn
rates for the appropriate aircraft to taxi and airborne delays to compute
the incremental jet fuel use as a result of the delays. Given data limitations, the JEC assumes no jet fuel is used at the gate, which likely understates the jet fuel consequences of delay given that gate use of auxiliary power units induces some fuel burn. The JEC calculated the
costs of total fuel burn by multiplying the number of gallons burned by
the national average wholesale price of jet fuel in the month of the
flight.
The JEC analyzed the incremental fuel, salary, and maintenance costs
strictly applicable to the minutes of delayed operation of individual
flights. The JEC finds that approach produces total incremental operating costs of delay between $3.6 (for the JEC Inclusive Delay Measure,
Measure C) and $6.1 billion (for Measure D). These numbers are
somewhat lower than other analysts' because they exclude all overhead
expenses on labor and capital, such as employee health care and the
opportunity cost of aircraft ownership.' 2 Also, the measures take into
account the phase of flight during which delay accrues, and since a
large share of delays occurs at the gate or during taxi, JEC estimates of
135
fuel costs may be lower than others that do not make such distinctions.
In particular, since (because of data limitations) the JEC assumes no
fuel bum during gate delays, and because 58 percent of the delay occurs at the gate, one expects lower fuel costs for this approach than for
others that do not account for the phase of flight in which delay occurs
and the associated different fuel bum rates per minute.
A serious limitation of the narrow approach is that it does not account
for higher overhead and capital costs to airlines that result from a system in which almost 20 percent of operating time is squandered in delay. As the DOT points out in its analytic guidance, if "...an initiative
improves system efficiency, an operator may be able to provide the
same service with fewer aircraft."' 3 Likewise a system with greater
delays requires more aircraft to provide a given level of service, along
with more flight attendants, more ground personnel, and other factors
of production.
This broader interpretation of the cost to airlines of delay suggests a
much costlier picture of delays than the narrow approach. Rather than
make detailed assumptions as to which specific operating cost categories rise as a result of widespread delay, the JEC estimated more inclusive operating costs to airlines by applying the share of operating time
lost in delay (19.5 percent for the JEC Inclusive Delay Measure, Measure C) to an estimate of the total operating expenses for domestic passenger flights. To estimate the total operating expenses attributable to
domestic scheduled passenger flights, the JEC used domestic carrier
data from Schedule P6.0 of BTS Form 41 Financial Reports, dropping
all-cargo carriers. Since fourth quarter 2007 data were not available,
the JEC assumed that fourth quarter expenses were the same as first
quarter 2007 expenses. The resulting total 2007 expense estimate was
$97.7 billion.' 4 On the other hand, the figure may overstate the relevant costs because it includes not just fuel, crew salaries, maintenance,
and depreciation, but also advertising, ticket agents, landing fees, legal
fees, and other factors that may be less affected by delays.
Then JEC applied the shares of delay in total operating time (reported
in Figure 3.4) to airlines' total operating expenses in 2007. The results
are reported in Figure 4.2 and report operating costs over five times
higher than the narrow approach. The JEC Inclusive Delay Measure
reports operating costs of $19.1 billion, and Measures B and D report
operating costs of $21.7 and $23.4 billion, respectively.
136
Figure A8 Estimated Operating Costs of Delay
(Billions of U.S. dollars, 2007)
Arrival Schedule
Delay Measure
JEC Inclusive
Delay Measure
12.2
19.1
Estimated Operating Cost
of Delay
Indirect costs to the Economy ofDelay
In addition to the direct increase in operating costs due to delay, some
analysts assess the indirect and induced costs to the rest of the economy due to air travel delay. Indirect costs include the costs of goods
and services bought from the rest of the economy by the civil aviation
industry. Air travel delays increase the production and distribution
costs of other segments of the economy that rely on air travel as an input into their product or use air travel to provide a service. 15 For example, in the case of commercial passenger airline delays, higher air
passenger transportation costs increase business and entertainment expenses, as well as delays in mail and other cargo costs. These additional costs cause higher prices to consumers, which leads to a decrease
137
in general economic activity and real GDP.' 6 Further, induced costs
include costs to goods and services that are induced from the spending
of income generated of industries of which transportation provided.
For example, tourism is affected by airline delays, and the reduction in
passenger travel will reduce expenditures of visitors in the food service, lodging, general retail, entertainment, public transportation, and
auto rental industries.' 7
One study, using an input-output model, measured the indirect and induced impact of commercial airline travel delay to be 1.5, meaning that
every dollar of direct impact on airlines has an additional effect on
GDP of $0.50.18 Assuming that the relationship between U.S. industries remains unchanged since the DRI/WEFA study, the JEC used the
results of the DRL/WEFA input-output model, multiplying the delay
costs to airlines by 1.5 to obtain an additional indirect impact due to
delay.'9
Figure A9 Indirect Effects of Inclusive Estimates of Airline Operating Costs (Billions of U.S. dollars, 2007)
Arrival Schedule Delay
Measure
Indirect Costs
1
JEC Inclusive Delay Measure
6.1
1
9.5
1
- j~.
The indirect costs associated with the narrow operating costs of delay
for the JEC Inclusive Delay Measure and Measure D are $1.8 and $3.0
billion, respectively. The indirect costs associated with more inclusive
operating costs for Measures B and D are $10.8 and $11.7 billion, respectively.
Value of Travelers' Time
Analysts have used a number of approaches in accounting for the value
of travelers' time. Since travel time is not something that is purchased
or sold, its value is revealed through choices made by travelers, for
example by choosing airlines with better on-time performance or paying more for direct flights instead of connections. However unobservable, traveler time is certainly valuable and carries the opportunity cost
of travelers' next highest-valued activities. Different travelers may
138
have different valuations for their time and indeed, the same traveler
may value his or her time differently depending on the purpose of the
travel, work conditions, or other factors affecting his or her tolerance
for delays. 20 If travel itself is unpleasant, a premium applies to traveler's time spent in delays. Although many analysts use hourly wage
rates to value business travelers' time, the hourly cost of the traveler to
his or her employer (including benefits) may be a better measure since
workers often choose between a mix of wages and fringe benefits in
selecting their jobs.
Since a travel delay limits the productivity of a worker, their wage is a
reasonable basis for the economic loss (to themselves, their employer,
and the economy). Factors determining what the proportion of the
wage should be considered lost due to a delay. Cell phones, laptops
and mobile e-mail make some business people nearly as productive
when stuck at the airport as they would be at their desks. On the other
hand, being late to or missing a meeting or event can greatly impair a
traveler's productivity. The employer clearly believed that the face-toface interaction, which a delayed flight could easily prevent or complicate, was worth more than the foregone productivity of having his or
her employee at their desk. Otherwise the employee would not have
been sent on the trip. Further, the value of time exceeds the wage rate
if time spent at work is enjoyed (relative to traveling), and falls short of
it if time at work is relatively disliked.2 '
The economic impact of an individual losing vacation time to flight
delays is likely to be smaller than the loss of time of a business traveler
since the delay does not also affect an employer. Further, personal
travelers are more likely prefer traveling to work, suggesting that the
wage rate may overestimate the value of time for leisure travelers.
The Department Of Transportation analytical guidance supports using
travelers' before-tax wage rates, including fringe benefits, as a value of
travel time. 22 DOT derived its recommended hourly values of travel
time savings from a survey conducted by the Air Transport Association
(ATA) of America in 1998 and updated it with changes in median annual income from 1998 to 2000, as reported in the U.S. Census Bureau,
Income 2000, Table 1. The ATA survey measured annual income for
business and leisure travelers and calculated an hourly wage. Travelers' values of time factor in 70 percent of the hourly wage for personal
travelers and 100 percent of the hourly wage for business travelers,
including fringe benefits. 2 3 DOT guidance also includes a high and
139
low value of each type of passenger, based on advice from a panel of
transportation economists, as well as an average value per passenger,
based on the ratio of personal to business travelers. 2 4 The JEC takes
the central value for its analysis and uses the weighted average across
business and personal travelers.
The Joint Economic Committee follows the guidance provided by the
DOT for cost benefit analyses regarding savings in travel time. Since
the Census Bureau's Income 2007 tables are not yet out, and because
the cost of a traveler's time should include fringe benefits, the JEC adjusted the DOT guideline numbers by using the Bureau of Labor Statistics, Employer Costs for Employee Compensation Summary for March
2007 versus March 2000. Figure AlO below updates those DOT values to 2007, inflating at the rate of hourly earnings growth including
fringe benefits.
Figure Al0 DOT Recommended Hourly Value of Travel Time Savings
(Inflated by JEC from 2000 to 2007 U.S. dollars per person)
Central Recommended Value
All Purposes: weighted average
of business and personal travelers
$37.60
Some analyses of the cost of delays to airline passengers include a multiplier effect which measures the impact on the economy because of
foregone purchases by delayed travelers. In this report, the JEC adheres to the guidelines suggested by DOT and does not include a multiplier to reflect a loss in expenditures by passengers.
Value of PassengerTime: Results
The JEC took the hourly value of traveler time for all purposes as described above and applied them to the measures of passenger delay in
Figure Al 1.25 The JEC finds that costs of passenger time lost to air
traffic delay were at least $7.4 billion in 2007 if delay is measured relative to scheduled arrival. Those costs amounted to $12.0 billion when
schedule padding was accounted for.
140
Figure All Estimated Cost of Lost Passenger Time (billions of U.S.
dollars, 2007)
Delay Measure
Arrival Schedule
Delay Measure
JEC Inclusive
Delay Measure
Value of Delayed Passenger Time
7.4
12
The values of lost passenger time were $13.8 and $15.1 billion for upper bound delay Measures B and D, respectively.
Total Costs
The overall results for assumptions reflecting a moderate estimate of
delay (the JEC Inclusive Delay Measure) along with a relatively inclusive approach to assessing operating costs appear in Figure A 12, along
with the analogous results for a measure of delay that excludes delays
already built into airline schedules (Measure A). The JEC finds that
those routine delays add an additional 58 percent to the overall costs of
delay.
Figure A12 Total Costs of Delay (billions of U.S. dollars, 2007)
Operating
Costs
Indirect
Costs
Passengers'
Time
Total
Arrival Schedule Delay
Measure
JEC Inclusive Delay
Measure
12.2
19.1
6.1
9.5
7.4
12
25.7
40.6
The total costs of delay for Measure D were $24.2 billion using the
narrow approach to estimating operating costs, and $50.2 billion using
141
a more inclusive approach. Total costs for The JEC Inclusive Delay
Measure or Measure C using narrow operating costs were $17.4 billion, and the total costs for Measure B with inclusive operating costs
were $46.3 billion.
Figure A13 depicts the shares of the three components of cost in -the
total for the results for the JEC Inclusive Delay Measure.
Figure A13 Composition of Total Cost of Delay
K'
m
cs
1
Vale d laad
row
Initial vs. Finalincidence of air travel delay costs
The analysis above describes how costs of delay accrue initially to various participants in the air travel system. However, the initial incidence of delay costs is likely very different from the final incidence,
particularly once airlines pass along costs to travelers in the form of
higher ticket prices and/or reduced service. Depending on the relative
market power of firms and consumers, air carriers will bear some share
of the burden as demand for air travel declines as a result of longer tra-
142
vel times and higher ticket prices. However, to the extent they can,
airlines will pass along the $19.1 billion in higher operating costs as a
result of delay to their customers. Likewise, costs may be passed along
to consumers in industries burdened indirectly by air traffic delays.
JET FUEL AND ENVIRONMENTAL COSTS
An important element of the costs of delay is the excess consumption
of jet fuel, not only because fuel is costly but also because it produces
pollution when burned. The operating cost analysis discussed above
involved a careful estimate of the fuel burn by phase of delay. Since
carbon dioxide (GO2 ) emissions are fixed relative to the total volume of
fuel burned, the data allow an estimate of CO 2 emissions from flight
delays. CO2 is the dominant gas implicated in the risk to the global
climate from human-induced greenhouse gas emissions.
Figure A14 Jet Fuel Quantity Burned, Costs, and Emissions From
Delay, 2007
Jet Fuel Burned
(millions of gallons)
740
Cost of Fuel Burned
(billions of dollars
2007)
1.6
CO2 Emissions
(millions of metric
tons)
7.1
Delays consumed at least 740 million (the JEC Inclusive Delay Measure or Measure C) and up to 1.4 billion (Measure D) gallons ofjet fuel.
At an average wholesale price of $2.15 per gallon in 2007, the delayinduced fuel cost totaled at least $1.6 billion.
In computing the jet fuel-related costs to airlines of delay, the JEC
multiplied excess jet fuel consumption for each delayed flight by the
national average wholesale price for a gallon ofjet fuel for the month
in which the flight departed (See Figure A15). The price ofjet fuel
rose significantly over the course of 2007, so monthly fuel price data
provide a more accurate estimate of costs than an annual average
would.
Airlines' actual average cost of fuel may have been significantly lower
than the national wholesale average because airlines frequently hedge
against fuel price shocks through futures contracts.2 6 However, the
wholesale price captures the opportunity cost of the fuel to airlines
even if it does not reflect the actual prices they paid. Further, airlines
143
may not contract for 100 percent of their fuel use, so the wholesale
price may better reflect their costs on the margin.
Figure A15 Jet Fuel Price By Month
Month
2007
Jet Fuel
US Wholesale Price per Gallon
January
$1.73
February
$1.77
March
$1.85
April
$2.02
May
$2.08
June
$2.11
July
$2.17
August
$2.15
September
$2.26
October
$2.35
November
$2.66
December
$2.66
Source: Department of Energy
The Joint Economic Committee estimated carbon dioxide (CO2 ) emissions from the delay-related jet fuel bum using data from the FAA.
The JEC finds that delay-related jet fuel burn emitted at least 7.1 and
up tol 3.4 million metric tons of carbon dioxide (MMTC), or about 5 to
9 percent of all carbon emissions from domestic commercial aircraft in
2006. According to the inventory compiled by the U.S. Environmental
Protection Agency (EPA)2 7 aggregate U.S. jet fuel combustion produced 142.1 million metric tons of carbon emissions in 2006.
144
In addition to C0 2, airplanes emit local air pollution such -as carbon
monoxide, unburned hydrocarbons, oxides of nitrogen, fine particulate
matter, and oxides of sulphur.2 8 These pollutants are of particular concern in EPA-designated non-attainment or maintenance areas that may
violate or risk violating clear air standards. Unlike carbon, local pollutants are not a simple factor of fuel consumption but rather depend on
weather conditions and the exact type of engine and airplane body
combination. Thus the JEC did not include them in its analysis. However, local criteria air pollutants can contribute to the costs of delays
both in the damage they cause directly to human health and the environment and by increasing the requirements of emissions reductions
outside the airline sector in order to meet EPA standards. Lowering
ground-based delays can reduce such costs and can be considered in
analysis of the benefits of reducing delays.
End Notes
'Mayer and Sinai (2003), page 1201.
2
Personal communication with FAA experts April, 2008
'Theodore Thrasher and William Weiss, "A Proposed Method for Measuring Air Traffic Delay,"
CSSI Inc, 2001 available at htto.//www.cssiinc.conm/ ublic/technicaltaners/docs/240
0
A%/o2OProposed%/o20Method/2Ofor /o2oMeasuringo/o2Air'/o2Trafflc /o2ODelav doc
4
By U.S. law, foreign carriers can fly between two U.S airports but cannot sell tickets for such
flights.
'For example, in February 2007, only about 90,000 flights arrived from or departed to a foreign
airport out of a total of over 870,000 flights traveling through at least one U S airport
6
Researchers have estimated security-related travel time costs to be $25 billion annually, assuming travelers arrive at the airport an hour earlier than before new security measures were imposed.
Steven A Morrison and Clifford Winston (2008), "Delayed! U.S. Aviation Infrastructure Policy
at a Crossroads," m Aviation Infrastructure Performance,Clifford Winston and Gines de Rus
(eds.), Brookings Institution Press
7
See "Economic Values For FAA Investment And Regulatory Decisions, A Guide", Revised Oct.
3, 2007, FAA Office of Aviation Policy and Plans, available at
http /Hwww.faagov/regulations policies/policv guidance/benefit costlmedia/ECONOMICVALU
ESFORFAAINVESTMENTANDREGULATORYDECISIONS I 0032007.Ddf
"Economic Values, page 4-2
9Air Transport Association, Economics and Energy, "Costs of Delay". Available at
http.//www.airlines ore/economics/specialtopics/ATC+Delav+Cost htm
10Hourly wages for flight attendants are not available from U S. government sources, and annual
salaries are problematic given the widely variable number of hours flight attendants may work
each year The JEC estimated an average hourly wage per flight attendant of $25 20, or $42 per
minute, from information at www.payscale.com.
http://www payscale com/researchfUS/Job=Flight Attendant/HourlyRate
"For more information see
httpo/www faa.gov/about/office org/headauarters offices/aep/models/sage/
12For example, the Air Transport Association estimates the economic costs of delay. See
http://www.airlines.org/economics/specialtopics/ATC+Delay+Cost htm The ATA applies a
single estimated per minute operating cost of $60.46, 46 percent of which is fuel costs, to an estimated 134 million minutes of system delay to find $8.1 billion in estimated operating cost for
2007
3
' GRA, Economic Values, p 4-1
"This estimate may be on the low side since fuel prices were climbing through the year, but the
first quarter was closer in total number of flights to the fourth quarter than the third quarter was
"DRI/WEFA, Inc., A Global Insight Company, "The National Economic Impact of Civil Avia-
145
tion," July 2002
'61bid., p 25.
"Ibid., Tables 2 and 3. Some of the impacts measured in Table 3 include general aviation and
cargo. These costs are only for commercial passenger air traffic
'8 lbd, Appendix A
'9Ibid., Appendix A
2Kenneth A. Small, Urban Transportation Economics, in Fundamentals of Pure and Applied
Economics, Jacques Lesourne and Hugo Sonnenschein (eds ), Harwood Academic Publishers,
1992
2'Small, Urban Transportation Economics, p 40.
22
See US Department of Transportation, Office of the Secretary of Transportation, The Value of
Travel Time. Departmental Guidance for Conducting Economic Evaluations, issued Apnl 9,
1997, available here at htty //ostpxweb.dot gov/pIolicv[Data/VOT97guid.pdf and 2003 update
available on line at http://ostpxweb dot.gov/policvlDataNyOTrevisionl 2-11-03.odf.
"These numbers are much higher than average hourly earnings reported by the Bureau of Labor
Statistics because airline travelers were found to have much higher annual incomes than the general population Consistent with other recently published work, the JEC assumes that incomes for
airline travelers in 2007 remain substantially higher than the average population See Stephen A
Morrison and Clifford Winston (2007), "Another Look at Airport Congestion Pricing," American
Economic Review, Vol 97, No 5, pp 1970-1977.
"4See GRA, Incorporated, Economic Values for FAA Investment and Regulatory Decisions, A
Guide," Contract No. DTFA 01-02-C00200, Final Report, Revised Oct. 3,2007, prepared for
FAA Office of Aviation Policy and Plans.
25Because a breakdown between business and personal travelers on each flight was infeasible, the
JEC uses the all-purpose value reported by DOT, updated to 2007 dollars That all-purpose value
used the ratio of business to personal travelers to calculate the overall value of passengers' time.
Thus, to the extent that the ratio of business to personal passengers is higher (lower) today than in
2000, the JEC measure will underestimate (overestimate) the value of lost passengers' time.
26
Ameet Sachdev, "United's hedge onjet fuel not best bet in 3rd quarter," Chicago Tribune Chicago, III Sep 16, 2006
2"U S. Environmental Protection Agency,"lnventory of U S Greenhouse Gas Emissions and
Sinks 1990-2006" p 3-9 . Available at
htti.//www eva gov/climatechanae/emissions/downloads/08 CR.ndf. Includes consumption ofjet
fuel and aviation gasoline
29
Ohsfeldt, M, Thrasher, T., Waitz, I, Ratliff, G, Sequeira, C, Thompson T, Graham, M, Cointin, R, Gillette, W, and Gupta, M, "Quantifying the Relationship Between Air Traffic Management Inefficiency, Fuel Bum, and Air Pollutant Emissions," presented at the 7th USA/Europe Air
Traffic Management Research and Development Seminar, Barcelona, 2007. Available at
httpl//www.atmseminar orglall-seminars/atm-seminar-2007/papers calendar, line 65
146
Equalitv in Job Loss:
Women Are Increasingly Vulnerable to Layoffs During Recessions
EXECUTIVE SUMMARY
If recent history is any guide, then the current downturn threatens
women's employment more than ever before, making it increasingly difficult for families to make ends meet. In recessions prior to
2001, women could buffer family incomes against male unemployment because they did not experience sharp job losses. However,
this changed in the 2001 recession as women lost jobs on par with
men in the industries that lost the most jobs. That was the first recession in decades during which women not only lost jobs, but also
did not see their employment rates recover to their pre-recession
peak. It now appears that, unlike in decades past, families can no
longer rely on women's employment to help boost family income
during a downturn.
When women lose jobs, families lose a large share of their income
and experience greater economic volatility. Wives typically bring
home more than a third of their family's income and single mothers are sole breadwinners. Families are more economically vulnerable as wives are no longer insulating families from economic
hardship in times of higher unemployment and falling or stagnant
real wages. Single-mother families are now especially vulnerable.
In an analysis of data from the Bureau of Labor Statistics, this report
finds:
When women lose jobs, families lose a substantial share of income.
Over the past three decades, only those families who have a
working wife have seen real increases in family income.
The 2001 recession hit the jobs that women held especially hard.
Unlike in the recessions of the early 1980s and 1990s, during
the 2001 recession, the percent of jobs lost by women often
exceeded that of men in the industries hardest hit by the downturn.
The lackluster recovery of the 2000s made it difficult for women
to regain their jobs - women's employment rates never returned to their pre-recession peak.
If the prior recession's trend holds, women will suffer equally to
men in the 2008 recession. Because women are disproportionately represented in state and local government services, their
147
job losses are likely to grow in the latter part of the recession
as state and local governments are forced to implement cutbacks in spending in areas that women are disproportionately
employed, such as education and health care.
Families can ill afford to lose a parent's earnings, especially as
costs for basics, like food and gasoline continue to rise. Greater job
losses for women not only mean that any downturn will be hard on
families, but also that spurring consumer spending to boost economic growth and job creation may take far more government action, especially with respect to fiscal spending, than in previous
recessions. Fiscal aid to the states is important to help states maintain programs-and keep workers-in the face of ensuing budget
cuts. Ensuring that all workers-women and men-can access unemployment compensation when they lose their jobs is critical.
Given the high costs of health care, Congress should also consider
extending Medicaid to unemployed families. Further, challenges
facing working families to balance work and family responsibilities
are exacerbated in the current downturn, signaling a greater need
for workplace flexibility.
WOMEN ARE INCREASINGLY VULNERABLE TO JOB LOSSES DURING
RECESSIONS
It is no longer the case that women's employment rises in recessions as
men's falls. Women lost more jobs in the 2001 recession than they had
in prior recessions, a striking departure from prior trends (Figure 1).'
In the three years following the recession that began in 1980, women's
employment grew for the first 18 months of the recession. In the first
18 months following the beginning of the 1990-1 recession, women's
employment growth was negligible, but then rose sharply over the next
18 months. In contrast, during the 2001 recession, women's employment followed a pattern more similar to men's: in the first few months
following the beginning of the 2001 recession, women's employment
did not grow, but in the months after that, their employment fell. While
women's employment did not fall as much as men's, the experience of
aggregate job losses was unique for women and indicates that their
employment patterns may be shifting to look more like men's, rising
and falling with the business cycle.
148
For men, however, employment trends have remained relatively stable
over the past three recessions and the 2001 recession initially looked
just like the prior two recessions (Figure 2). After the first nine months
of the 2001 recession, men's employment followed a similar path to
the early 1990s recession. The trend during the 1980-2 recession differs because it was a "double-dip" recession, where the economy
started to improve in 1981, but then sank back into recession in 1982.
149
THE 2001 RECESSION SIGNALED END OF LONG-TERM RISE IN
WOMEN'S EMPLOYMENT RATE
For women, the job losses of the 2001 recession were followed by no
significant employment growth over the 2000s recovery, which, like
losing jobs in a recession, is a sharp departure from women's prior employment trends. From the end of World War II through 2000, even
when the economy was in recession, women continued to see a rising
employment rate with only slight stalls during economic downturns
(Figure 3). However, since the late 1990s, the employment rate of
women has shown no growth. The dashed line in Figure 3 shows the
trend in women's employment rates from 1948 to 2000, the period over
which women's employment rates rose rapidly, and the solid line
shows the trend from 1990 to 2000. Especially striking is that as of
2008, the female employment rate is about four percentage points below the 1990-2000 trendline and about six percentage points below the
1948-2000 trendline.
150
Men's employment rates over the 2000s recovery are consistent with
their flat employment rate trend from 1979 to 2000 (Figure 4). While
the male employment rate fell for the first three decades after World
War 11, for the next three decades, changes in men's employment rate
has remained essentially flat, moving along with the business cycle, but
showing no particular long-term up or down trend. During the 2000s
economic recovery, however, male employment rates did not recover
to their pre-recession peak, which may indicate that men are again seeing a trend towards lower employment rates.
151
There is a growing body of research on what changed for women
workers in the late 1990s that led to the end-at least for now-in the
long-term rise in women's employment rates. 2 The reasons why women lost so many jobs in the 2001 recession are tied to the way that recession unfolded or are industry-specific. 3 The 2001 recession was
caused by the burst of the stock bubble, but sharp job losses did not
occur until after the events of September 11, when employers began
shedding jobs in services, such as retail, which disproportionately employ women.
There is evidence that the recession of 2001 hit the jobs that women
held especially hard and that the lackluster recovery of the 2000s made
it difficult for women to regain their jobs back. Unlike in the recessions
of the early 1980s and 1990s, during the 2001 recession, women lost a
disproportionate share of jobs in the industries hardest hit by the downturn.
152
Flgmt 5.Women's Employmendtieteashiigly Smifitveto the BIuhtis C( de
Percent Clangein FmplolimentbyGtdetmt within
~
QS
15.0
JorbIoslundustdei
Rec-essvx
R% a~l9(I~jSI)I20
10.0%
bjJ%
00%
150.0%
.<
1990
laitlIn thre Ina
l 9witch
n's
me91
josta
womn'lcs job lossesrs
re'essZreerion,
tQ-1t
Clost aJ largrhae
m01 stulbln:d
buten~uj:
cl0
o ser to: partyJ
wenunrer
ofo
n
n
ot
that lost the most jobs.
e nteidustries
*In the 2001 recession, this pattern shifted. Compared to men,
women lost a larger share ofjobs in manufacturing and trade,
transportation and utilities. In the other high-job-loss indus-
tries, women lost about the same share of jobs as men.
Women's larger job losses in the 2001 recession may also be due to
women's progress in entering a wide array of industries and occupations. Because of this, women may be more susceptible to the impact
of the business cycle than they were when they were more highly concentrated in a smaller number of non-cyclical occupations, like teaching and nursing. There is no evidence, however, that mothers are increasingly "opting out" of employment, in favor of full-time motherhood.4 For this story to be true, the employment rate of non-ohr
would have had to diverge sharply from that of mothers, which has not
been the case.'
153
WOMEN LOSE JOBS. FAMILIES LOSE A SUBSTANTIAL SHARE
Women's increased vulnerability to the business cycle has significant
implications for family economic well-being. Decades ago, when most
families with children had a stay-at-home mother, families relied on
one income. When a father got laid off, the mother could try to make
up the lost income by finding a job. There is evidence that this "added
worker effect" helped to smooth out family income in hard times.6
However, today most children grow up in family where their parents
work, regardless of whether the child lives in a married-couple or single-parent family. Thus, there is no longer an additional worker to enter the labor force when times are tough.
Women's increased vulnerability to recession can wreck havoc on
family economic well-being. The typical wife brings home over a third
of her family's income and the one quarter of children being raised in
single-mother families have only their mother's salary to rely upon.7
The importance of women's income to family well-being over the past
few decades is illustrated in Figure 6: the only families who have seen
any increase in real income over the past three decades are those with a
working wife.8
WEAK RECOVERY LEAVES FAMILIES ESPECIALLY VULNERABLE IN
A DOWNTURN
154
Clearly, an economic downturn now will be harder on families than in
earlier recessions. Both higher unemployment and declining real wages
and incomes can hit families hard. Researchers estimate that if we have
a mild-to-moderate recession, families will lose just over $2,000 per
year by 2010. However, if we have a more severe recession, families
will see income losses of $3,750 per year by 2011.9 If trends since the
late 1990s hold, families will not be able to rely on women's employment to moderate fluctuations in family income.
The current downturn may be worse for families because it follows
the weakest recovery in the post-World War II period, both in terms of
jobs and income gains. This, combined with the credit squeeze, means
that many families facing unemployment have little to fall back on and
will not be able to borrow to make ends meet. With lower real incomes, more debt and less savings and home equity, families are especially vulnerable as we enter this downturn. This points to a larger role
for fiscal policy than in prior recessions. Unlike during the 2001 recession, families cannot "deficit spend," by borrowing extensively, to
maintain consumption. It also points to continued concerns about how
families can balance their work and family responsibilities, especially
in the face of rapidly rising prices.
There are a number of ways Congress can help families cope with job
losses and falling incomes during this economic downturn. For example:
Providing states with grants to cover lost revenue can help boost local
economies, while ensuring that important services are maintained
This recession will likely lead to cutbacks in state and local government budgets, more so than in past recessions because of the collapse
in home prices which has significantly reduced property tax revenue.
Additionally, falling incomes will lead to declines in income tax revenue and lower consumption will reduce sales tax revenue, which will
lead to cutbacks in spending. State and local government cutbacks disproportionately affect female-headed families since they rely more on
government services, but these cutbacks also disproportionately affect
women's employment because women are more likely than men to be
employed in state and local government. Federal aid to the state boosts
family incomes by keeping more women employed, as well as making
sure that unemployed and low-income families are able to access the
income supports and services that they need.
155
Extending Medicaidto the unemployed andtheirfamilieswould be a
first step to ensuring that being without ajob does not mean going
without medical care. For most workers, a lost job also means the loss
of health insurance. Unemployed workers can purchase health insurance from their former employer for up to 18 months after they lose
their job through COBRA (the 1986 Consolidated Omnibus Budget
Reconciliation Act), but purchasing these benefits is expensive. The
average family purchasing COBRA benefits could spend 80 percent of
one person's unemployed benefits just on health insurance coverage
alone.' 0 Helping families cope with the burden of health insurance coverage during a spell of unemployment will free up family's fund to
cope with other rising expenses, such as food, gasoline, and housing.
Extending unemployment to the long-term unemployed helps, but
policymakers should also temporarilyincrease benefits and loosen
application standards, to help more of the unemployed access benefits. In the first quarter of 2008, only 41.6 percent of the unemployed
received any unemployment compensation. Even for those who do receive benefits, the wage replacement level is quite low: the average
worker's benefits are just half of their pre-unemployment earnings."
Since women workers are more likely to work part-time than men, and
consequently, more likely to earn less, women are less likely to qualify
for unemployment compensation and more likely to receive lower benefits, on average, than men.' 2
Family-friendly workplace policies are needed now more than ever.
Families need the income of both parentsnow more than ever. For
the majority who will keep their jobs during any recession, policymakers should look to extend benefits that allow them to be good employees and good caretakers. This includes access to paidsick days and
establishinga nationwidefamily leave insuranceprogram, similar to
what is now in effect in Californiaand New Jersey. Further, encouraging employers to adopt flexible workplaces can help both employers
and employees in a recession because workers can downshift to reduced schedules or telecommute, saving the firm money, while helping
employees balance work and family.
Because most mothers already work, families have little to fall back on
to help smooth income during this economic downturn. Acting now
will go a long way toward not only helping families in need, but also
boosting consumption and fostering macroeconomic growth in the medium- to long-term.
156
END NOTES
'It is important to note, however, that higher job losses among women have not led women to
have higher unemployment rates relative to men. In the 2001 recession, unemployment among
women hit a high of 5.3 percent, while men's unemployment rose all the way to 6 0 percent.
For a review of this literature, see. Heather Boushey, "Opting Out? The Effect of Children on
Women's Employment in the United States" Feminist Economics, Vol 14, No 1,2008, pp 1-36.
2
Recent research points to both cyclical and structural changes in the labor market to explain
declining employment rates for U.S women. See: Julie L Hotchkiss, "Change in Behavioral and
Characteristic Determination of Female Labor Force Participation," Economic Review, Vol. 2,
2006, pp, 1-20 and Enca Groshen and Simon Potter, "Has Structural Change Contributed to a
3
Jobless Recovery?", CurrentIssues in Economics and Finance, FederalReserve Bank of New
York, Vol 9, No 8, 2003, pp 1-7.
Heather Boushey, "Opting Out? The Effect of Children on Women's Employment in the United
States" FeministEconomics, Vol 14, No 1,2008, pp 1-36.
4
Heather Boushey, Dean Baker and David Rosnick, "Gender Bias inthe Current Economic Recovery? Declining Employment Rates for Women in the 21 st Century," Washington, DC: Center
for Economic and Policy Research, 2005 BLS, Household Survey.
5
Chinhui Juhn and Simon Potter," Is There Still an Added Worker Effect9" FederalReserve Bank
ofNew York Staff Reports, No. 210, December 2007; Shelly Lundberg, "The Added Worker Effect." JournalofLabor Economics, Vol 3, No. 1, pp 11-37, 1985
6
'0f course, many mothers get child support, but not close to all: according to the Census Bureau,
two-thirds (64 7 percent) of custodial mothers actually receive their child support payments (U S
Census Bureau, Child Support. 2005, Table I
http //www.census gov/hhes/www/childsupport/chidsuOS.pdt)
iSee also Elizabeth Warren and Amelia Warren Tyagi, The Two-Income Trap. New York, Basic
Books, 2003.
9John Schmitt and Dean Baker, "What We're In For Projected Economic Impact of the Next
Recession", Center for Economic and Policy Research, January 2008, available at
http //www cepr net/documents/publications/JSDB_08recession pdf
'5The average weekly unemployment benefit allowance inthe first quarter of 2008 was $299 14,
according to the Department of Labor The average annual cost of a family health care plan is
$12,106, according to the Henry J. Kaiser Family Foundation
-U S. Department of Labor, Unemployment Insurance DataSummary, 2008
http.//workforcesecuritv.doleta.gov/unemolov/content/data stats/datasumO8/DataSum 2008 1pd
f pg67
-Henry J Kaiser Family Foundation and Health Research and Educational Trust, Survey of Employer Health Benefits, 2007. September 11, 2007
http.l/www kf orglinsurance!7672/upload!7693 pdf
"Department of Labor, Unemployment Insurance DataSummary,
httnp.//workforcesecuritv.doleta eov/unemplov/content/data stats/datasumOg8DataSum 2008 1.pd
f. Accessed 28 May 2008
Andrew Stettner, Heather Boushey, and Jeffrey Wenger Clearingthe Path to Unemployment
Insurancefor Low-Wage Workers An Analysis ofAlternative Base PeriodImplementation.
Washington, DC., Center for Economic and Policy Research, 2005.
2
1
157
African American Families Are Being! Squeezed
With mounting job losses, stagnating wages, rising prices, and a collapsing housing market, most Americans are feeling the strains of a
weak economy. For African Americans and their families, these problems are compounded by unemployment that is double that of whites.
Now more than ever we need a new direction in economic policy,
aimed at restoring broad-based growth, reducing the high costs of
energy and health care, improving retirement security, and increasing
prosperity for all Americans.
African American Families Are Being Squeezed By Rising Expenses.
Median African American family income is lower than median family income overall, so rising costs eat up a larger share of their family budgets.
Between 2000 and 2006, African American families saw median family income fall by 2.9 percent, to $39,367, a loss of $1,192.* Since 2000, the average price of gasoline has increased 145 percent to $4.06 per gallon, the
average family health insurance premium has jumped 41 percent to $11,765,
and the average cost of child care for two children is now $1,041 per month.
[U.S. Census Bureau, Current Population Survey, available here; Energy
Information Administration, available here; U.S. Department of Health and
Human Services, available here; National Association of Child Care Resource & Referral Agencies, available here.]
Wage Growth Has Stalled For African American Workers. During the
2000s economic recovery, African American workers' inflation-adjusted
wages grew at an annual rate of only 0.2 percent, after having grown four
times as much (0.8 percent) per year during the 1990s recovery. For all
workers, inflation-adjusted wages grew by 0.3 percent annually, far less than
productivity, which grew by 2.6 percent per year. [U.S. Department of Labor, Bureau of Labor Statistics, available here and JEC analysis.]
African Americans Are Now Losing Jobs. After years of lackluster employment gains, the economy is now shedding jobs: African Americans have
lost 55,000 jobs since December 2007. African American unemployment
rose from 8.2 percent in 2000 to 9.2 percent in 2008. Unemployment for
African Americans is almost twice as high as unemployment for whites (4.9
percent) and is slightly higher than unemployment for Hispanics (7.7 percent). There are now 1.6 million African American workers unemployed277,000 more than when President Bush took office. [U.S. Department of
Labor, Bureau of Labor Statistics, available here.]
158
The Subprime Mortgage Crisis Is Impacting African American Homeowners. On the Bush Administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime
mortgages to vulnerable borrowers. Evidence suggests that those lenders
targeted minority, elderly and female borrowers. During the subprime boom,
African American home-buyers were nearly three times more likely than
whites to receive a high cost home loan. The Joint Economic Committee
estimates the number of U.S. subprime foreclosures will total 2 million by
the end of 2009; a disproportionate share will likely be African American
homeowners. [ACORN Fair Housing, available here; JEC April 2008 Impact of Subprime Foreclosures report, available here.]
One-in-Four African Americans Were Living in Poverty in 2006. Nationwide, 9.0 million African Americans - or 24.3 percent of the African
American population - were living below the poverty line in 2006, up from
22.5 percent in 2000. One third (33.4 percent) of African American children
were living below the poverty line, nearly three times the total national poverty rate of 12.3 percent. There were 196,000 more poor African American
children in 2006, compared to 2000. [U.S. Department of Commerce, Bureau of the Census, available here; JEC August 29, 2007 Fact Sheet on Poverty, available here.]
1 Million More Uninsured African Americans Since 2000. In 2006, 7.7
million African Americans (20.5 percent) had no health insurance and 11.4
million African American children (14.1 percent) had no health insurance.
Across the country, the number of all Americans without health insurance
totals 47 million (15.8 percent of the population), up 8.6 million since 2000.
[U.S. Department of Commerce, Bureau of the Census, available here and
here; JEC August 29, 2007 Fact Sheet on Health Insurance Coverage, available here.]
* All dollar values (except gas prices, which are current) are in 2007 CPI-URS adjusted dollars.
159
Hispanic Families Are Being Squeezed
With mounting job losses, stagnating wages, rising prices, and a collapsing housing market, most Americans are feeling the strains of a
weak economy. Many of America's Hispanic families are struggling to
stay out of poverty and maintain health insurance. Now more than ever
we need a new direction in economic policy, aimed at restoring broadbased growth, reducing the high costs of energy and health care, improving retirement security, and increasing prosperity for all Americans.
Hispanic Families Are Being Squeezed By Rising Expenses. Median Hispanic family income is lower than median family income overall, so rising
costs eat up larger share of their family budgets. Between 2000 and 2006,
Hispanic families saw median family income fall by 0.8 percent, to $41,147,
a loss of $334.* Since 2000, the average price of gasoline has increased 145
percent to $4.06 per gallon, the average family health insurance premium
has jumped 41 percent to $11,765, and the average cost of child care for two
children is now $1,041 per month. [U.S. Census Bureau, Current Population
Survey, available here; Energy Information Administration, available here;
U.S. Department of Health and Human Services, available here; National
Association of Child Care Resource & Referral Agencies, available here.]
Wage Growth Has Stalled For Hispanic Workers. During the 2000s economic recovery, Hispanic workers' inflation-adjusted wages grew at an annual rate of only 0.5 percent. For all workers, inflation-adjusted wages grew
by 0.3 percent annually, far less than productivity, which grew by 2.6 percent per year. [U.S. Department of Labor, Bureau of Labor Statistics, available here and JEC analysis.]
Hispanics Are Now Losing Jobs. After years of lackluster employment
gains, the economy is now shedding jobs: Hispanics have lost 340,000 jobs
since December 2007. Hispanic unemployment rose from 5.6 percent in
2000 to 7.7 percent in 2008. Unemployment for Hispanics is higher than
unemployment for whites (4.9 percent) and just below unemployment for
African Americans (9.2 percent). There are now 1.7 million Hispanic workers unemployed-727,000 more than when President Bush took office. [U.S.
Department of Labor, Bureau of Labor Statistics, available here.]
The Subprime Mortgage Crisis Is Impacting Hispanic Homeowners. On
the Bush Administration's watch, unregulated mortgage originators were
given financial incentives to sell risky, unaffordable subprime mortgages to
160
vulnerable borrowers. Evidence suggests that those lenders targeted minority, elderly and female borrowers. During the subprime boom, Hispanic
home-buyers were nearly two and a half times more likely than whites to
receive a high cost home loan. The Joint Economic Committee estimates the
number of U.S. subprime foreclosures will total 2 million by the end of
2009; a disproportionate share will likely be Hispanic homeowners.
[ACORN Fair Housing, available here; JEC April 2008 Impact of Subprime
Foreclosures report, available here.]
One-in-Five Hispanics Were Living in Poverty in 2006. Nationwide, 9.2
million Hispanics - or 20.6 percent of the Hispanic population - were living
below the poverty line in 2006. More than one quarter (26.9 percent) of Hispanic children were living below the poverty line, more than twice the total
national poverty rate of 12.3 percent. There were 550,000 more poor Hispanic children in 2006 than there were in 2000. [U.S. Department of Commerce, Bureau of the Census, available here; JEC August 29, 2007 Fact
Sheet on Poverty, available here.]
3.5 Million More Uninsured Hispanics Since 2000. In 2006, 15.3
million Hispanics (34.1 percent of Hispanics) had no health insurance,
of which 3.4 million were children (22.1 percent of Hispanic children)
had no health insurance. Across the country, the number of all Americans without health insurance totals 47 million (15.8 percent of the
population), up 8.6 million since 2000. [U.S. Department of Commerce, Bureau of the Census, available here and here; JEC August 29,
2007 Fact Sheet on Health Insurance Coverage, available here.]
* All dollars values (except gas prices, which are current) are in 2007 CPIU-RS adjusted dollars.
161
Young Workers And Their Families Are Bein! Squeezed
With mounting job losses, stagnating wages, rising prices, and a collapsing
housing market, most Americans are feeling the strains of a weak economy.
For young families, these problems are compounded by high student loan
debt, and the high cost of child care. Now more than ever we need a new
direction in economic policy, aimed at restoring broad-based growth, reducing the high costs of energy and health care, improving retirement security,
and increasing prosperity for all Americans.
Young Families Are Being Squeezed By Rising Expenses. Median family
income among young families is lower than median family income overall,
so rising costs eat up a larger share of their budgets. Between 2000 and
2006, America's young families (headed by someone aged 25 to 34) saw
median family income fall by 5.6 percent, down to $51,560, a loss of
$3,080. Since 2000, the average price of gasoline has increased 145 percent
-to $4.06 per gallon, the average family health insurance premium has
jumped 41 percent to $11,765, and the average cost of child care for two
children is now $1,041 per month. [U.S. Census Bureau, Current Population
Survey, available here; Energy Information Administration, available here;
U.S. Department of Health and Human Services, available here; National
Association of Child Care Resource & Referral Agencies, available here.]
Wage Growth Has Stalled For Young Workers. During the 2000s economic recovery, inflation-adjusted wages of young workers (aged 25 to 34)
fell at an annual rate of 0.4 percent, after having grown 0.5 percent per year
during the 1990s recovery. For all workers, inflation-adjusted wages grew
by 0.3 percent annually, far less than productivity, which grew by 2.6 percent per year. [Bureau of Labor Statistics, U.S. Department of Labor, available here and JEC analysis.]
Young Workers Are Losing Jobs. After years of lackluster employment
gains, the economy is now shedding jobs: young workers between the ages
of 20 and 34 have lost 127,000 jobs since December 2007. Unemployment
among young workers aged 20 to 24 rose from 7.0 percent in 2000 to 10.1
percent in 2008, while for those aged 25 to 34, it rose from 3.7 percent in
2000 to 5.4 percent in 2008. There are now 3.3 million young workers unemployed (aged 20 to 34)-953,000 more than when President Bush took
office. Job losses hurt young families, since among young families (headed
by someone aged 20-34), three-quarters (74 percent) have children at home.
[Bureau of Labor Statistics, U.S. Department of Labor, available here and
here.]
162
Student Loan Debt Poses Large Burdens on Young Families. On
top of rising expenses, many young families have high student loan
debt. The cost to attend private and public universities has risen 21 and
34 percent, respectively, from 2000 to 2007 and students increasingly
rely on loans to pay for college. Approximately one-third (31.4 percent) of people between ages 25 and 34 have at least a bachelor's degree and of those nearly two-thirds have student loan debt. The average
student with student loans now graduates with $19,200 in student debt.
[Center for Economic and Policy Research, available here; The Project
on Student Debt, available here, College Board, available here and
here; Bureau of the Census, U.S. Department of Commerce available
here.]
One-in-Five Young Families Were Living in Poverty in 2006. Nationwide, 2 million young families with children and headed by someone aged 25 to 34 (19.6 percent) were living below the poverty line in'
2006, up from 16.2 percent in 2000. [Bureau of the Census, U.S. Department of Commerce, available here; JEC August 29, 2007 Fact
Sheet on Poverty, available here.]
2.4 Million More Uninsured Young Workers in 2006. In 2006, 10.7
million (27 percent) young workers (aged 25 to 34) had no health insurance. Across the country, the number of all Americans without
health insurance totals 47 million (15.8 percent of the population), up
8.6 million since the current Administration took office. [Bureau of the
Census, U.S. Department of Commerce, available here; JEC August
29, 2007 Fact Sheet on Health Insurance Coverage, available here.]
* All dollars values (except gas prices, which are current) are in 2007 CPIU-RS adjusted dollars.
163
Families Near Retirement Are Being Squeezed
With stagnating wages, rising prices, and a collapsing housing market, most
Americans are feeling the strains of a weak economy. For families nearing
retirement, there is the added problem of dwindling assets. Millions of families are vulnerable to low incomes in retirement, especially since far less
than half (43.2 percent) of private sector workers have an employersponsored retirement plan, either a traditional pension or a retirement savings plan. Now more than ever we need a new direction in economic policy,
aimed at restoring broad-based growth, reducing the high costs of health
care and energy, improving retirement security, and increasing prosperity for
all Americans. [Congressional Research Service, available here.]
The Housing Crisis Has Jeopardized the Economic Security of Homeowners Nearing Retirement. Families own less of their homes than ever
before: the ratio of homeowner's equity to value is at an all-time low, as
they now own an average of just 46 percent of their home, down from almost 58 percent in 2000. A recent study estimates that a 10 percent further
decline in real home prices could result in a 35 percent decline in the net
worth of households with a family member between the ages of 45 and 54
by 2009. That leaves a family in the middle-wealth bracket with an average
of only $97,600 in assets for their retirement. [Center for Economic Policy
Research, available here; JEC April 10"h State-by-State Subprime Foreclosure Report, available here; Federal Reserve Board of Governors, Flow of
Funds, available here.]
Retirement Security Is Threatened by Declining Stock Market. Falling
home prices will leave families with less wealth and increasingly dependent
upon Medicare and Social Security income for their retirement security, but
stock market losses are also adding to retirement insecurity as families see
the value of their 401(k) plans dwindle. Since September 2007, the S&P 500
has dropped 17.4 percent; it is now 6.3 percent lower than it was in January
2001. [Standard & Poor's 500 Index, available here.]
Families Nearing and In Retirement Are Being Squeezed By Rising Expenses. Median income among families nearing retirement (families headed
by someone aged 55 to 64) was $70,719 in 2006, up 5.9 percent from
$66,768 in 2000.* However, for families headed by someone 65 or older,
real median income was just $40,786, up just $624 from 2000. For retired
families on fixed incomes, rising costs eat up larger share of their family
budgets. Since 2000, the average price of gasoline has increased 145 percent
to $4.06 per gallon and the average family health insurance premium has
jumped 41 percent to $11,765. [U.S. Census Bureau, Current Population
Survey, available here; Energy Information Administration, available here;
U.S. Department of Health and Human Services, available here.]
164
Older Workers Are Now Losing Jobs. After years of lackluster employment gains, the economy is now losing jobs: workers between the ages of 55
and 64 have lost 63,000 jobs since December 2007. Unemployment among
older workers rose from 2.7 percent in 2000 to 3.3 percent in 2008. There
are now over 900,000 workers between the ages of 55 and 64 unemployed 395,000 more than when President Bush took office. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Near-Retirement Workers See Weak Wage Growth. During the 2000s
economic recovery, inflation-adjusted wages of workers ages 55 to 64 grew
at an annual rate of 1.1 percent. [Bureau of Labor Statistics, U.S. Department of Labor, available here and JEC analysis.]
Six Million Americans Over 55 Were Living in Poverty in 2006. Nationwide, 2.8 million Americans aged 55 to 64 - or 8.8 percent of the nearretirement population - were living below the poverty line in 2006. In addition, 3.4 million Americans 65 and over (or 9.4 percent of the elderly population) were living below the poverty line in 2006. The total national poverty
rate was 12.3 percent in 2006. [Bureau of the Census, U.S. Department of
Commerce, available here.]
Older Americans Struggle With Rising Health Care Costs. In 2006, 4.1
million Americans between the ages of 55 and 64 (12.7 percent) had no
health insurance, 1.I million more than in 2000. Most every American over
age 65 receives Medicare, but families are paying more for supplemental
"Medigap" and prescription drug coverage. Between 2000 and 2007, the
cost of medical care has increased an average of 4.3 percent per year, far
faster than median income for older workers [Bureau of the Census, U.S.
Department of Commerce, available here; Bureau of Labor Statistics, Consumer Price Index for Medical Care, available here.]
* All dollar values (except gas prices, which are current) are in 2007 CPI-URS dollars.
165
Women and Their Families Are Being Saueezed
With mounting job losses, stagnating wages, rising prices, and a collapsing
housing market, most Americans are feeling the strains of a weak economy.
For women, these problems are compounded by a continuing gender gap in
pay. Now more than ever we need for a new direction in economic policy,
aimed at restoring broad-based growth, reducing the high costs of energy
and health care, improving retirement security, and increasing prosperityfor
all Americans.
Female-Headed Families Are Being Squeezed By Rising Expenses. Median income among female-headed families is lower than median family
income overall, so rising costs eat up a larger share of their family budgets.
Between 2000 and 2006, female-headed families saw their median income
fall by 3.0 percent, to $24,394, a loss of $836.* Since 2000, the average
price of gasoline has increased 145 percent to $4.06 per gallon, the average
family health insurance premium has jumped 41 percent to $11,765, and the
average cost of child care for two children is now $1,041 per month. [U.S.
Census Bureau, Current Population Survey, available here and here; Energy
Information Administration, available here; U.S. Department of Health and
Human Services, available here; National Association of Child Care Resource & Referral Agencies, available here.]
Wage Growth Has Stalled For Female Workers. During the 2000s economic recovery, women's inflation-adjusted wages rose at an annual rate of
0.7 percent, after having grown nearly twice as much (1.2 percent) per year
during the I990s recovery. For all workers, inflation-adjusted wages grew
by 0.3 percent annually, far less than productivity, which grew by 2.6 percent per year. Today, women earn 81 cents to every dollar a man earns. [Bureau of Labor Statistics, U.S. Department of Labor, available here and JEC
analysis.]
Women Are Now Losing Jobs. After years of lackluster employment gains,
the economy is now shedding jobs: female workers have lost 298,000 jobs
since December 2007. Female unemployment rose from 4.1 percent in 2000
to 5.2 percent in 2008 and there are now 3.8 million unemployed women1.0 million more than when President Bush took office. Women's job losses
hurt families: nearly three-quarters of all children are raised in families
without a stay-at-home parent, and in married-couple families working
wives bring home over a third of their family's total income. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
166
The Subprime Mortgage Crisis Is Impacting Female Homeowners. On
the Bush Administration's watch, unregulated mortgage originators were
given financial incentives to sell risky, unaffordable subprime mortgages to
vulnerable borrowers. Evidence suggests that those lenders targeted minority, elderly and female borrowers. During the subprime boom-despite having higher credit scores on average-female home-buyers were 32 percent
more likely than males to receive a high cost subprime mortgage loan. The
Joint Economic Committee estimates the number of U.S. subprime foreclosures will total 2 million by the end of 2009; a disproportionate share will
likely be women homeowners. [Consumer Federation of America, available
here; JEC April 2008 Impact of Subprime Foreclosures report, available
here.]
Over One-in-Three Female-Headed Families Was Living in Poverty in
2006. Nationwide, 3.6 million female-headed families (36.5 percent) were
living in poverty in 2006, up from 33.0 percent in 2000. Two-fifths (42.2
percent) of children living in female-headed households were living below
the poverty line, three and a half times the total national poverty rate of 12.3
percent. This are 1 million more poor children in female-headed families
than there were in 2000. [Bureau of the Census, U.S. Department of Commerce, available here; JEC August 29, 2007 Fact Sheet on Poverty, available
here.]
Nearly One-Fifth of Women Have No Health Insurance. In 2006,
16.9 million (18 percent) of women (aged 18 to 64) had no health insurance. Across the country, the number of all Americans without
health insurance totals 47 million (15.8 percent of the population), up
8.6 million since 2000. [Kaiser Family Foundation Fact Sheet, available here; JEC August 29, 2007 Fact Sheet on Health Insurance Coverage, available here.]
* All dollar values (except gas prices, which are current) are in 2007 CPlU-RS adjusted dollars.
167
Income In America:
Household Income UD Slishtlv in 2007. but Down Since 2000
Highlihts from the Census Bureau's UDdate on Household Income in the United States
American families are experiencing very difficult economic times the toughest in terms of stagnant incomes since World War II. Real
median household income is 0.6 percent lower in 2007 than it was at
the end of the 1990s. Even though incomes grew by 1.3 percent
($665 ) between 2006 and 2007, this was not enough to make up for
prior years' income losses. Since the Bush administration took office there has been a large increase in income inequality, with the
poorest households' income declining even as the richest households' incomes rise. The data confirm that the vast majority of Americans have not benefited from economic growth over the past seven
years.
National:
Income inequality has risen during Bush's presidency. While real
median income for households near the top of the income distribution
rose during the Bush years, incomes at the middle and the bottom fell.
Median income fell 0.6 percent ($324) from 2000 to 2007. Income at
the lowest 20th percentile fell by 6.0 percent ($1,285) and at the 10th
percentile by 4.5 percent ($579).
Modest recent growth in typical household's income has not been
enough to reverse a seven-year decline. Real (inflation-adjusted) median household income grew a modest 1.3 percent to $50,233 in 2007.
However, the modest income growth in the last three years has not
been sufficient to reverse the four years of income losses from 2000 to
2004. Last year, median household income remained 0.6 percent ($324
in 2007 prices) below its level in 2000. By contrast, during the Clinton
Administration (1992-2000), median household income rose by 14.0
percent ($6,198 in 2007 prices) (Chart 1).
168
a)
E0
C
19.0%
-
14.0%
-
14.0%
V
0
on
CD
9.0%-
-3
0)
4.0%-
C
-1.0%
-0.6%
E
a)
-6.0%Cu
c
0
1992-2000
Source:
2000-2007
Iont Economic Committue cakukhisbased on date frm
Minorities have experienced the largest drops in household income
since 2000. Real median household income has declined by 5.1 percent
for blacks, and 3.1 percent for Hispanics over the past seven years
(Chart 3). While blacks and Hispanics faced significant declines, incomes for non-Hispanic whites remained essentially flat between 2000
and 2007.
169
10th
_,Otl
3Okh
S3f
90t.
95
~~~~~~~~6
2.01~
-20%
-'C'
-401
-7.01~~~~~6
1
More women are working full-time. The number of women working
full-time increased by almost one million in 2007. Over three-fifths
(61.4 percent) of working women worked full-time, the highest ratio
ever.
1I-..
J.-
I-
Z_
I-
'
. _.'"!--t
.-
170
States:
Following Census guidance on how to use state level data, this report
compares the two-year average for 1999-2000, the peak years of the
1990s economic recovery and the last years of the Clinton Administration, to the two-year average for 2006-2007, to analyze changes in
household income over the 2000s economic recovery under President
Bush. Over that period:
Household income dropped in 13 states since President Bush took
office. In 13 states, real median household income declined significantly in the 2006-2007 period relative to the 1999-2000 period (Table 1).
In six of these states (Delaware, Illinois, Michigan, Mississippi, Missouri and North Carolina), the drop in income exceeded 8 percent.
Households living in Missouri experienced the greatest declines (13.2
percent). In only eight states (Arkansas, Hawaii, Idaho, Montana, New
Hampshire, New Jersey, South Dakota, and West Virginia) did the typical household see a statistically significant rise in real income in the
2006-2007 period relative to the 1999-2000 period.
Over half of the Midwest states have experienced declines in
household income since the 1999-2000 period. The Midwest region
was hit the hardest by income drops. Seven of twelve states in that region experienced a statistically significant percentage decline in real
median household income. The South also suffered disproportionately:
six of the 17 states in the region experienced a significant percentage
decline in income.
Table 1: Median Income of Households, by State,
1999-2000 av- 2006-2007 aver- Change (from
State
Percentage
2007 Dollars
2007 Dollars
-1.4*
49,901
50.588
United States
171
Florida
45,675
46,383
1.5
Hawaii
58,709
63,104
7.5*
Illinois
56,545
51,279
-9.3*
49,200
-2.1
Iowa
50,237
. ~~~~~~~~~~~~~~~~~i
Kentucky
42,814
40,029
-6.5*
Maine
46,604
47,415
1.7
Massachusetts
55,513
57,681
3.9
Minnesota
61,913
57,932
Missouri
52,885
45,924
-13.2*
Nebraska
49,156
49,342
0.4
59,300
65,652
10.7*
New Mexico
41,385
42.760
3.3
North Carolina
46,236
42,219
-8.7*
Ohio
50,422
48,151
-4.5*
Oregon
50,846
49,331
-3.0
Rhode Island
5 1,971
54,735
5.3
New Hampshire
7; -
=ll--1Y1}>~t~m
4Z477
Souh Dakonta
South Dakota
44,240
46,567
Y~~~~~~~nn~~~~~~~~~~ee
52,<
-
Texas
.
2
5.3*
47,304
'-
Vermont
I's.L-t
i ';.,,
-~~~~~~~~~~~~~~r,
45,294
- 7,4
P
57.265Haiti,
Ve r mt , 445- .
50,423
49,6i
-4.2*
1.5
172
173
Health Insurance In America:
Number of Uninsured Americans is 7.2 Million Higher Than
When President Bush Took Office
Highlights from the Census Bureau's Update on U.S. Health Insurance Coverage
National:
Since 2000, the ranks of uninsured Americans have grown by 7.2
million. This represents an 18.8 percent increase in the number of uninsured over the economic cycle between 2000 and 2007 (Chart 1).
The number of uninsured fell in 2007 for the first time since President
Bush was elected.
50
45.7
45
384
40
0
35
I
30
25
2000
2007
Soune: Burenu of the Census, U.S. Department of Commerce.
Nearly one-in-nine children are growing up without health insurance. Approximately 11 percent of all children-8.1 million children-did not have health insurance in 2007. This represents a decline
of 236,000 since the year 2000. This decline is due entirely to expansions in the public Medicaid/SCHIP program. Child enrollment in the
Medicaid program has increased by 5.8 million since 2000, while private health insurance coverage of children has dropped by 3.0 million
over the same period.
174
Minorities are more likely than whites to be without health insurance. The percentage of Hispanics and African-Americans without
health insurance was particularly high relative to whites and other ethnic groups. Almost one-third of Hispanics and one-fifth of AfricanAmericans were uninsured in 2007. The Hispanic uninsured rate fell to
32.1 percent in 2007 from 34.1 percent in 2006, and the black uninsured rate fell to 19.5 percent in 2007 from 20.5 percent in 2006.
Declines in private coverage continue. The percentage of Americans
covered by private and employer-provided insurance dropped again in
2007 (Chart 2). Private coverage has now declined in seven consecutive years. Only 67.5 percent of Americans drew on private sources for
any of their insurance coverage during 2007. This is down from 72.6
percent in 2000. The majority of this shift is due to declines in employer-provided insurance, which now covers less than 60 percent of
the population.
80
72.6
75
7069
71.5
703
60
68-
679
65
65
~60
.55
50
45
40
2000 2001 2002 2003 2004 2005 2006
U. S. Department of Co m m erce
Source: Bureau of the CensusU,
2007
Only expansion of government coverage prevented further growth
in the uninsured during 2007. According to Census Bureau figures,
the number of Americans covered by public health insurance grew to
27.8 percent of the population in 2007, counter-balancing declines in
private coverage. The number of Americans receiving health insurance
175
from public sources has increased by 14 million since the year 2000,
even as private coverage has dropped. The majority of coverage
growth is due to expansions in the Medicaid and the State Children's
Health Insurance Program (SCHIP).
Steep increases in private insurance premiums have played an important role in declining employer-sponsored coverage. Insurance
premiums charged to employers have increased by 98 percent since the
year 2000, almost five times the rate of overall inflation. These cost
increases have caused many employers to drop insurance coverage, and
have increased cost pressures on those employees who are offered insurance. In 2007, the average worker contribution for employerprovided family coverage grew to $273 per month, more than double
the average contribution of $135 per month in 2000. Meanwhile, workers' wages grew by only 24 percent over the same period.
Nearly half of all of the uninsured work full time. The ranks of the
uninsured in 2007 included 26.8 million Americans who had worked at
some time during the year; among those were 21.1 million people who
worked full-time (35 or more hours per week in the majority of weeks
they worked in 2007.) Another 5.8 million Americans during 2007 who
were without health insurance worked part-time.
The number of uninsured fell from the record level set in 2006. The
number of Americans without health insurance declined to 45.7 million
in 2007. This represents a drop of 1.3 million from the record level set
in 2006, which was the highest level at any point since the Census Bureau began collecting comparable data starting in 1987.
States:
Following Census guidance on how to utilize and compare state level
data, this report compares the two-year average for 1999-2000, the last
years of the Clinton Administration, with the two-year average for
2006-2007, to gauge state health insurance coverage trends under President Bush. Over that period:
Two-thirds of all states saw the number of uninsured increase. Between 1999/2000 and 2006/2007, 32 states experienced a statistically
significant increase in the number of uninsured, and 25 states also
showed a statistically significant increase in the percentage of uninsured. Texas was the state with the largest increase in the number of
uninsured (nearly 1.3 million). Mississippi and Missouri experienced
176
the largest increases in the percentage of people uninsured (5.7 and 5.2
percentage points, respectively). The percentage of people without
health insurance in Oregon and Tennessee increased by 4.6 and 4.1
percentage points, respectively. The other states with a 3.0 or more
percentage point increase were Arkansas, Florida, Georgia, Maryland,
Nebraska, New Jersey, North Carolina, and Rhode Island.
Few states saw increases in health insurance coverage. Only New
York and the District of Columbia experienced a statistically significant reduction in both the number and percentage of uninsured. Washington, Maine, and Idaho saw a statistically significant reduction in the
percentage of uninsured, but no significant change in the number of
uninsured.
Coverage for the
v Svtate. 1999-2000 and 2006-2007
.,tie VYear.
State
_
United States
Change (2006-2007 average
2-year average
less 1999-2000 average)'
(2006-2007)
(Rate)
Thousands (Rate) Thousands
2-vear average
(1999-2000)
Thousands (Rate)
_
_
_
.
.
.
7 '75^
46,326 (15.5)
38,597 (13.9)
*/
I 7\
It
7,72'9 (t1.7) -
SIR
Alaska
I1 5 (18.3)
116 (17.4)
I (-0.9)
Arkansas
362 (13.7)
486 (17.5)
124 * (3.7)
*
Colorado
629 (145)
813 (16.8)
184* (23)
*
(9.2)
101 (11.7)
29* (2.5)
*
2,753 (17.4)
3,738 (20.7)
986 * (3.3)
*
Delaware
Florida
71
-13
(-1.3)
Hawaii
116
(9.5)
103 (8.2)
Illinois
1,601
(13)
1,738 (13.7)
136* (0.7)
(9.9)
72* (2.2)
iO
\%Mf!
Iowa
Kentucky
219
(7.6)
499 (12.7)
291
135 (10.7)
*
MEN
XW=WOM Wnwimmima a
Maine
106* (1.9)
605 (14.6)
*
119 (
6
(-1.6) *
177
~I~7: £T7: >~sjs
5
Massachusetts
545
(8.7)
498
(7.9)
-46
Minnesota
347
(7.1)
454
(8.8)
106* (1.7)
*
Missouri
428
(7.7)
750 (12.9)
322* (5.2)
*
J§~~Tj
~~~lsl IfVT? .7YTTB4j
(-0.8)
_
Nebraska
148
(8.8)
225 (12.8)
77* (4)
*
New Hampshire
104
(8.3)
144
40* (2.6)
*
New Mexico
(11)
434 (23.9)
441 (22.7)
North Carolina
1,049 (13.3)
1,547 (17.2)
Ohio
1,141 (10.2)
1,230 (10.9)
436 (12.7)
648 (17.3)
Oregon
7
(-1.2)
498* (39)
89
(0.7)
212* (4.6) *
Rhode Island
69
(6.7)
102
(9.7)
33
South Dakota
75 (10.3)
86
(11)
11
(0.7)
2ig~PM
1j
TexVs8,
77-yspx>g
Vermont
56
(9.3)
66 (10.7)
Washington
765
(13.2)
741 (11.6)
Wisconsin
458
(8.5)
TWiW7
466
______
*
*
(3.1)
*
10* (1.4)
-23
(8.5)
__
(-1.6)
8
(0)
_
_
*Statistically different from zero at the 90-percent confidence level.
'Details may not sum to totals because of
rounding
Source: US Census Bureau, Current Population Survey, 2000, 2001, 2007, and 2008 Annual
Social and Economic Supplement
*
178
Poverty in America: One in Eight Americans Living in Poverty
Highlights from the Federal Government's Update on Povertv in
the United States
American families are experiencing very difficult economic times the toughest in terms of stagnant incomes since World War II. Their
incomes are lower in 2007 than at the end of the 1990s and income
inequality has risen sharply. Under the Bush administration, the
number of Americans living in poverty has increased by nearly 5.7
million; and incomes for families in the bottom 40 percent of the income distribution ladder have fallen. Today, one out of every eight
Americans is living below the federal poverty line.
National:
The Number Of Americans Living In Poverty Has Increased By
Nearly 5.7 Million Since 2000. The number of Americans living in
poverty was almost 37.3 million in 2007 (Chart 1 ). The official poverty line for a family of four is $21,027.
50
45
03
%
45
la
16
Povertyxate
14e
scale)
~~~~~~~~~~~~~(right
C
~~~~~~~~~~~~~
40
12
30
2
C 0
-1
CD
8
0O
110
2
.
5
m
0 1 °.
-
4
5poverty (left scale)
1
*<|
z
6
Numberm
0
o 15-
.>t
.
.
.
.
.
CD
.
.
.
.
.
.
.
.
,._
.
C
o
CD
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
Source: Bureau of the Census,U.S.Departnufnt of Commerce.
The National Poverty Rate Is More Than One Percentage Point
Higher Than In 2000. The poverty rate in 2007 was 12.5 percent, increasing slightly from its level of 12.3 percent in 2006. The poverty
rate increased for four straight years from 2000 to 2004. In 2007, the
poverty rate was 1.2 percentage points higher than it was in 2000
179
(Chart 1).
More Than One In Six Children Lives In Poverty. The poverty rate
for all children under 18 years of age was 18.0 percent in 2007, increasing from its level of 17.4 percent in 2006. In 2007, approximately
half a million more children under 18 lived in poverty than in 2006.
Since 2000, the number of children living in poverty has increased by
1.7 million, with the child poverty rate rising from 16.2 to 18.0 percent.
Blacks And Hispanics Are More Likely To Be Living In Poverty.
The poverty rate was 24.4 percent for blacks in 2007 and 21.5 percent
for Hispanics. The recent increase in the poverty rate among Hispanics
is significant. In 2006, the poverty rate for Hispanics was 20.6 percent.
Since 2000, the poverty rate among blacks has also increased significantly, rising by almost 2 percentage points (Chart 2). The poverty
rates among black and Hispanic children were even higher, at 33.7 percent and 28.6 percent, respectively.
Poverty Rates Are Highest Among Minorities
Poverty Rates by Race and Ethnicity, 2000 and 2007
30
Qj
0
P-
0
22 5
25
20
I5
2000 2007
F
4 8.2
24.4
21L.5 21.5
U
15-
10
r.5
0IL
White, Non-
Black
Hispanic
Hispanic
Sourre- Bureau of the Census, U.S.Depardumnt of Comnwrce
Cuts In Critical Federal Programs Are Contributing To Rising
Poverty In America. Poverty has increased not only because of the
relatively weak labor market, but also because income support programs like Food Stamps and Temporary Assistance for Needy Families
(TANF) are not keeping pace with inflation and are helping fewer in-
180
dividuals. Food Stamp benefits are now $46 a month below the cost of
the Thrifty Food Plan for a family of four. While the number of children living in poverty has increased by nearly 2 percentage points since
2000, the number of children receiving TANF has moved in the opposite direction, declining by 29 percent-1.2 million children-over the
same period.
States:
Since 2000, The Number of People in Poverty Rose By 20 Percent
In The Midwest And The South. The number of poor people in the
Midwest region of the country increased by 20 percent while its total
population increased by only 3 percent (Table 1). One-third of states in
the Midwest experienced a statistically significant increase in the number of people in poverty. In the South, poverty levels increased by 19
percent, or 2.5 million people. Half of the states in the South experienced a statistically significant increase in the number of poor people.
Mississippi and Texas were hit the hardest. In Mississippi, the poverty
rate increased by 6.1 percentage points. In Texas, the number of people
living in poverty increased by over 700,000 people-more than double
any other state.
Eight States Plus the District of Columbia Saw Significant Increases In The Poverty Rate. In three of these states and in the District of
Columbia, the poverty rate increased by at least 3 percentage points
(Table 2). Only two states (Idaho and New Mexico) experienced a significant decline in its poverty rate. The rate in the remaining 40 states
was essentially unchanged.
The Number Of Poor People Increased Significantly In 15 States
And The District of Columbia. Fifteen states and the District of Columbia experienced significant increases in the number of poor people
(Table 2). In nine of these states and the District of Columbia, the increase was at least 25 percent.
Table 1: The Midwest and South Experienced Substantial Increases in Poverty
Two-year average of population and number of people in poverty, 1999-2000 and 2006-2007
181
1999-2000
Percent Increase
(1999-2000 vs. 2006-2007)
2006-2007
Total population (in
millions)
Population
in poverty
(in millions)
Total population (in
millions)
West
63.0
7.7
69.4
8.2
10
6
South
98.1
12.7
108.7
15.2
11
19
ortheast
52.9
5.6
54.0
6.2
2
10
Midwest
63.6
6.1
65.4
7.3
3
20
United States
277.6
32.2
297.6
36.9
7
15
Region
Population
in poverty
(in mil- Total popula- Population in
lions)
tion
poverty
Source: US Census Bureau, Current Population Survey,
2000, 2001, 2007, and 2008 Annual Social and Economic
Supplement
Table 2: The Rates and Numbers of Americans in Poverty Are Rising from Coast to Coast
(1999-2000 and 2006-2007)
State
2-year average
2-year average
Change (2006-2007 average
(1999-2000)
Thousands
United States
Thousands
32,186 (11.6)
36,868
Alaska
48 (7.6)
55
Arkansas
410 (15.6)
7y .4b53
Colorado
,7
(2006-2007)
(Rate)
--'j~nne,..
f
Florida
o b4 - '
T7
(Rate)
119 (9.9)
16&: (13.
.
4,681*
(0.8)
7
(0.6)
437 (15.8)
27
(0.2)
tC
X
7
77
(0.6)
7
(.0.1)
(9.8)
92 - (9.4)
80
(9.3)
2,159
(12)
2 (1S8 1
1,846 (11.7)
Thousands (Rate)
(12.4)
(8.3)
472
73 (9.4)
997 (
Hawaii
:3f r
7T~327t~
Delaware
DisOt
(13A
395 (9.1)
less 1999-2000 average)'
.
'
I
105
YI?f
(8.3)
*
A18J
313*
(0.3)
t;.
-7
-14
By.__1:~___
1
__ _
(-1.5)
182
Illinois
1,261 (10.3)
Iowa
224 (7.8)
282
(9.6)
59
(1.8)
(16.2)
187*
(3.8)
p.N:,-
*
S.N,
ZAM
39* (-)
1,300 (10.3)
E-A
,.
Kentucky
485 (12.3)
672
Maine
131 (10.3)
138 (10.5)
8
(0.2)
Massachusetts
678 (10.8)
732 (11.6)
54
(0.8)
Minnesota
315 (6.5)
452
137*
(2.3)
Missouri
576 (10.4)
700 (12.1)
124
(1.7)
Nebraska
165 (9.8)
177 (10.1)
12
(0.3)
New Hampshire
76 (6.1)
(5.6)
-2
(-0.5)
New Mexico
348 (19.2)
300 (15.5)
V
48
(-3 8)*
NorthCarolina
1,034 (13.1)
1,324
(14.7)
290*
(1.5)
(11)
1,409
(12.5)
178
(1.5)
59
(0.6)
73
(8.7)
*
*
mg~~~~~~~~~~P
1,230
Ohio
Oregon
401 (11.7)
460 (12.3)
Rhode Island
105 (10.1)
104
South Dakota
67 (9.2)
:y
a~
W&W
3Ai
Wisconsin
9
589 (10.2)
Washington
J l
~
M,.Ml
g~
'
SMl'
"""
-
479 (8.9)
i
12
(0.8)
3,860
(16.5)
722*
(1.1)
54
(8.8)
-5
(-1)
581
(9.1)
_8
(-1.1)
98
(1.6)
59 (9.8)
Vermont
.
78 (10.1)
3,138 (15.4)
Texas
(-0.2)
(10)
7
r sn
578
A
(10..6)
1
183
*Statistically different from zero at the 90-percent confidence level.
'Details may not sum to totals because of rounding
Source: U.S. Census Bureau, Current Population Survev. 2000. 2001.
184
From Wall Street To Main Street: How The Credit Crisis Affects
You
"The credit window is closed." Jim Press, President of Chrysler
OVERVIEW
We are all familiar with the numerous ways in which we use credit.
Credit finances the smaller purchases we make when we use our credit
cards, and the larger purchases that are fundamental to our lives - the
cars we drive, the homes we live in, the colleges where we send our
children. Credit is also crucial for the needs of businesses, and for
state and local governments.
lr
At its most basic level, credit is what allows us to make purchases today based on the money we are going to earn in the future. When we
purchase a car or a house, few of us have the full cash amount available, so we borrow money from a lender who has confidence in our ability to repay the loan (plus interest) over time. This enables us to turn
our future earnings into current spending, and in turn, furthers economic growth by increasing demand for the goods we are purchasing. If
people could only buy cars when they had saved up the full purchase
price, there would be many fewer cars sold, and many fewer people
employed in every facet of the auto industry.
In the same way, institutional actors also depend on credit. Businesses
rely on credit to get off the ground (leasing space, buying start up
185
equipment), to keep their operations running (stocking their shelves,
buying new equipment, making payroll and paying the electric bill)
and they use credit to expand (opening new stores and factories, and
hiring new employees).Government also relies on credit to pay for
many of their longer term projects-school improvements, highway
repairs, new streetlights-which they finance by issuing bonds against
future tax revenues.
In today's economy, all of these forms of credit are part of a much
larger global financial web, in which financial institutions around the
world are constantly borrowing and lending to one another, to manufacturers and retailers, and, ultimately, to consumers. In short, while
we may not always see it, credit is the lifeblood of the economy.
How The Credit Crisis Fuels Economic Slowdown
Reduced Credit
Higher Loan Defaults
~~¶owdown~~
Ind~~duao
Lower Revenues
and Wges, HIher
urtertoyment
At its most extreme, the availability of credit can dry up, and a credit
crisis, such as we are now experiencing, can occur. When a credit crisis does occur, the consequences for the economy can be devastating.
The lack of available credit forces individuals and businesses alike to
cut back on spending, reducing business revenues, which then causes
wages to drop and unemployment to rise. The resulting economic
slowdown causes more individuals and businesses to default on their
loans, worsening the credit crisis. In short, this is a vicious circle, in
which a credit freeze and economic contraction feed into each other.
THE ONSET OF THE CREDIT CRISIS
186
The Securitizationof Loans
Over the past decade, credit was increasingly "securitized". Banks
would pool together many different loans, and then sell securities,
based on the rights to the payments from the loans in the pool, to outside investors. The sales of these securities provided banks with immediate cash, which they could then use to make more mortgages.
And investors liked these securities, because they were considered safe
investments (frequently, nearly as safe as U.S. Treasury bills, and they
typically paid a higher return than equivalent investments).
From Your House To Wall Street
4
/
The most common and well-known of these securitized loans is the
"mortgage-backed security" (MBS), based on pools of residential
mortgages. But many other types of loans have also increasingly become securitized over the past decade-car loans, student loans, even
credit card debt. Over the past decade, this type of securitized credit
saw explosive growth, because of the superior returns and perception
of safety. By the first quarter of 2006, the total value of all outstanding
U.S. MBS totaled approximately $6.1 trillion.
The Deflation of the Housing Bubble
187
Mortgage Backed
1
Securities are
{attractive Investments
As is now obvious, the US experienced an unprecedented housing
bubble in the earlier part of this decade. The availability of easy, cheap
credit with low underwriting standards inflated the demand for housing, which led to increased housing prices. The growing housing market made mortgage-backed securities increasingly attractive, creating
more demand among investors for MBS, which then provided even
more credit for US homebuyers. This housing bubble has now officially popped. But the repercussions for the US economy have not yet
been fully felt.
The deflation of the housing bubble has brought increased mortgage
defaults which, coupled with concerns about poor mortgage underwriting standards, and the widespread belief that US housing prices are still
overvalued, have led to tremendous declines in the values of MBS.
And because MBS-and other forms of securitized debt-were so
widely held, some major financial institutions have been forced to take
huge writedowns in recent months.
As these writedowns have become recognized, these financial institutions have been forced to raise capital to cover the losses incurred.
Those which have been able to raise sufficient capital have so far been
able to survive, while those which have been unable to raise sufficient
capital have failed, sometimes suddenly and unexpectedly.
Large FinancialInstitutions FailOvernight
188
Bear Steams was one of the first major examples of a big failure of a
financial firm, due to its inability to find sufficient capital to cover its
mortgage related losses. In March 2008, the Federal Reserve negotiated a deal in which JP Morgan Chase acquired Bear Steams at an
extremely low price ($1 0/share), which only happened because of the
inclusion of federal guarantees on some $30 billion in risky Bear
Steams assets. The collapse of Bear Steams began a steady deterioration in credit conditions, during which time a number of banks failed,
which came to a head in September.
The weekend of September 13-14, the eminent Wall Street firm Merrill
Lynch, concerned about its ability to survive future MBS losses, agreed
to sell itself to Bank of America for considerably less than where its
stock price had stood a few months earlier. That same weekend, Lehman Brothers, another iconic Wall Street firm, was unable to obtain
any relief, and so was forced to file for bankruptcy on September 15.
Both Merrill and Lehman came under heavy pressure because they
possessed insufficient capital. As mortgage-related losses mounted,
customers began pulling out of brokerage accounts with Merrill and
Lehman, concerned about the safety of their assets. Merrill and Lehman thus came under increasing pressure to raise more capital to cover
these losses and the outflows of brokerage deposits. When it became
apparent that the capital available was insufficient to cover their expected losses, Merrill sold itself to Bank of America, and Lehman entered into bankruptcy.
Around this same time, AIG, the world's largest insurance company,
also came under heavy pressure to raise capital. AIG's financial arm,
AIG Financial Products, had accrued an enormous amount of exposure
to mortgage-related assets, and as a result, it was carrying enormous
unrecognized losses on its books. On September 15, the day Lehman
announced bankruptcy, AIG's auditors forced AIG to recognize some
of these losses. As a result, the next day, September 16, AIG was
forced to effectively sell 80% of its equity to the Federal Reserve in
exchange for an $85 billion line of credit.
These events were widely considered shocking. Many observers felt
that Lehman could survive, and its inability to find any capital to save
itself was an eye-opening event. The demises of Merrill and AIG were
even more sobering, because they were widely considered to be in sterling shape up until a few days before their dispositions.
189
Confidence in the Health of FinancialInstitutions Drops, Causing
Credit Freeze Among Banks
Finding credit was already difficult in this environment, but the sudden
and unexpected failures of Lehman Brothers and AIG caused lending
to freeze up even more. Lehman in particular caused problems, because many investors which had uninsured accounts with, or other exposure to, Lehman, suddenly lost the ability to access their cash, with
no idea of how much, if anything, they would be able to eventually
recover.
Confidence in the solvency of financial institutions has plummeted and
as a result, banks virtually ceased lending to one another. The most
widely-used measure of lending between banks (the London interbank
overnight rate or "LIBOR"), reached an all-time high of 6.88% this
past Tuesday (September 30), an indication that banks are extremely
reluctant to lend to each other at any interest rate. This is an indication
of the extreme lack of confidence banks have in the financial system
right now.
Other Sources of Credit Also Freezing Up
In addition to bank lending, other sources of credit have also dried up.
Money market mutual funds, which are considered safe alternatives to
depository accounts, have also come under serious pressure in recent
weeks. Money market funds have historically been an important
source of credit for businesses, as they are a major purchaser of shortterm corporate debt (also called "commercial paper").
Following the failure of Lehman, two money market funds failed due
to their exposure to Lehman debt. This is unprecedented. Money market funds, which are not federally insured, have historically been extremely safe and conservative, with their sole goal being to break even.
From 1971 up to September 2008, there was only one money rmarket
fund which failed. These failures led to a run on money market funds,
which has continued to this time, as investors have withdrawn their
money. On Monday (September 29), money market funds saw a $10
billion outflow of funds.
The decline in money market funds has already caused corporate borrowing costs to skyrocket. Short-term corporate debt rates jumped
from 2% on Monday to a range between 5.75% and 7.75% on Tuesday.
The problems in money market funds signal larger problems in the
debt markets. Corporate and municipal bond issues are becoming costlier and harder to fulfill. Even such long-time institutions as GE,
AT&T, and the State of Massachusetts are finding it difficult to find
enough buyers of their bond issues.
190
How WILL THE CREDIT CRISIS IMPACT ME
The Vicious Cycle
MAIN STREET
WALL STREET
0
--
~~~~~10
in
So how will the credit crisis affect ordinary Americans, living outside
the confines of Wall Street? It all goes back to the idea of the "vicious
circle". As credit tightens up, Main Street businesses and consumers
are forced to reduce spending. This in turn reduces the revenues of
businesses, forcing them to cut costs, including lowering wages and
cutting staff. As a result, businesses and individuals alike have more
trouble paying their bills and are more likely to miss payments on their
loans (like mortgages and corporate debt).
As these missed payments turn into loan defaults, the value of mortgage-backed securities and corporate debt is further reduced, which
then forces Wall Street firms to cut back even further on-their lending
activities, causing a further tightening of credit.
In short, what we are seeing now, if uninterrupted is a feedback loop,
where tighter credit leads to less economic activity, which leads to a
decline in the value of financial assets, which then creates even tighter
credit conditions. In an environment like the current one, only those
borrowers with the safest credit ratings can find credit, and even this is
costly. And without credit, businesses large and small wither and die.
Whether it's the small business owner who cannot expand or the large
conglomerate that cannot make payroll, the impact is the same - the
economy shrinks and the pie gets smaller.
191
We are already seeing evidence that the vicious circle is well underway. Unemployment numbers are up again, with 159,000 newly unemployed workers in September. Auto sales have declined for 11
straight months, due to more restrictive credit and decreased consumer
confidence, and as a result, 18% of US car dealerships may close in
2009. Private student lending has become severely restricted, as banks
are increasingly unwilling to commit cash to long-term loans. And
some colleges have already lost access to funds parked with failed institutions such as Wachovia and Lehman, which may ultimately raise
the cost of tuition.
The impacts of the credit crisis are not limited to the private sector,
either. Cities and states have become increasingly reliant on the issuance of bonds to finance various projects. Like other credit markets,
the markets for "muni bonds" (which have historically been much safer
than private bonds and offer significant tax benefits) have also frozen
up. In recent weeks, a high number of municipalities, including Massachusetts, have been forced to back out of the muni bond market due
to insufficient investor interest or overly high costs. One expert recently predicted that muni bond issuances would drop by 25-30% in
2009. Even those that are issued will almost certainly be at much
higher cost, limiting the amount of new road construction, school
maintenance, and other municipal and state projects that can be paid
for.
Non-profit institutions have in recent years also made extensive use of
short-term borrowing, and like their for-profit analogues, they are already experiencing problems because of the credit freeze. Blood
banks, hospitals, homeless shelters are among the many types of nonprofit institutions that rely on the credit markets to meet their short
funding needs. If the availability of credit continues to deteriorate,
many of these non-profit entities will have to cut back, or even shut
down.
How WILL THE EMERGENCY ECONOMIC STABILIZATION ACT
HELP THE CREDIT CRISIS?
The newly enacted Emergency Economic Stabilization Act (EESA)
will help to alleviate the credit crisis by paying a fair price for the MBS
that financial firms are currently holding. By adding a massive new
buyer to the equation, EESA is expected to improve the market for
MBS. Struggling financial firms can then sell some of their troubled
assets, thus improving the condition of their balance sheets, and mak-
192
ing it easier for them to attract new capital. More capital and less
troubled assets will hopefully stimulate new lending.
However, the effects of EESA will not be known until the Treasury
plan has been put into operation. While EESA may help to stabilize
the credit markets, banks and other financial institutions may still require significant capital. Moreover, recent signs indicate that the real
economy is beginning to slow significantly. Additional policy steps,
including more stimulus, may be required in the near future.
193
State By State Economic Snapshots
ALABAMA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Alabama. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 9 3rd month of the Clinton administration. Since the beginning of 2008, Alabama lost 9,100 jobs - an average of 900 jobs per
month. The unemployment rate in Alabama now stands at 5.6 percent,
up 3.7 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Alabama.
In 2006-2007, the typical household's income in Alabama remained
$3,251 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
194
worth. In Alabama, subprime mortgages in delinquency have increased
from 10,400 in the second quarter of 2006 to 14,800 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Alabama will total 7,891 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Alabama $276 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $16,300 Per Alabama Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $30 billion for Alabama
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 45.0 Percent in Alabama Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Alabama was $10,879, a 45.0 percent increase from 2000,
while the average premium for individual coverage was $4,058, an increase of 29.4 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
195
Over the Last Two Years, 619,000 Alabama Residents Had No
Health Insurance. A growing number of Alabama residents are living
without health insurance. During the 2006-2007 period, an average of
619,000 Alabama residents-13.6 percent of the state's populationhad no health insurance; this was 0.7 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $604 Per
Month in Alabama. Child care continues to be a hefty burden on the
budgets of Alabama parents, with inflation-adjusted monthly care for
an infant averaging $337, and monthly care for two children averaging
$604. [National Association of Child Care Resource and Referral
Agencies, available here.]
Alabama College Tuition Rose 35.5 Percent Since 2000. Parents of
college students in Alabama have also been hard hit under the current
Administration, as inflation-adjusted tuition for Alabama's four-year
public colleges increased 35.5 percent between the 2000-2001 and
2006-2007 school years to $4,712 per year. With that 35.5 percent increase over just six years, Alabama families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Alabama, 656,000 Residents Were Living in Poverty Over the
Last Two Years. In Alabama, 656,000 residents - or 14.4 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
196
ALASKA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Alaska. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 9 3rd month of the Clinton administration. Since the beginning of 2008, Alaska added only 400 jobs. The unemployment rate
in Alaska now stands at 7.4 percent, up 6.3 percent in 2008. [Bureau of
Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Alaska. In
2006-2007, the typical household's income in Alaska remained $3,273
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Alaska, subprime mortgages in delinquency have increased
197
from 700 in the second quarter of 2006 to 1,100 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Alaska will
total 931 between the first quarter of 2008 and the end of 2009. [Mortgage Bankers Association, JEC April 10th State-by-State Subprime
Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Alaska $61.3 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $29,800 Per Alaska Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $7 billion for Alaska taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 17.3 Percent in Alaska Since 2001. In
2006, the average inflation-adjusted health care premium for family
coverage in Alaska was $12,585, a 17.3 percent increase from 2001,
while the average premium for individual coverage was $4,683, an increase of 15.7 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 116,000 Alaska Residents Had No
Health Insurance. A growing number of Alaska residents are living
without health insurance. During the 2006-2007 period, an average of
198
116,000 Alaska residents-17.4 percent of the state's population-had
no health insurance. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,293 Per
Month in Alaska. Child care continues to be a hefty burden on the
budgets of Alaska parents, with inflation-adjusted monthly care for an
infant averaging $699, and monthly care for two children averaging
$1,293. [National Association of Child Care Resource and Referral
Agencies, available here.]
Alaska College Tuition Rose 28.0 Percent Since 2000. Parents of
college students in Alaska have also been hard hit under the current
Administration, as inflation-adjusted tuition for Alaska's four-year
public colleges increased 28.0 percent between the 2000-2001 and
2006-2007 school years to $4,422 per year. With that 28.0 percent increase over just six years, Alaska families are finding it more and more
difficult to afford to send their children to college, and they are not
alone. Nationally, public college tuition has risen at more than double
the rate of inflation in recent years. Between the 2000-2001 and 20062007 academic years, average inflation-adjusted tuition and fees at
U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Alaska, 55,000 Residents Were Living in Poverty Over the Last
Two Years. In Alaska, 55,000 residents - or 8.3 percent of the population - were living below the poverty line during the 2006-2007 period.
Nationally, 12.5 percent of Americans - more than 37 million people were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Poverty, available here.]
ARIZONA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
199
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Arizona. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 9 3 rd month of the Clinton administration. Since the beginning of 2008, Arizona lost 65,700 jobs - an average of 6,600 jobs
per month. The unemployment rate in Arizona now stands at 6.1 percent, up 4.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Arizona. In
2006-2007, the typical household's income in Arizona remained $640
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Arizona, subprime mortgages in delinquency have increased
from 13,600 in the second quarter of 2006 to 39,200 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Arizona will total 49,890 between the first quarter of 2008 and the end
200
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Arizona $2.85 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Arizona
home prices will fall 27.1 percent between 2007 and 2009, resulting in
a net loss of $133 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $19,800 Per Arizona Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $44 billion for Arizona
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 45.0 Percent in Arizona Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Arizona was $11,916, a 45.0 percent increase from 2000,
while the average premium for individual coverage was $4,416, an increase of 45.9 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 1.24 Million Arizona Residents Had No
Health Insurance. A growing number of Arizona residents are living
without health insurance. During the 2006-2007 period, an average of
201
1.24 million Arizona residents-19.6 percent of the state's population-had no health insurance; this was 1.8 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,203 Per
Month in Arizona. Child care continues to be a hefty burden on the
budgets of Arizona parents, with inflation-adjusted monthly care for an
infant averaging $680, and monthly care for two children averaging
$1,203. [National Association of Child Care Resource and Referral
Agencies, available here.]
Arizona College Tuition Rose 69.1 Percent Since 2000. Parents of
college students in Arizona have also been hard hit under the current
Administration, as inflation-adjusted tuition for Arizona's four-year
public colleges increased 69.1 percent between the 2000-2001 and
2006-2007 school years to $4,669 per year. With that 69.1 percent increase over just six years, Arizona families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Arizona, 907,000 Residents Were Living in Poverty Over the
Last Two Years. In Arizona, 907,000 residents - or 14.4 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
ARKANSAS
202
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Arkansas. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Arkansas lost 1,000 jobs - an average of 100 jobs per
month. The unemployment rate in Arkansas now stands at 5.4 percent,
up 5.5 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Arkansas.
In 2006-2007, the typical household's income in Arkansas remained
$3,114 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Arkansas, subprime mortgages in delinquency have increased
from 4,500 in the second quarter of 2006 to 6,500 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
203
Committee (JEC), the number of subprime foreclosures in Arkansas
will total 3,611 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Arkansas $106 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $ 100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $20,300 Per Arkansas Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $22 billion for Arkansas
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 34.2 Percent in Arkansas Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Arkansas was $10,217, a 34.2 percent increase from 2000,
while the average premium for individual coverage was $3,671, an increase of 18.2 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 486,000 Arkansas Residents Had No
Health Insurance. A growing number of Arkansas residents are living
without health insurance. During the 2006-2007 period, an average of
486,000 Arkansas residents-I 7.5 percent of the state's population-
204
had no health insurance; this was 3.7 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $656 Per
Month in Arkansas. Child care continues to be a hefty burden on the
budgets of Arkansas parents, with inflation-adjusted monthly care for
an infant averaging $356, and monthly care for two children averaging
$656. [National Association of Child Care Resource and Referral
Agencies, available here.]
Arkansas College Tuition Rose 41.0 Percent Since 2000. Parents of
college students in Arkansas have also been hard hit under the current
Administration, as inflation-adjusted tuition for Arkansas's four-year
public colleges increased 41.0 percent between the 2000-2001 and
2006-2007 school years to $4,937 per year. With that 41.0 percent increase over just six years, Arkansas families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Arkansas, 437,000 Residents Were Living in Poverty Over the
Last Two Years. In Arkansas, 437,000 residents - or 15.8 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
CALIFORNIA
205
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in California. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93d month of the Clinton administration. Since the beginning of 2008, California lost 104,300 jobs - an average of 10,400
jobs per month. The unemployment rate in California now stands at
8.2 percent, up 5.9 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in California.
In 2006-2007, the typical household's income in California remained
$994 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In California, subprime mortgages in delinquency have increased from 73,200 in the second quarter of 2006 to 162,200 in the
second quarter of 2008. According to a 2008 analysis published by the
206
Joint Economic Committee (JEC), the number of subprime foreclosures in California will total 211,248 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost California $24.3 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $ 100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that California
home prices will fall 16.9 percent between 2007 and 2009, resulting in
a net loss of $1.05 trillion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $29,500 Per California Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $360 billion for
California taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 56.9 Percent in California Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in California was $11,858, a 56.9 percent increase from 2000,
while the average premium for individual coverage was $4,164, an increase of 45.0 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 6.7 Million California Residents Had No
Health Insurance. A growing number of California residents are liv-
207
ing without health insurance. During the 2006-2007 period, an average
of 6.7 million California residents-1 8.5 percent of the state's population-had no health insurance. Across the country, the number of
Americans without health insurance totals 45.7 million, up 7.2 million
since the current Administration took office. [Bureau of the Census,
U.S. Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,540 Per
Month in California. Child care continues to be a hefty burden on the
budgets of California parents, with inflation-adjusted monthly care for
an infant averaging $862, and monthly care for two children averaging
$1,540. [National Association of Child Care Resource and Referral
Agencies, available here.]
California College Tuition Rose 47.7 Percent Since 2000. Parents of
college students in California have also been hard hit under the current
Administration, as inflation-adjusted tuition for California's four-year
public colleges increased 47.7 percent between the 2000-2001 and
2006-2007 school years to $4,452 per year. With that 47.7 percent increase over just six years, California families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In California, 4.51 Million Residents Were Living in Poverty Over
the Last Two Years. In California, 4.51 million residents - or 12.5
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available here.]
COLORADO
208
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Colorado. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Colorado added only 7,700 jobs, an average ofjust
800 jobs per month. The unemployment rate in Colorado now stands
at 5.7 percent, up 4.0 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Colorado.
In 2006-2007, the typical household's income in Colorado remained
$206 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan-
cial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Colorado, subprime mortgages in delinquency have increased
from 15,200 in the second quarter of 2006 to 17,300 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
209
Economic Committee (JEC), the number of subprime foreclosures in
Colorado will total 22,576 between the first quarter of 2008 and the
end of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Colorado $1.46 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Colorado
home prices will fall 6.4 percent between 2007 and 2009, resulting in a
net loss of $27.7 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $24,300 Per Colorado Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $45 billion for Colorado
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 40.0 Percent in Colorado Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Colorado was $11,550, a 40.0 percent increase from 2000,
while the average premium for individual coverage was $4,152, an increase of 39.6 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 813,000 Colorado Residents Had No
Health Insurance. A growing number of Colorado residents are living
210
without health insurance. During the 2006-2007 period, an average of
813,000 Colorado residents-16.8 percent of the state's populationhad no health insurance; this was 2.3 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,415 Per
Month in Colorado. Child care continues to be a hefty burden on the
budgets of Colorado parents, with inflation-adjusted monthly care for
an infant averaging $791, and monthly care for two children averaging
$1,415. [National Association of Child Care Resource and Referral
Agencies, available here.]
Colorado College Tuition Rose 32.1 Percent Since 2000. Parents of
college students in Colorado have also been hard hit under the current
Administration, as inflation-adjusted tuition for Colorado's four-year
public colleges increased 32.1 percent between the 2000-2001 and
2006-2007 school years to $4,634 per year. With that 32.1 percent increase over just six years, Colorado families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Colorado, 472,000 Residents Were Living in Poverty Over the
Last Two Years. In Colorado, 472,000 residents - or 9.8 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
CONNECTICUT
211
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, failing real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Connecticut. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Connecticut lost 7,700 jobs - an average of 800 jobs
per month. The unemployment rate in Connecticut now stands at 6.5
percent, up 4.8 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Connecticut.
In 2006-2007, the typical household's income in Connecticut remained
$2,489 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Connecticut, subprime mortgages in delinquency have increased from 8,400 in the second quarter of 2006 to 13,400 in the
212
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Connecticut will total 13,228 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Connecticut $1.28 billion in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $ 100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
Connecticut home prices will fall 12.7 percent between 2007 and 2009,
resulting in a net loss of $43.9 billion in housing wealth. [JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $41,400 Per Connecticut Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $55 billion for
Connecticut taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 42.1 Percent in Connecticut Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in Connecticut was $12,736, a 42.1 percent increase
from 2000, while the average premium for individual coverage was
$4,516, an increase of 20.2 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
213
Over the Last Two Years, 326,000 Connecticut Residents Had No
Health Insurance. A growing number of Connecticut residents are
living without health insurance. During the 2006-2007 period, an aver-
age of 326,000 Connecticut residents-9.4 percent of the state's population-had no health insurance; this was 0.5 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,670 Per
Month in Connecticut. Child care continues to be a hefty burden on
the budgets of Connecticut parents, with inflation-adjusted monthly
care for an infant averaging $921, and monthly care for two children
averaging $1,670. [National Association of Child Care Resource and
Referral Agencies, available here.]
Connecticut College Tuition Rose 31.4 Percent Since 2000. Parents
of college students in Connecticut have also been hard hit under the
current Administration, as inflation-adjusted tuition for Connecticut's
four-year public colleges increased 31.4 percent between the 20002001 and 2006-2007 school years to $7,151 per year. With that 31.4
percent increase over just six years, Connecticut families are finding it
more and more difficult to afford to send their children to college, and
they are not alone. Nationally, public college tuition has risen at more
than double the rate of inflation in recent years. Between the 20002001 and 2006-2007 academic years, average inflation-adjusted tuition
and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education.
Digest of Education Statistics "Average undergraduate tuition and fees
and room and board rates charged for full-time students in degreegranting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007
available here.]
In Connecticut, 292,000 Residents Were Living in Poverty Over
the Last Two Years. In Connecticut, 292,000 residents - or 8.4 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
214
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
DELEWARE
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Delaware. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Delaware lost 2,200 jobs - an average of 200 jobs per
month. The unemployment rate in Delaware now stands at 5.4 percent,
up 3.5 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Delaware.
In 2006-2007, the typical household's income in Delaware remained
$5,062 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unafford-
215
able subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Delaware, subprime mortgages in delinquency have increased from 2,200 in the second quarter of 2006 to 3,600 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Delaware will total 3,241 between the first quarter of 2008 and
the end of 2009. [Mortgage Bankers Association, JEC April I0th Stateby-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Delaware $197 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Delaware
home prices will fall 7.5 percent between 2007 and 2009, resulting in a
net loss of $8 billion in housing wealth. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $45,100 Per Delaware Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $15 billion for Delaware
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 43.6 Percent in Delaware Since 2001.
In 2006, the average inflation-adjusted health care premium for family
coverage in Delaware was $12,968, a 43.6 percent increase from 2001,
while the average premium for individual coverage was $4,849, an increase of 34.9 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
216
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 101,000 Delaware Residents Had No
Health Insurance. A growing number of Delaware residents are living
without health insurance. During the 2006-2007 period, an average of
101,000 Delaware residents-1 1.7 percent of the state's populationhad no health insurance; this was 2.5 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,041 Per
Month in Delaware. Child care continues to be a hefty burden on the
budgets of Delaware parents, with inflation-adjusted monthly care for
an infant averaging $551, and monthly care for two children averaging
$1,041. [National Association of Child Care Resource and Referral
Agencies, available here.]
Delaware College Tuition Rose 32.8 Percent Since 2000. Parents of
college students in Delaware have also been hard hit under the current
Administration, as inflation-adjusted tuition for Delaware's four-year
public colleges increased 32.8 percent between the 2000-2001 and
2006-2007 school years to $7,417 per year. With that 32.8 percent increase over just six years, Delaware families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Delaware, 80,000 Residents Were Living in Poverty Over the
Last Two Years. In Delaware, 80,000 residents - or 9.3 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
217
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
DISTRICT OF COLUMBIA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in District of Columbia. After seven and a
half years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, District of Columbia added only 7,700 jobs, an average ofjust 800 jobs per month. The unemployment rate in District of
Columbia now stands at 7.4 percent, up 5.7 percent in 2008. [Bureau of
Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in the District
of Columbia. In 2006-2007, the typical household's income in the
District of Columbia remained $1,452 lower than it had been in 19992000, before the recession of 2001. This is the first economic recovery
where incomes did not return to their pre-recession peak. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Income, available here. All dollar
values are inflation-adjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mort-
218
gage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In the District of Columbia, subprime mortgages in delinquency
have increased from 900 in the second quarter of 2006 to 1,900 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in D.C. will total 1,776 between the first quarter of 2008 and the
end of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and-declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost the District of Columbia
$244 million in 2008 and 2009. Nationally, the expected economic
costs of forecast subprime foreclosures total nearly $100 billion in
these two years alone. Moreover, declining home prices across the
country are stripping families of their personal housing wealth, which
had until recently largely driven consumer spending. The JEC estimates that D.C. home prices will fall 18.4 percent between 2007 and
2009, resulting in a net loss of $9.69 billion in housing wealth. [JEC
April 10th State-by-State Subprime Foreclosure Report, available
here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $61,600 Per D.C. Household. According to
the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $15 billion for D.C. taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 23.7 Percent in the District of Columbia Since 2001. In 2006, the average inflation-adjusted health care
premium for family coverage in the District of Columbia was $12,619,
a 23.7 percent increase from 2001, while the average premium for individual coverage was $4,672, an increase of 31.7 percent since 2001.
Nationwide, the inflation-adjusted average monthly premium for family health coverage in the United States rose by 33.1 percent from 2001
219
to 2006, even as real median household income rose just 0.2 percent
over the same period. [Agency for Healthcare Research and Quality,
U.S. Department of Health and Human Services, available here.]
Over the Last Two Years, 61,000 D.C. Residents Had No Health
Insurance. A growing number of D.C. residents are living without
health insurance. During the 2006-2007 period, an average of 61,000
D.C. residents-10.6 percent of the District's population-had no
health insurance. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
College Tuition in the District of Columbia Rose 10.8 Percent Since
2000. Parents of college students in the District of Columbia have also
been hard hit under the current Administration, as inflation-adjusted
tuition for the District of Columbia's four-year public colleges increased 10.8 percent between the 2000-2001 and 2006-2007 school
years to $2,670 per year. With that 10.8 percent increase over just six
years, D.C. families are finding it more and more difficult to afford to
send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of inflation in
recent years. Between the 2000-2001 and 2006-2007 academic years,
average inflation-adjusted tuition and fees at U.S. public colleges and
universities increased by 38.5 percent. [Institute of Education Sciences,
U.S. Department of Education. Digest ofEducation Statistics "Average
undergraduate tuition and fees and room and board rates charged for
full-time students in degree-granting institutions, by type and control
of institution and state or jurisdiction". Data for 2000-2001 available
hee data for 2006-2007 available here.]
In the District of Columbia, 104,000 Residents Were Living in Poverty Over the Last Two Years. In the District of Columbia, 104,000
residents - or 18.1 percent of the population - were living below the
poverty line during the 2006-2007 period. Nationally, 12.5 percent of
Americans - more than 37 million people - were living in poverty as
of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
FLORIDA
220
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Florida. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93d month of the Clinton administration. Since the beginning of 2008, Florida lost 163,600 jobs - an average of 16,400 jobs
per month. The unemployment rate in Florida now stands at 7.0 percent, up 4.5 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Florida. In
2006-2007, the typical household's income in Florida remained $707
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Florida, subprime mortgages in delinquency have increased
from 59,400 in the second quarter of 2006 to 130,800 in the second
221
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Florida will total 177,401 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April I 0th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Florida $13 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Florida
home prices will fall 20.9 percent between 2007 and 2009, resulting in
a net loss of $324 billion in housing wealth. [JEC April I 0th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $21,400 Per Florida Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $152 billion for Florida taxpayers by 2017; the total cost to the country will be an estimated $2.8
trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 39.3 Percent in Florida Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Florida was $11,368, a 39.3 percent increase from 2000,
while the average premium for individual coverage was $4,051, an increase of 30.0 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 3.74 Million Florida Residents Had No
Health Insurance. A growing number of Florida residents are living
222
without health insurance. During the 2006-2007 period, an average of
3.74 million Florida residents-20. 7 percent of the state's population-had no health insurance; this was 3.3 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,001 Per
Month in Florida. Child care continues to be a hefty burden on the
budgets of Florida parents, with inflation-adjusted monthly care for an
infant averaging $563, and monthly care for two children averaging
$1,001. [National Association of Child Care Resource and Referral
Agencies, available here.]
Florida College Tuition Rose 10.7 Percent Since 2000. Parents of
college students in Florida have also been hard hit under the current
Administration, as inflation-adjusted tuition for Florida's four-year
public colleges increased 10.7 percent between the 2000-2001 and
2006-2007 school years to $3,050 per year. With that 10.7 percent increase over just six years, Florida families are finding it more and more
difficult to afford to send their children to college, and they are not
alone. Nationally, public college tuition has risen at more than double
the rate of inflation in recent years. Between the 2000-2001 and 20062007 academic years, average inflation-adjusted tuition and fees at
U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Florida, 2.16 Million Residents Were Living in Poverty Over the
Last Two Years. In Florida, 2.16 million residents - or 12.0 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
GEORGIA
223
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Georgia. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Georgia lost 67,300 jobs - an average of 6,700 jobs
per month. The unemployment rate in Georgia now stands at 7.0 percent, up 4.5 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Georgia. In
2006-2007, the typical household's income in Georgia remained $51
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Georgia, subprime mortgages in delinquency have increased
from 33,300 in the second quarter of 2006 to 48,000 in the second
224
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Georgia will total 34,332 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Georgia $1.89 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Georgia
home prices will fall 1.2 percent between 2007 and 2009, resulting in a
net loss of $9.29 billion in housing wealth. [JEC April I 0th State-byState Subprime Foreclosure Report, available here.]
225
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $23,300 Per Georgia Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $80 billion for Georgia
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 39.6 Percent in Georgia Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Georgia was $11,107, a 39.6 percent increase from 2000,
while the average premium for individual coverage was $3,986, an increase of 24.6 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 1.66 Million Georgia Residents Had No
Health Insurance. A growing number of Georgia residents are living
without health insurance. During the 2006-2007 period, an average of
1.66 million Georgia residents-17.6 percent of the state's population-had no health insurance; this was 3.3 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Departrnent of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $789 Per
Month in Georgia. Child care continues to be a hefty burden on the
budgets of Georgia parents, with inflation-adjusted monthly care for an
infant averaging $433, and monthly care for two children averaging
$789. [National Association of Child Care Resource and Referral
Agencies, available here.]
226
Georgia College Tuition Rose 22.6 Percent Since 2000. Parents of
college students in Georgia have also been hard hit under the current
Administration, as inflation-adjusted tuition for Georgia's four-year
public colleges increased 22.6 percent between the 2000-2001 and
2006-2007 school years to $3,851 per year. With that 22.6 percent increase over just six years, Georgia families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Georgia, 1.23 Million Residents Were Living in Poverty Over
the Last Two Years. In Georgia, 1.23 million residents - or 13.1 per-
cent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
HAWAII
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Hawaii. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
227
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93d month of the Clinton administration. Since the beginning of 2008, Hawaii lost 4,700 jobs - an average of 500 jobs per
month. The unemployment rate in Hawaii now stands at 4.5 percent,
up 3.1 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Hawaii. In
2006-2007, the typical household's income in Hawaii remained $4,395
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Hawaii, subprime mortgages in delinquency have increased
from 1,500 in the second quarter of 2006 to 2,900 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Hawaii will
total 3,762 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Hawaii $870 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Hawaii
home prices will fall 14.0 percent between 2007 and 2009, resulting in
228
a net loss of $24.4 billion in housing wealth. [JEC April I0th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $24,500 Per Hawaii Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $11 billion for Hawaii taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 12.1 Percent in Hawaii Since 2001. In
2006, the average inflation-adjusted health care premium for family
coverage in Hawaii was $9,725, a 12.1 percent increase from 2001,
while the average premium for individual coverage was $3,662, an increase of 15.9 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 103,000 Hawaii Residents Had No
Health Insurance. A growing number of Hawaii residents are living
without health insurance. During the 2006-2007 period, an average of
103,000 Hawaii residents-8.2 percent of the state's population-had
no health insurance. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,221 Per
Month in Hawaii. Child care continues to be a hefty burden on the
budgets of Hawaii parents, with inflation-adjusted monthly care for an
infant averaging $720, and monthly care for two children averaging
$1,221. [National Association of Child Care Resource and Referral
Agencies, available here.]
229
Hawaii College Tuition Rose 12.3 Percent Since 2000. Parents of
college students in Hawaii have also been hard hit under the current
Administration, as inflation-adjusted tuition for Hawaii's four-year
public colleges increased 12.3 percent between the 2000-2001 and
2006-2007 school years to $3,930 per year. With that 12.3 percent increase over just six years, Hawaii families are finding it more and more
difficult to afford to send their children to college, and they are not
alone. Nationally, public college tuition has risen at more than double
the rate of inflation in recent years. Between the 2000-2001 and 20062007 academic years, average inflation-adjusted tuition and fees at
U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Hawaii, 105,000 Residents Were Living in Poverty Over the
Last Two Years. In Hawaii, 105,000 residents - or 8.3 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
IDAHO
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Idaho. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
230
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Idaho lost 10,900 jobs - an average of 1,100 jobs per
month. The unemployment rate in Idaho now stands at 5.3 percent, up
2.7 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Idaho. In
2006-2007, the typical household's income in Idaho remained $3,447
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Idaho, subprime mortgages in delinquency have increased
from 2,500 in the second quarter of 2006 to 4,300 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Idaho will
total 4,843 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Idaho $255 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Idaho home
prices will fall 15.2 percent between 2007 and 2009, resulting in a net
231
loss of $12.2 billion in housing wealth. [JEC April I 0th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $16,000 Per Idaho Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $9 billion for Idaho taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 44.5 Percent in Idaho Since 2001. In
2006, the average inflation-adjusted health care premium for family
coverage in Idaho was $11,117, a 44.5 percent increase from 2001,
while the average premium for individual coverage was $3,686, an increase of 16.4 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 218,000 Idaho Residents Had No Health
Insurance. A growing number of Idaho residents are living without
health insurance. During the 2006-2007 period, an average of 218,000
Idaho residents-14.6 percent of the state's population-had no health
insurance. Across the country, the number of Americans without health
insurance totals 45.7 million, up 7.2 million since the current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $832 Per
Month in Idaho. Child care continues to be a hefty burden on the
budgets of Idaho parents, with inflation-adjusted monthly care for an
infant averaging $44 1, and monthly care for two children averaging
$832. [National Association of Child Care Resource and Referral
Agencies, available here.]
232
Idaho College Tuition Rose 34.4 Percent Since 2000. Parents of college students in Idaho have also been hard hit under the current Administration, as inflation-adjusted tuition for Idaho's four-year public
colleges increased 34.4 percent between the 2000-2001 and 2006-2007
school years to $4,155 per year. With that 34.4 percent increase over
just six years, Idaho families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Idaho, 145,000 Residents Were Living in Poverty Over the Last
Two Years. In Idaho, 145,000 residents - or 9.7 percent of the population - were living below the poverty line during the 2006-2007 period.
Nationally, 12.5 percent of Americans - more than 37 million people were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Poverty, available here.]
ILLINOIS
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Illinois. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic condi-
233
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Illinois lost 28, 100 jobs - an average of 2,800 jobs per
month. The unemployment rate in Illinois now stands at 7.3 percent,
up 5.3 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Illinois. In
2006-2007, the typical household's income in Illinois remained $5,266
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subpnme Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Illinois, subprime mortgages in delinquency have increased
from 32,800 in the second quarter of 2006 to 48,100 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Illinois will total 53,591 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Illinois $4.7 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Illinois
home prices will fall 5.1 percent between 2007 and 2009, resulting in a
234
net loss of $46.8 billion in housing wealth. [JEC April I 0th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $28,500 Per Illinois Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $136 billion for Illinois taxpayers by 2017; the total cost to the country will be an estimated $2.8
trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 42.3 Percent in Illinois Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Illinois was $12,096, a 42.3 percent increase from 2000,
while the average premium for individual coverage was $4,358, an increase of 24.3 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 1.74 million Illinois Residents Had No
Health Insurance. A growing number of Illinois residents are living
without health insurance. During the 2006-2007 period, an average of
1.74 million Illinois residents-13.7 percent of the state's populationhad no health insurance; this was 0.7 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,425 Per
Month in Illinois. Child care continues to be a hefty burden on the
budgets of Illinois parents, with inflation-adjusted monthly care for an
infant averaging $827, and monthly care for two children averaging
$1,425. [National Association of Child Care Resource and Referral
Agencies, available here.]
235
Illinois College Tuition Rose 67.8 Percent Since 2000. Parents of
college students in Illinois have also been hard hit under the current
Administration, as inflation-adjusted tuition for Illinois's four-year
public colleges increased 67.8 percent between the 2000-2001 and
2006-2007 school years to $8,038 per year. With that 67.8 percent increase over just six years, Illinois families are finding it more and more
difficult to afford to send their children to college, and they are not
alone. Nationally, public college tuition has risen at more than double
the rate of inflation in recent years. Between the 2000-2001 and 20062007 academic years, average inflation-adjusted tuition and fees at
U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here: data for 2006-2007 available here.]
In Illinois, 1.3 million Residents Were Living in Poverty Over the
Last Two Years. In Illinois, 1.3 million residents - or 10.3 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
INDIANA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Indiana. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
236
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Indiana lost 32,400 jobs - an average of 3,200 jobs
per month. The unemployment rate in Indiana now stands at 6.4 percent, up 4.5 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Indiana. In
2006-2007, the typical household's income in Indiana remained $2,925
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Indiana, subprime mortgages in delinquency have increased
from 21,700 in the second quarter of 2006 to 28,200 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Indiana will total 28,953 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Indiana $1.02 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
237
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $18,900 Per Indiana Household. Accord-
ing to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $47 billion for Indiana
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 50.7 Percent in Indiana Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Indiana was $11,760, a 50.7 percent increase from 2000,
while the average premium for individual coverage was $4,096, an increase of 31.1 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 732,000 Indiana Residents Had No
Health Insurance. A growing number of Indiana residents are living
without health insurance. During the 2006-2007 period, an average of
732,000 Indiana residents-I 1.6 percent of the state's population-had
no health insurance; this was 1.7 percent more than during the 19992000 period. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,086 Per
Month in Indiana. Child care continues to be a hefty burden on the
budgets of Indiana parents, with inflation-adjusted monthly care for an
infant averaging $612, and monthly care for two children averaging
$1,086. [National Association of Child Care Resource and Referral
Agencies, available here.]
238
Indiana College Tuition Rose 44.8 Percent Since 2000. Parents of
college students in Indiana have also been hard hit under the current
Administration, as inflation-adjusted tuition for Indiana's four-year
public colleges increased 44.8 percent between the 2000-2001 and
2006-2007 school years to $6,284 per year. With that 44.8 percent increase over just six years, Indiana families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Indiana, 707,000 Residents Were Living in Poverty Over the
Last Two Years. In Indiana, 707,000 residents - or 11.2 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
IOWA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Iowa. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
239
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Iowa added only 3,000 jobs, an average ofjust 300
jobs per month. The unemployment rate in Iowa now stands at 4.4
percent, up 3.8 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Iowa. In
2006-2007, the typical household's income in Iowa remained $1,037
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Iowa, subprime mortgages in delinquency have increased
from 4,500 in the second quarter of 2006 to 5,800 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Iowa will
total 6,013 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Iowa $191 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Iowa home
prices will fall 0.2 percent between 2007 and 2009, resulting in a net
241
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $19,400 Per Iowa Household. According to
the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $24 billion for Iowa taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 41.8 Percent in Iowa Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Iowa was $10,832, a 41.8 percent increase from 2000,
while the average premium for individual coverage was $4,021, an increase of 36.7 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 291,000 Iowa Residents Had No Health
Insurance. A growing number of Iowa residents are living without
health insurance. During the 2006-2007 period, an average of 291,000
Iowa residents-9.9 percent of the state's population-had no health
insurance; this was 2.2 percent more than during the 1999-2000 period.
Across the country, the number of Americans without health insurance
totals 45.7 million, up 7.2 million since the current Administration took
office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Health Insurance
Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,056 Per
Month in Iowa. Child care continues to be a hefty burden on the
budgets of Iowa parents, with inflation-adjusted monthly care for an
infant averaging $585, and monthly care for two children averaging
$1,056. [National Association of Child Care Resource and Referral
Agencies, available here.]
Iowa College Tuition Rose 66.2 Percent Since 2000. Parents of college students in Iowa have also been hard hit under the current Admin-
242
istration, as inflation-adjusted tuition for Iowa's four-year public colleges increased 66.2 percent between the 2000-2001 and 2006-2007
school years to $6,019 per year. With that 66.2 percent increase over
just six years, Iowa families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digestof Education Statistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Iowa, 282,000 Residents Were Living in Poverty Over the Last
Two Years. In Iowa, 282,000 residents - or 9.6 percent of the population - were living below the poverty line during the 2006-2007 period.
Nationally, 12.5 percent of Americans - more than 37 million people were living in poverty as of 2007. [Bureau of the Census, U.S. Departmnent of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Poverty, available here.]
KANSAS
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Kansas. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
243
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Kansas added only 7,000 jobs, an average ofjust 700
jobs per month. The unemployment rate in Kansas now stands at 4.9
percent, up 4.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Kansas. In
2006-2007, the typical household's income in Kansas remained $274
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on In-
come, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Kansas, subprime mortgages in delinquency have increased
from 5,000 in the second quarter of 2006 to 6,200 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Kansas will
total 4,683 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Sub-
prime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Kansas $159 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
244
The Iraq War Will Cost $20,800 Per Kansas Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $23 billion for Kansas taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 54.5 Percent in Kansas Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Kansas was $11,343, a 54.5 percent increase from 2000,
while the average premium for individual coverage was $3,935, an increase of 26.6 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 340,000 Kansas Residents Had No
Health Insurance. A growing number of Kansas residents are living
without health insurance. During the 2006-2007 period, an average of
340,000 Kansas residents-12.5 percent of the state's population-had
no health insurance; this was 1.6 percent more than during the 19992000 period. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $904 Per
Month in Kansas. Child care continues to be a hefty burden on the
budgets of Kansas parents, with inflation-adjusted monthly care -for an
infant averaging $514, and monthly care for two children averaging
$904. [National Association of Child Care Resource and Referral
Agencies, available here.]
Kansas College Tuition Rose 64.3 Percent Since 2000. Parents of
college students in Kansas have also been hard hit under the current
Administration, as inflation-adjusted tuition for Kansas's four-year
public colleges increased 64.3 percent between the 2000-2001 and
245
2006-2007 school years to $4,966 per year. With that 64.3 percent increase over just six years, Kansas families are finding it more and more
difficult to afford to send their children to college, and they are not
alone. Nationally, public college tuition has risen at more than double
the rate of inflation in recent years. Between the 2000-2001 and 20062007 academic years, average inflation-adjusted tuition and fees at
U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Kansas, 334,000 Residents Were Living in Poverty Over the
Last Two Years. In Kansas, 334,000 residents - or 12.3 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
KENTUCKY
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Kentucky. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
246
through the 93d month of the Clinton administration. Since the beginning of 2008, Kentucky lost 17,900 jobs - an average of 1,800 jobs
per month. The unemployment rate in Kentucky now stands at 6.8
percent, up 5.3 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Kentucky.
In 2006-2007, the typical household's income in Kentucky remained
$2,785 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Kentucky, subprime mortgages in delinquency have increased from 8,400 in the second quarter of 2006 to 10,900 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Kentucky will total 10,588 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Kentucky $398 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Kentucky
home prices will fall 0.4 percent between 2007 and 2009, resulting in a
net loss of $527 million in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
247
The Iraq War Will Cost $15,900 Per Kentucky Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $26 billion for Kentucky
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 19.4 Percent in Kentucky Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Kentucky was $10,151, a 19.4 percent increase from 2000,
while the average premium for individual coverage was $3,901, an increase of 23.9 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 605,000 Kentucky Residents Had No
Health Insurance. A growing number of Kentucky residents are living
without health insurance. During the 2006-2007 period, an average of
605,000 Kentucky residents-14.6 percent of the state's populationhad no health insurance; this was 1.9 percent more than during the .
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $910 Per
Month in Kentucky. Child care continues to be a hefty burden on the
budgets of Kentucky parents, with inflation-adjusted monthly care for
an infant averaging $493, and monthly care for two children averaging
$910. [National Association of Child Care Resource and Referral
Agencies, available here.]
Kentucky College Tuition Rose 72.5 Percent Since 2000. Parents of
college students in Kentucky have also been hard hit under the current
Administration, as inflation-adjusted tuition for Kentucky's four-year
248
public colleges increased 72.5 percent between the 2000-2001 and
2006-2007 school years to $5,821 per year. With that 72.5 percent increase over just six years, Kentucky families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Kentucky, 672,000 Residents Were Living in Poverty Over the
Last Two Years. In Kentucky, 672,000 residents - or 16.2 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
LOUISIANA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that foMlows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Louisiana. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
249
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Louisiana added only 4,900 jobs, an average of just
500 jobs per month. The unemployment rate in Louisiana now stands
at 5.5 percent, up 4.0 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Louisiana.
In 2006-2007, the typical household's income in Louisiana remained
$617 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Louisiana, there were 16,500 subprime mortgages in delinquency in the second quarter of 2008. According to a 2008 analysis
published by the Joint Economic Committee (JEC), the number of subprime foreclosures in Louisiana will total 11,252 between the first
quarter of 2008 and the end of 2009. [Mortgage Bankers Association,
JEC April 10th State-by-State Subprime Foreclosure Report, available
here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Louisiana $426 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
250
The Iraq War Will Cost $20,400 Per Louisiana Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $33 billion for Louisiana
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 41.8 Percent in Louisiana Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Louisiana was $11,110, a 41.8 percent increase from 2000,
while the average premium for individual coverage was $4,053, an increase of 30.1 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 848,000 Louisiana Residents Had No
Health Insurance. A growing number of Louisiana residents are living without health insurance. During the 2006-2007 period, an average
of 848,000 Louisiana residents-20.2 percent of the state's population-had no health insurance; this was 1.0 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $894 Per
Month in Louisiana. Child care continues to be a hefty burden on the
budgets of Louisiana parents, with inflation-adjusted monthly care for
an infant averaging $471, and monthly care for two children averaging
$894. [National Association of Child Care Resource and Referral
Agencies, available here.]
Louisiana College Tuition Rose 17.0 Percent Since 2000. Parents of
college students in Louisiana have also been hard hit under the current
Administration, as inflation-adjusted tuition for Louisiana's four-year
public colleges increased 17.0 percent between the 2000-2001 and
251
2006-2007 school years to $3,778 per year. With that 17.0 percent increase over just six years, Louisiana families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Louisiana, 693,000 Residents Were Living in Poverty Over the
Last Two Years. In Louisiana, 693,000 residents - or 16.5 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MAINE
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Maine. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
252
through the 93rd month of the Clinton administration. Since the be-
ginning of 2008, Maine lost 5,900 jobs - an average of 600 jobs per
month. The unemployment rate in Maine now stands at 5.7 percent, up
4.9 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Maine. In
2006-2007, the typical household's income in Maine remained $812
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Maine, subprime mortgages in delinquency have increased
from 2,500 in the second quarter of 2006 to 3,900 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Maine will
total 4,385 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April I 0th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Maine $242 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Maine home
prices will fall 7.3 percent between 2007 and 2009, resulting in a net
loss of $6.42 billion in housing wealth. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
253
The Iraq War Will Cost $16,000 Per Maine Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $9 billion for Maine taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 31.8 Percent in Maine Since 2001. In
2006, the average inflation-adjusted health care premium for family
coverage in Maine was $12,682, a 31.8 percent increase from 2001,
while the average premium for individual coverage was $4,783, an increase of 30.6 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 119,000 Maine Residents Had No Health
Insurance. A growing number of Maine residents are living without
health insurance. During the 2006-2007 period, an average of 119,000
Maine residents--9.1 percent of the state's population-had no health
insurance. Across the country, the number of Americans without health
insurance totals 45.7 million, up 7.2 million since the current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,234 Per
Month in Maine. Child care continues to be a hefty burden on the
budgets of Maine parents, with inflation-adjusted monthly care for an
infant averaging $673, and monthly care for two children averaging
$1,234. [National Association of Child Care Resource and Referral
Agencies, available here.]
Maine College Tuition Rose 28.5 Percent Since 2000. Parents of college students in Maine have also been hard hit under the current Administration, as inflation-adjusted tuition for Maine's four-year public
colleges increased 28.5 percent between the 2000-2001 and 2006-2007
school years to $6,557 per year. With that 28.5 percent increase over
254
just six years, Maine families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Maine, 138,000 Residents Were Living in Poverty Over the Last
Two Years. In Maine, 138,000 residents - or 10.5 percent of the popu-
lation - were living below the poverty line during the 2006-2007 period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
MARYLAND
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Maryland. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the be-
255
ginning of 2008, Maryland added only 10,800 jobs, an average ofjust
1,1 00 jobs per month. The unemployment rate in Maryland now
stands at 5.0 percent, up 3.6 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Maryland.
In 2006-2007, the typical household's income in Maryland remained
$254 lower than it had been in 1999-2000, before the recession of
200 . This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mort-
gage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Maryland, subprime mortgages in delinquency have increased from 13,900 in the second quarter of 2006 to 31,000 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Maryland will total 24,391 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Maryland $2.76 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Maryland
home prices will fall 14.1 percent between 2007 and 2009, resulting in
a net loss of $110 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
256
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $26,000 Per Maryland Household. Ac-
cording to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $54 billion for
Maryland taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 32.8 Percent in Maryland Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Maryland was $11,600, a 32.8 percent increase from 2000,
while the average premium for individual coverage was $4,044, an increase of 26.7 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 769,000 Maryland Residents Had No
Health Insurance. A growing number of Maryland residents are living
without health insurance. During the 2006-2007 period, an average of
769,000 Maryland residents-13.8 percent of the state's populationhad no health insurance; this was 3.7 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,492 Per
Month in Maryland. Child care continues to be a hefty burden on the
budgets of Maryland parents, with inflation-adjusted monthly care for
an infant averaging $915, and monthly care for two children averaging
$1,492. [National Association of Child Care Resource and Referral
Agencies, available here.]
257
Maryland College Tuition Rose 27.7 Percent Since 2000. Parents of
college students in Maryland have also been hard hit under the current
Administration, as inflation-adjusted tuition for Maryland's four-year
public colleges increased 27.7 percent between the 2000-2001 and
2006-2007 school years to $7,106 per year. With that 27.7 percent increase over just six years, Maryland families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Maryland, 480,000 Residents Were Living in Poverty Over the
Last Two Years. In Maryland, 480,000 residents - or 8.6 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MASSACHUSETTS
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Massachusetts. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating econom-
258
ic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Massachusetts lost 3,800 jobs - an average of 400
jobs per month. The unemployment rate in Massachusetts now stands
at 5.5 percent, up 4.3 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Massachusetts. In 2006-2007, the typical household's income in Massachusetts
remained $2,168 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Massachusetts, subprime mortgages in delinquency have increased from 14,300 in the second quarter of 2006 to 23,900 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Massachusetts will total 20,954 between the first quarter of
2008 and the end of 2009. [Mortgage Bankers Association, JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Massachusetts $2.81 billion in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
Massachusetts home prices will fall 7.9 percent between 2007 and
259
2009, resulting in a net loss of $58.9 billion in housing wealth. [JEC
April 10th State-by-State Subprime Foreclosure Report, available
here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $30,300 Per Massachusetts Household.
According to the JEC's recent report, the direct and indirect costs of
the Iraq War will be massive, especially if the Bush administration
continues to keep large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $74 billion for
Massachusetts taxpayers by 2017; the total cost to the country will be
an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 39.7 Percent in Massachusetts Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in Massachusetts was $12,607, a 39.7 percent increase
from 2000, while the average premium for individual coverage was
$4,563, an increase of 36.5 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 498,000 Massachusetts Residents Had
No Health Insurance. A growing number of Massachusetts residents
are living without health insurance. During the 2006-2007 period, an
average of 498,000 Massachusetts residents-7.9 percent of the state's
population-had no health insurance. Across the country, the number
of Americans without health insurance totals 45.7 million, up 7.2 million since the current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $2,047 Per
Month in Massachusetts. Child care continues to be a hefty burden on
the budgets of Massachusetts parents, with inflation-adjusted monthly
care for an infant averaging $1,194, and monthly care for two children
260
averaging $2,047. [National Association of Child Care Resource and
Referral Agencies, available here.]
Massachusetts College Tuition Rose 59.0 Percent Since 2000. Parents of college students in Massachusetts have also been hard hit under
the current Administration, as inflation-adjusted tuition for Massachusetts's four-year public colleges increased 59.0 percent between the
2000-2001 and 2006-2007 school years to $7,629 per year. With that
59.0 percent increase over just six years, Massachusetts families are
finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In Massachusetts, 732,000 Residents Were Living in Poverty Over
the Last Two Years. In Massachusetts, 732,000 residents - or 11.6
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MICHIGAN
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
261
Jobs Are Disappearing in Michigan. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Michigan lost 74,000 jobs - an average of 7,400 jobs
per month. The unemployment rate in Michigan now stands at 9.3
percent, up 7.4 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Michigan.
In 2006-2007, the typical household's income in Michigan remained
$6,364 lower than it hid been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Michigan Residents. Rising energy costs are making it
more difficult for Michigan families to stretch their household budgets.
In October 2001, the average retail price per gallon of gasoline in
Michigan was $1.11. The average gas price per gallon is now $1.89 as
of November 20, 2008. When adjusted for inflation, this represents an
increase of 43 percent. Additionally, the coming winter presents more
challenges for families who depend on heating oil to heat their homes.
The average Michigan household will spend $1,360, a -19.6 percent
increase since last year's winter. [Federal Highway Administration,
U.S. Department of Transportation, available here; American Automobile Association, available here; Energy Information Administration,
U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
262
worth. In Michigan, subprime mortgages in delinquency have increased from 46,400 in the second quarter of 2006 to 56,300 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Michigan will total 53,663 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April I 0th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Michigan $2.32 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Michigan
home prices will fall 6.0 percent between 2007 and 2009, resulting in a
net loss of $62.8 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $19,900 Per Michigan Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $77 billion for Michigan
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 46.5 Percent in Michigan Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Michigan was $11,758, a 46.5 percent increase from 2000,
while the average premium for individual coverage was $4,565, an increase of 38.1 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
263
Over the Last Two Years, 1.1 million Michigan Residents Had No
Health Insurance. A growing number of Michigan residents are living
without health insurance. During the 2006-2007 period, an average of
1.1 million Michigan residents-i 1.0 percent of the state's population-had no health insurance; this was 1.9 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,240 Per
Month in Michigan. Child care continues to be a hefty burden on the
budgets of Michigan parents, with inflation-adjusted monthly care for
an infant averaging $695, and monthly care for two children averaging
$1,240. [National Association of Child Care Resource and Referral
Agencies, available here.]
Michigan College Tuition Rose 41.5 Percent Since 2000. Parents of
college students in Michigan have also been hard hit under the current
Administration, as inflation-adjusted tuition for Michigan's four-year
public colleges increased 41.5 percent between the 2000-2001 and
2006-2007 school years to $7,504 per year. With that 41.5 percent increase over just six years, Michigan families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here. data for 2006-2007 available here.]
In Michigan, 1.2 million Residents Were Living in Poverty Over
the Last Two Years. In Michigan, 1.2 million residents - or 12.1 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
264
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
MINNESOTA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Minnesota. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Minnesota lost 18,300 jobs - an average of 1,800 jobs
per month. The unemployment rate in Minnesota now stands at 6.0
percent, up 4.7 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Minnesota.
In 2006-2007, the typical household's income in Minnesota remained
$3,981 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Minnesota Residents. Rising energy costs are making
it more difficult for Minnesota families to stretch their household
265
budgets. In October 2001, the average retail price per gallon of gasoline in Minnesota was $1.19. The average gas price per gallon is now
$1.87 as of November 20, 2008. When adjusted for inflation, this
represents an increase of 32 percent. Additionally, the coming winter
presents more challenges for families who depend on heating oil to
heat their homes. The average Minnesota household will spend
$1,360, a -19.6 percent increase since last year's winter. [Federal
Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Minnesota, subprime mortgages in delinquency have increased from 13,000 in the second quarter of 2006 to 17,700 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Minnesota will total 24,437 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Minnesota $1.37 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Minnesota
home prices will fall 6.8 percent between 2007 and 2009, resulting in a
net loss of $41.5 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
266
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $28,300 Per Minnesota Household. Ac-
cording to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $58 billion for
Minnesota taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 42.9 Percent in Minnesota Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Minnesota was $11,699, a 42.9 percent increase from
2000, while the average premium for individual coverage was $4,087,
an increase of 28.0 percent since 2000. Nationwide, the inflationadjusted average monthly premium for family health coverage in the
United States rose by 43.5 percent from 2000 to 2006, even as real median household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 454,000 Minnesota Residents Had No
Health Insurance. A growing number of Minnesota residents are living without health insurance. During the 2006-2007 period, an average
of 454,000 Minnesota residents-8.8 percent of the state's population-had no health insurance; this was 1.7 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,807 Per
Month in Minnesota. Child care continues to be a hefty burden on the
budgets of Minnesota parents, with inflation-adjusted monthly care for
an infant averaging $1,034, and monthly care for two children averaging $1,807. [National Association of Child Care Resource and Referral Agencies, available here.]
267
Minnesota College Tuition Rose 60.2 Percent Since 2000. Parents of
college students in Minnesota have also been hard hit under the current
Administration, as inflation-adjusted tuition for Minnesota's four-year
public colleges increased 60.2 percent between the 2000-2001 and
2006-2007 school years to $7,392 per year. With that 60.2 percent increase over just six years, Minnesota families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Minnesota, 452,000 Residents Were Living in Poverty Over the
Last Two Years. In Minnesota, 452,000 residents - or 8.7 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MISSISSIPPI
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, failing real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Mississippi.
After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
268
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93d month of the Clinton administration. Since the beginning of 2008, Mississippi lost 16,000 jobs - an average of 1,600
jobs per month. The unemployment rate in Mississippi now stands at
7.2 percent, up 6.3 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Mississippi.
In 2006-2007, the typical household's income in Mississippi remained
$4,348 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Mississippi Residents. Rising energy costs are making
it more difficult for Mississippi families to stretch their household
budgets. In October 2001, the average retail price per gallon of gasoline in Mississippi was $1.04. The average gas price per gallon is now
$1.90 as of November 20, 2008. When adjusted for inflation, this
represents an increase of 49 percent. Additionally, the coming winter
presents more challenges for families who depend on heating oil to
heat their homes. The average Mississippi household will spend
$1,098, a -7.8 percent increase since last year's winter. [Federal Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Mississippi, subprime mortgages in delinquency have increased from 10,800 in the second quarter of 2006 to 11,500 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclo-
269
sures in Mississippi will total 6,368 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April I0th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Mississippi $191 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $13,500 Per Mississippi Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $15 billion for Mississippi taxpayers by 2017; the total cost to the country will be an esti-.
mated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 40.2 Percent in Mississippi Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in Mississippi was $10,053, a 40.2 percent increase
from 2000, while the average premium for individual coverage was
$3,812, an increase of 27.5 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 573,000 Mississippi Residents Had No
Health Insurance. A growing number of Mississippi residents are living without health insurance. During the 2006-2007 period, an average
of 573,000 Mississippi residents-19.8 percent of the state's population-had no health insurance; this was 5.7 percent more than during
270
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $733 Per
Month in Mississippi. Child care continues to be a hefty burden on the
budgets of Mississippi parents, with inflation-adjusted monthly care for
an infant averaging $387, and monthly care for two children averaging
$733. [National Association of Child Care Resource and Referral
Agencies, available here.]
Mississippi College Tuition Rose 29.0 Percent Since 2000. Parents
of college students in Mississippi have also been hard hit under the
current Administration, as inflation-adjusted tuition for Mississippi's
four-year public colleges increased 29.0 percent between the 20002001 and 2006-2007 school years to $4,457 per year. With that 29.0
percent increase over just six years, Mississippi families are finding it
more and more difficult to afford to send their children to college, and
they are not alone. Nationally, public college tuition has risen at more
than double the rate of inflation in recent years. Between the 20002001 and 2006-2007 academic years, average inflation-adjusted tuition
and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education.
Digest of Education Statistics "Average undergraduate tuition and fees
and room and board rates charged for full-time students in degreegranting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007
available heire.]
In Mississippi, 625,000 Residents Were Living in Poverty Over the
Last Two Years. In Mississippi, 625,000 residents - or 21.6 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MISSOURI
271
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Missouri. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Missouri lost 11,300 jobs - an average of 1,100 jobs
per month. The unemployment rate in Missouri now stands at 6.5 percent, up 5.3 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Missouri. In
2006-2007, the typical household's income in Missouri remained
$6,961 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Missouri Residents. Rising energy costs are making it
more difficult for Missouri families to stretch their household budgets.
In October 2001, the average retail price per gallon of gasoline in Missouri was $1.03. The average gas price per gallon is now $1.72 as of
November 20, 2008. When adjusted for inflation, this represents an
increase of 40 percent. Additionally, the coming winter presents more
challenges for families who depend on heating oil to heat their homes.
272
The average Missouri household will spend $1,360, a -19.6 percent
increase since last year's winter. [Federal Highway Administration,
U.S. Department of Transportation, available here: American Automobile Association, available here; Energy Information Administration,
U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Missouri, subprime mortgages in delinquency have increased
from 19,800 in the second quarter of 2006 to 26,300 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Missouri will total 15,930 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Missouri $658 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Missouri
home prices will fall 1.5 percent between 2007 and 2009, resulting in a
net loss of $6.04 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $19,300 Per Missouri Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $44 billion for Missouri
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
273
Health Care Premiums Rose 44.8 Percent in Missouri Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Missouri was $11,469, a 44.8 percent increase from 2000,
while the average premium for individual coverage was $4,064, an increase of 29.6 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 750,000 Missouri Residents Had No
Health Insurance. A growing number of Missouri residents are living
without health insurance. During the 2006-2007 period, an average of
750,000 Missouri residents-12.9 percent of the state's populationhad no health insurance; this was 5.2 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $835 Per
Month in Missouri. Child care continues to be a hefty burden on the
budgets of Missouri parents, with inflation-adjusted monthly care for
an infant averaging $488, and monthly care for two children averaging
$835. [National Association of Child Care Resource and Referral
Agencies, available here.]
Missouri College Tuition Rose 42.2 Percent Since 2000. Parents of
college students in Missouri have also been hard hit under the current
Administration, as inflation-adjusted tuition for Missouri's four-year
public colleges increased 42.2 percent between the 2000-2001 and
2006-2007 school years to $6,320 per year; With that 42.2 percent increase over just six years, Missouri families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
274
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Missouri, 700,000 Residents Were Living in Poverty Over the
Last Two Years. In Missouri, 700,000 residents - or 12.1 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
MONTANA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high pric-
es for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Montana. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Montana added only 2,900 jobs, an average of just
300 jobs per month. The unemployment rate in Montana now stands at
4.8 percent, up 3.2 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Montana.
In 2006-2007, the typical household's income in Montana remained
275
$3,928 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Montana Residents. Rising energy costs are making it
more difficult for Montana families to stretch their household budgets.
In October 2001, the average retail price per gallon of gasoline in Montana was $1.27. The average gas price per gallon is now $2.02 as of
November 20, 2008. When adjusted for inflation, this represents an
increase of 32 percent. Additionally, the coming winter presents more
challenges for families who depend on heating oil to heat their homes.
The average Montana household will spend $935, a -20.1 percent increase since last year's winter. [Federal Highway Administration, U.S.
Department of Transportation, available here; American Automobile
Association, available here; Energy Information Administration, U.S.
Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mort-
gage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Montana, subprime mortgages in delinquency have increased
from 900 in the second quarter of 2006 to 1,300 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Montana
will total 936 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Montana $47.5 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $ 100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
276
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
277
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $15,000 Per Montana Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $6 billion for Montana
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Over the Last Two Years, 153,000 Montana Residents Had No
Health Insurance. A growing number of Montana residents are living
without health insurance. During the 2006-2007 period, an average of
153,000 Montana residents-16.4 percent of the state's populationhad no health insurance. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $829 Per
Month in Montana. Child care continues to be a hefty burden on the
budgets of Montana parents, with inflation-adjusted monthly care for
an infant averaging $430, and monthly care for two children averaging
$829. [National Association of Child Care Resource and Referral
Agencies, available here.J
Montana College Tuition Rose 48.6 Percent -Since 2000. Parents of
college students in Montana have also been hard hit under the current
Administration, as inflation-adjusted tuition for Montana's four-year
public colleges increased 48.6 percent between the 2000-2001 and
2006-2007 school years to $5,378 per year. With that 48.6 percent increase overjust six years, Montana families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for-full-time students in degree-granting insti-
278
tutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Montana, 123,000 Residents Were Living in Poverty Over the
Last Two Years. In Montana, 123,000 residents - or 13.2 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
NEBRASKA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Nebraska. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Nebraska added only 4,100 jobs, an average of just
400 jobs per month. The unemployment rate in Nebraska now stands
at 3.6 percent, up 2.8 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Nebraska.
In 2006-2007, the typical household's income in Nebraska remained
$186 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
279
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Nebraska Residents. Rising energy costs are making it
more difficult for Nebraska families to stretch their household budgets.
In October 2001, the average retail price per gallon of gasoline in Nebraska was $1.15. The average gas price per gallon is now $1.94 as of
November 20, 2008. When adjusted for inflation, this represents an
increase of 42 percent. Additionally, the coming winter presents more
challenges for families who depend on heating oil to heat their homes.
The average Nebraska household will spend $1,360, a -19.6 percent
increase since last year's winter. [Federal Highway Administration,
U.S. Department of Transportation, available here; American Automo-
bile Association, available here; Energy Information Administration,
U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan-
cial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Nebraska, subprime mortgages in delinquency have increased from 2,800 in the second quarter of 2006 to 3,500 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Nebraska will total 2,829 between the first quarter of 2008 and
the end of 2009. [Mortgage Bankers Association, JEC April I 0th Stateby-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Nebraska $97.1 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Nebraska
home prices will fall 0.3 percent between 2007 and 2009, resulting in a
280
net loss of $890 million in housing wealth. [JEC April I 0th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $25,400 Per Nebraska Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $18 billion for Nebraska
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 39.0 Percent in Nebraska Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Nebraska was $11,065, a 39.0 percent increase from 2000,
while the average premium for individual coverage was $3,994, an increase of 29.8 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 225,000 Nebraska Residents Had No
Health Insurance. A growing number of Nebraska residents are living
without health insurance. During the 2006-2007 period, an average of
225,000 Nebraska residents-12.8 percent of the state's populationhad no health insurance; this was 4.0 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $920 Per
Month in Nebraska. Child care continues to be a hefty burden on the
budgets of Nebraska parents, with inflation-adjusted monthly care for
an infant averaging $473, and monthly care for two children averaging
$920. [National Association of Child Care Resource and Referral
Agencies, available here.]
281
Nebraska College Tuition Rose 45.9 Percent Since 2000. Parents of
college students in Nebraska have also been hard hit under the current
Administration, as inflation-adjusted tuition for Nebraska's four-year
public colleges increased 45.9 percent between the 2000-2001 and
2006-2007 school years to $5,181 per year. With that 45.9 percent increase over just six years, Nebraska families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Nebraska, 177,000 Residents Were Living in Poverty Over the
Last Two Years. In Nebraska, 177,000 residents - or 10.1 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
NEVADA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Nevada. After seven and a half years of
historically low job growth, American workers have now faced ten
282
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Nevada lost 13,500 jobs - an average of 1,400 jobs
per month. The unemployment rate in Nevada now stands at 7.6 percent, up 5.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Nevada. In
2006-2007, the typical household's income in Nevada remained $580
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for Nevada Residents. Rising energy costs are making it
more difficult for Nevada families to stretch their household budgets.
In October 2001, the average retail price per gallon of gasoline in Nevada was $1.33. The average gas price per gallon is now $2.24 as of
November 20, 2008. When adjusted for inflation, this represents an
increase of 39 percent. Additionally, the coming winter presents more
challenges for families who depend on heating oil to heat their homes.
The average Nevada household will spend $935, a -20.1 percent increase since last year's winter. [Federal Highway Administration, U.S.
Department of Transportation, available here; American Automobile
Association, available here; Energy Information Administration, U.S.
Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Nevada, subprime mortgages in delinquency have increased
from 8,400 in the second quarter of 2006 to 21,400 in the second quarter of 2008. According to a 2008 analysis published by the Joint Eco-
283
nomic Committee (JEC), the number of subprime foreclosures in Nevada will total 30,278 between the first quarter of 2008 and the end of
2009. [Mortgage Bankers Association, JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Nevada $1.76 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Nevada
home prices will fall 31.9 percent between 2007 and 2009, resulting in
a net loss of $84.8 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $26,700 Per Nevada Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $25 billion for Nevada taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 19.7 Percent in Nevada Since 2001. In
2006, the average inflation-adjusted health care premium for family
coverage in Nevada was $10,055, a 19.7 percent increase from 2001,
while the average premium for individual coverage was $3,697, an increase of 8.9 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 469,000 Nevada Residents Had No
Health Insurance. A growing number of Nevada residents are living
without health insurance. During the 2006-2007 period, an average of
284
469,000 Nevada residents-1 8.4 percent of the state's population-had
no health insurance; this was 1.0 percent more than during the 19992000 period. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.)
Child Care Costs For Two-Child Families Averaged $658 Per
Month in Nevada. Child care continues to be a hefty burden on the
budgets of Nevada parents, with inflation-adjusted monthly care for an
infant averaging $373, and monthly care for two children averaging
$658. [National Association of Child Care Resource and Referral
Agencies, available here.]
Nevada College Tuition Rose 2.9 Percent Since 2000. Parents of college students in Nevada have also been hard hit under the current Administration, as inflation-adjusted tuition for Nevada's four-year public
colleges increased 2.9 percent between the 2000-2001 and 2006-2007
school years to $2,844 per year. With that 2.9 percent increase over
just six years, Nevada families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Nevada, 246,000 Residents Were Living in Poverty Over the
Last Two Years. In Nevada, 246,000 residents - or 9.6 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
NEW HAMPSHIRE
285
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in New Hampshire. After seven and a half
years of historically lowjob growth, American workers have now
faced ten consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, New Hampshire added only 2,000 jobs, an average of
just 200 jobs per month. The unemployment rate in New Hampshire
now stands at 4.1 percent, up 3.4 percent in 2008. [Bureau of Labor
Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in New Hampshire. In 2006-2007, the typical household's income in New Hampshire remained $6,352 lower than it had been in 1999-2000, before the
recession of 2001. This is the first economic recovery where. incomes
did not return to their pre-recession peak. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007 dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for New Hampshire Residents. Rising energy costs are
making it more difficult for New Hampshire families to stretch their
household budgets. In October 2001, the average retail price per gallon
of gasoline in New Hampshire was $1.18. The average gas price per
gallon is now $2.03 as of November 20, 2008. When adjusted for inflation, this represents an increase of 38 percent. Additionally, the
coming winter presents more challenges for families who depend on
286
heating oil to heat their homes. The average New Hampshire household will spend $1,741, a -12.9 percent increase since last year's winter. [Federal Highway Administration, U.S. Department of Transportation, available here; American Automobile Association, available here;
Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In New Hampshire, subprime mortgages in delinquency have
increased from 3,400 in the second quarter of 2006 to 5,100 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in New Hampshire will total 4,025 between the first quarter of
2008 and the end of 2009. [Mortgage Bankers Association, JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost New Hampshire $429
million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
New Hampshire home prices will fall 9.1 percent between 2007 and
2009, resulting in a net loss of $10.9 billion in housing wealth. [JEC
April 10th State-by-State Subprime Foreclosure Report, available
here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $23,100 Per New Hampshire Household.
According to the JEC's recent report, the direct and indirect costs of
the Iraq War will be massive, especially if the Bush administration
continues to keep large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $12 billion for
New Hampshire taxpayers by 2017; the total cost to the country will be
287
an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.j
Health Care Premiums Rose 40.7 Percent in New Hampshire Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in New Hampshire was $13,013, a 40.7 percent increase from 2000, while the average premium for individual coverage
was $4,741, an increase of 38.2 percent since 2000. Nationwide, the
inflation-adjusted average monthly premium for family health coverage in the United States rose by 43.5 percent from 2000 to 2006, even
as real median household income declined by 2.0 percent over the
same period. [Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, available here.]
Over the Last Two Years, 144,000 New Hampshire Residents Had
No Health Insurance. A growing number of New Hampshire residents are living without health insurance. During the 2006-2007 period, an average of 144,000 New Hampshire residents-] 1.0 percent of
the state's population-had no health insurance; this was 2.6 percent
more than during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2
million since the current Administration took office. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $1,397 Per
Month in New Hampshire. Child care continues to be a hefty burden
on the budgets of New Hampshire parents, with inflation-adjusted
monthly care for an infant averaging $776, and monthly care for two
children averaging $1,397. [National Association of Child Care Resource and Referral Agencies, available here.]
New Hampshire College Tuition Rose 16.4 Percent Since 2000. Par-
ents of college students in New Hampshire have also been hard hit under the current Administration, as inflation-adjusted tuition for New
Hampshire's four-year public colleges increased 16.4 percent between
the 2000-2001 and 2006-2007 school years to $9,003 per year. With
that 16.4 percent increase over just six years, New Hampshire families
are finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
288
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state orjurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In New Hampshire, 73,000 Residents Were Living in Poverty Over
the Last Two Years. In New Hampshire, 73,000 residents - or 5.6
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available here.]
NEW JERSEY
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in New Jersey. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, New Jersey lost 27,200 jobs - an average of 2,700
jobs per month. The unemployment rate in New Jersey now stands at
289
6.0 percent, up 4.2 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in New Jersey.
In 2006-2007, the typical household's income in New Jersey remained
$3,974 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for New Jersey Residents. Rising energy costs are making
it more difficult for New Jersey families to stretch their household
budgets. In October 2001, the average retail price per gallon of gasoline in New Jersey was $1.05. The average gas price per gallon is now
$1.95 as of November 20, 2008. When adjusted for inflation, this
represents an increase of 49 percent. Additionally, the coming winter
presents more challenges for families who depend on heating oil to
heat their homes. The average New Jersey household will spend
$1,741, a -12.9.percent increase since last year's winter. [Federal
Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In New Jersey, subprime mortgages in delinquency have increased from 16,200 in the second quarter of 2006 to 28,600 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in New Jersey will total 32,537 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, sub-
290
prime mortgage-related foreclosures will cost New Jersey $5.87 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that New Jersey
home prices will fall 17.2 percent between 2007 and 2009, resulting in
a net loss of $157 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $34,800 Per New Jersey Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $110 billion for
New Jersey taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 34.5 Percent in New Jersey Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in New Jersey was $12,549, a 34.5 percent increase
from 2000, while the average premium for individual coverage was
$4,586, an increase of 28.2 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 1.34 million New Jersey Residents Had
No Health Insurance. A growing number of New Jersey residents are
living without health insurance. During the 2006-2007 period, an average of 1.34 million New Jersey residents-15.6 percent of the state's
population-had no health insurance; this was 3.9 percent more than
during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since
the current Administration took office. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
291
Child Care Costs For Two-Child Families Averaged $1,726 Per
Month in New Jersey. Child care continues to be a hefty burden on
the budgets of New Jersey parents, with inflation-adjusted monthly
care for an infant averaging $931, and monthly care for two children
averaging $1,726. [National Association of Child Care Resource and
Referral Agencies, available here.]
New Jersey College Tuition Rose 38.9 Percent Since 2000. Parents
of college students in New Jersey have also been hard hit under the
current Administration, as inflation-adjusted tuition for New Jersey's
four-year public colleges increased 38.9 percent between the 20002001 and 2006-2007 school years to $9,333 per year. With that 38.9
percent increase overjust six years, New Jersey families are finding it
more and more difficult to afford to send their children to college, and
they are not alone. Nationally, public college tuition has risen at more
than double the rate of inflation in recent years. Between the 20002001 and 2006-2007 academic years, average inflation-adjusted tuition
and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education.
Digest of EducationStatistics "Average undergraduate tuition and fees
and room and board rates charged for full-time students in degreegranting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007
available here.]
In New Jersey, 752,000 Residents Were Living in Poverty Over the
Last Two Years. In New Jersey, 752,000 residents - or 8.7 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
NEW MEXICO
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recov-
292
ery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in New Mexico.
After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, New Mexico lost 200 jobs - an average of 0 jobs per
month. The unemployment rate in New Mexico now stands at 4.4 percent, up 3.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in New Mexico.
In 2006-2007, the typical household's income in New Mexico remained $1,375 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for New Mexico Residents. Rising energy costs are mak-
ing it more difficult for New Mexico families to stretch their household
budgets. In October 2001, the average retail price per gallon of gasoline in New Mexico was $1.20. The average gas price per gallon is
now $2.19 as of November 20, 2008. When adjusted for inflation, this
represents an increase of 52 percent. Additionally, the coming winter
presents more challenges for families who depend on heating oil to
heat their homes. The average New Mexico household will spend
$935, a -20.1 percent increase since last year's winter. [Federal Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
293
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In New Mexico, subprime mortgages in delinquency have increased from 3,100 in the second quarter of 2006 to 4,400 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in New Mexico will total 3,982 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost New Mexico $195 million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
New Mexico home prices will fall 7.4 percent between 2007 and 2009,
resulting in a net loss of $5.75 billion in housing wealth. [JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $16,400 Per New Mexico Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $12 billion for New
Mexico taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.I
Health Care Premiums Rose 54.0 Percent in New Mexico Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in New Mexico was $11,637, a 54.0 percent increase
from 2000, while the average premium for individual coverage was
$4,165, an increase of 32.4 percent since 2000. Nationwide, the infla-
294
tion-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health-and Human Services, available here.]
Over the Last Two Years, 441,000 New Mexico Residents Had No
Health Insurance. A growing number of New Mexico residents are
living without health insurance. During the 2006-2007 period, an average of 441,000 New Mexico residents-22.7 percent of the state's
population-had no health insurance. Across the country, the number
of Americans without health insurance totals 45.7 million, up 7.2 million since the current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $983 Per
Month in New Mexico. Child care continues to be a hefty burden on
the budgets of New Mexico parents, with inflation-adjusted monthly
care for an infant averaging $534, and monthly care for two children
averaging $983. [National Association of Child Care Resource and
Referral Agencies, available here.]
New Mexico College Tuition Rose 27.6 Percent Since 2000. Parents
of college students in New Mexico have also been hard hit under the
current Administration, as inflation-adjusted tuition for New Mexico's
four-year public colleges increased 27.6 percent between the 20002001 and 2006-2007 school years to $3,943 per year. With that 27.6
percent increase over just six years, New Mexico families are finding it
more and more difficult to afford to send their children to college, and
they are not alone. Nationally, public college tuition has risen at more
than double the rate of inflation in recent years. Between the 20002001 and 2006-2007 academic years, average inflation-adjusted tuition
and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education.
Digest of Education Statistics "Average undergraduate tuition and fees
and room and board rates charged for full-time students in degreegranting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007
available here.]
295
In New Mexico, 300,000 Residents Were Living in Poverty Over
the Last Two Years. In New Mexico, 300,000 residents - or 15.5 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
NEW YORK
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in New York. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, New York lost 21,800 jobs - an average of 2,200 jobs
per month. The unemployment rate in New York now stands at 5.7
percent, up 4.6 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in New York.
In 2006-2007, the typical household's income in New York remained
$131 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
296
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for New York Residents. Rising energy costs are making
it more difficult for New York families to stretch their household
budgets. In October 2001, the average retail price per gallon of gasoline in New York was $1.17. The average gas price per gallon is now
$2.40 as of November 20, 2008. When adjusted for inflation, this
represents an increase of 64 percent. Additionally, the coming winter
presents more challenges for families who depend on heating oil to
heat their homes. The average New York household will spend
$1,741, a -12.9 percent increase since last year's winter. [Federal
Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In New York, subprime mortgages in delinquency have increased from 33,400 in the second quarter of 2006 to 50,800 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in New York will total 58,339 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April I 0th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost New York $8.41 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that New York
home prices will fall 12.0 percent between 2007 and 2009, resulting in
a net loss of $128 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.)
297
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $32,700 Per New York Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $232 billion for
New York taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 42.1 Percent in New York Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in New York was $12,386, a 42.1 percent increase from
2000, while the average premium for individual coverage was $4,724,
an increase of 30.0 percent since 2000. Nationwide, the inflationadjusted average monthly premium for family health coverage in the
United States rose by 43.5 percent from 2000 to 2006, even as real median household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 2.59 million New York Residents Had
No Health Insurance. A growing number of New York residents are
living without health insurance. During the 2006-2007 period, an average of 2.59 million New York residents-13.6 percent of the state's
population-had no health insurance. Across the country, the number
of Americans without health insurance totals 45.7 million, up 7.2 million since the current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $1,658 Per
Month in New York. Child care continues to be a hefty burden on the
budgets of New York parents, with inflation-adjusted monthly care for
an infant averaging $902, and monthly care for two children averaging
$1,658. [National Association of Child Care Resource and Referral
Agencies, available here.]
298
New York College Tuition Rose 3.2 Percent Since 2000. Parents of
college students in New York have also been hard hit under the current
Administration, as inflation-adjusted tuition for New York's four-year
public colleges increased 3.2 percent between the 2000-2001 and
2006-2007 school years to $5,022 per year. With that 3.2 percent increase over just six years, New York families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In New York, 2.71 million Residents Were Living in Poverty Over
the Last Two Years. In New York, 2.71 million residents - or 14.3
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available here.]
NORTH CAROLINA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in North Carolina. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating econom-
299
ic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 d month of the Clinton administration. Since the beginning of 2008, North Carolina lost 39,500 jobs - an average of 4,000
jobs per month. The unemployment rate in North Carolina now stands
at 7.0 percent, up 4.7 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in North Carolina. In 2006-2007, the typical household's income in North Carolina
remained $4,017 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for North Carolina Residents. Rising energy costs are
making it more difficult for North Carolina families to stretch their
household budgets. In October 2001, the average retail price per gallon
of gasoline in North Carolina was $1.08. The average gas price per
gallon is now $2.00 as of November 20, 2008. When adjusted for inflation, this represents an increase of 51 percent. Additionally, the
coming winter presents more challenges for families who depend on
heating oil to heat their homes. The average North Carolina household
will spend $1,098, a -7.8 percent increase since last year's winter.
[Federal Highway Administration, U.S. Department of Transportation,
available here; American Automobile Association, available here;
Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan-
cial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In North Carolina, subprime mortgages in delinquency have
increased from 23,800 in the second quarter of 2006 to 31,200 in the
second quarter of 2008. According to a 2008 analysis published by the
300
Joint Economic Committee (JEC), the number of subprime foreclosures in North Carolina will total 19,669 between the first quarter of
2008 and the end of 2009. [Mortgage Bankers Association, JEC April
I0th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost North Carolina $1 billion
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprimie foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that North Carolina home prices will fall 0.9 percent between 2007 and 2009. [JEC
April 10th State-by-State Subprime Foreclosure Report, available
here.]Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $22,000 Per North Carolina Household.
According to the JEC's recent report, the direct and indirect costs of
the Iraq War will be massive, especially if the Bush administration
continues to keep large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $78 billion for
North Carolina taxpayers by 2017; the total cost to the country will be
an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 41.4 Percent in North Carolina Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in North Carolina was $11,269, a 41.4 percent increase from 2000, while the average premium for individual coverage
was $4,144, an increase of 29.5 percent since 2000. Nationwide, the
inflation-adjusted average monthly premium for family health coverage in the United States rose by 43.5 percent from 2000 to 2006, even
as real median household income declined by 2.0 percent over the
same period. [Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, available here.]
Over the Last Two Years, 1.55 million North Carolina Residents
Had No Health Insurance. A growing number of North Carolina residents are living without health insurance. During the 2006-2007 pe-
301
riod, an average of 1.55 million North Carolina residents-I 7.2 percent of the state's population-had no health insurance; this was 3.9
percent more than during the 1999-2000 period. Across the country,
the number of Americans without health insurance totals 45.7 million,
up 7.2 million since the current Administration took office. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,134 Per
Month in North Carolina. Child care continues to be a hefty burden
on the budgets of North Carolina parents, with inflation-adjusted
monthly care for an infant averaging $613, and monthly care for two
children averaging $1,134. [National Association of Child Care Resource and Referral Agencies, available here.]
North Carolina College Tuition Rose 50.8 Percent Since 2000. Parents of college students in North Carolina have also been hard hit under the current Administration, as inflation-adjusted tuition for North
Carolina's four-year public colleges increased 50.8 percent between
the 2000-2001 and 2006-2007 school years to $4,038 per year. With
that 50.8 percent increase over just six years, North Carolina families
are finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In North Carolina, 1.32 million Residents Were Living in Poverty
Over the Last Two Years. In North Carolina, 1.32 million residents or 14.7 percent of the population - were living below the poverty line
during the 2006-2007 period. Nationally, 12.5 percent of Americans more than 37 million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See
the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
302
NORTH DAKOTA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, record-high prices for gasoline, heating oil and health care, falling real wages, and
an unprecedented loss in housing wealth. As George W. Bush
heads into his final months as president, American families are
faced with an economic downturn that follows the weakest recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in North Dakota. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, North Dakota added only 3,200 jobs, an average of
just 300 jobs per month. The unemployment rate in North Dakota now
stands at 3.4 percent, up 3.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in North Dakota. In 2006-2007, the typical household's income in North Dakota
remained $2,725 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
Rising Energy Costs Lead to Higher Gasoline Prices and Heating
Oil Costs for North Dakota Residents. Rising energy costs are making it more difficult for North Dakota families to stretch their household budgets. In October 2001, the average retail price per gallon of
gasoline in North Dakota was $1.19. The average gas price per gallon
is now $2.07 as of November 20, 2008. When adjusted for inflation,
303
this represents an increase of 46 percent. Additionally, the coming
winter presents more challenges for families who depend on heating oil
to heat their homes. The average North Dakota household will spend
$1,360, a -19.6 percent increase since last year's winter. [Federal
Highway Administration, U.S. Department of Transportation, available
here; American Automobile Association, available here; Energy Information Administration, U.S. Department of Energy, available here.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In North Dakota, subprime mortgages in delinquency have increased from 300 in the second quarter of 2006 to 400 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
North Dakota will total 398 between the first quarter of 2008 and the
end of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost North Dakota $11.1 million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $16,400 Per North Dakota Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $4 billion for North
Dakota taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
304
Health Care Premiums Rose 43.3 Percent in North Dakota Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in North Dakota was $10,329, a 43.3 percent increase
from 2000, while the average premium for individual coverage was
$3,888, an increase of 44.1 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 68,000 North Dakota Residents Had No
Health Insurance. A growing number of North Dakota residents are
living without health insurance. During the 2006-2007 period, an average of 68,000 North Dakota residents-i 1.1 percent of the state's population-had no health insurance; this was 0.4 percent more than during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since
the current Administration took office. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $879 Per
Month in North Dakota. Child care continues to be a hefty burden on
the budgets of North Dakota parents, with inflation-adjusted monthly
care for an infant averaging $461, and monthly care for two children
averaging $879. [National Association of Child Care Resource and
Referral Agencies, available here.]
North Dakota College Tuition Rose 62.4 Percent Since 2000. Parents of college students in North Dakota have also been hard hit under
the current Administration, as inflation-adjusted tuition for North Dakota's four-year public colleges increased 62.4 percent between the
2000-2001 and 2006-2007 school years to $5,471 per year. With that
62.4 percent increase over just six years, North Dakota families are
finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. De-
305
partment of Education. Digestof Education Statistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In North Dakota, 64,000 Residents Were Living in Poverty Over
the Last Two Years. In North Dakota, 64,000 residents - or 10.3 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 FactSheet on Poverty, available here.]
OHIO
The American economy is confronting immense challenges as.
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Ohio. After seven and a half years of historically low job growth, American workers have now faced ten consecutive months ofjob losses amid deteriorating economic conditions.
The recent downturn comes on top of the worst job creation record of
any president since Herbert Hoover. Since President Bush first took
office in January 2001, only 4.4 million jobs have been created nationally, as compared with 22.4 million new jobs created through the 93 rd
month of the Clinton administration. Since the beginning of 2008,
Ohio lost 25,100 jobs - an average of 2,500 jobs per month. The unemployment rate in Ohio now stands at 7.3 percent, up 5.8 percent in
2008. [Bureau of Labor Statistics, U.S. Department of Labor, available
here.]
306
Incomes Never Recovered from the Last Recession in Ohio. In
2006-2007, the typical household's income in Ohio remained $2,272
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Ohio, subprime mortgages in delinquency have increased
from 40,300 in the second quarter of 2006 to 47,400 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Ohio will total 60,307 between the first quarter of 2008 and the end of
2009. [Mortgage Bankers Association, JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property-Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Ohio $2.53 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Ohio home
prices will fall 4.4 percent between 2007 and 2009, resulting in a net
loss of $65.8 billion in housing wealth. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $21,300 Per Ohio Household. According to
the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $96 billion for Ohio taxpayers
307
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 45.0 Percent in Ohio Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Ohio was $11,260, a 45.0 percent increase from 2000,
while the average premium for individual coverage was $4,162, an increase of 37.4 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 1.23 Million Ohio Residents Had No
Health Insurance. A growing number of Ohio residents are living
without health insurance. During the 2006-2007 period, an average of
1.23 million Ohio residents-10.9 percent of the state's populationhad no health insurance; this was 0.7 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,083 Per
Month in Ohio. Child care continues to be a hefty burden on the
budgets of Ohio parents, with inflation-adjusted monthly care for an
infant averaging $576, and monthly care for two children averaging
$1,083. [National Association of Child Care Resource and Referral
Agencies, available here.]
Ohio College Tuition Rose 65.8 Percent Since 2000. Parents of col-
lege students in Ohio have also been hard hit under the current Administration, as inflation-adjusted tuition for Ohio's four-year public colleges increased 65.8 percent between the 2000-2001 and 2006-2007
school years to $9,010 per year. With that 65.8 percent increase over
just six years, Ohio families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
308
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Ohio, 1.41 milion Residents Were Living in Poverty Over the
Last Two Years. In Ohio, 1.41 million residents - or 12.5 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
OKLAHOMA
The American economy is confronting immense challenges as states
have been hit with thousands of job losses, high energy and health care
prices, falling real wages, and an unprecedented loss in housing wealth.
As George W. Bush heads into his final months as president, American
families are faced with an economic downturn that follows the weakest
recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Oklahoma. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Oklahoma added only 10,600 jobs, an average ofjust
1,100 jobs per month. The unemployment rate in Oklahoma now
stands at 4.3 percent, up 4.1 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
309
Incomes Never Recovered from the Last Recession in Oklahoma. In
2006-2007, the typical household's income in Oklahoma remained
$1,727 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial
Crisis. Under the Bush administration's watch, unregulated mortgage
originators were given financial incentives to sell risky, unaffordable
subprime mortgages to vulnerable borrowers. Declining home prices
mean many families owe more than their homes are currently worth. In
Oklahoma, subprime mortgages in delinquency have increased from
7,000 in the second quarter of 2006 to 9,600 in the second quarter of
2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Oklahoma
will total 8,256 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values and
Household Wealth. The mortgage foreclosure crisis is reducing home
values and declining property taxes. According to the JEC, subprime
mortgage-related foreclosures will cost Oklahoma $240 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $24,500 Per Oklahoma Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $34 billion for Oklahoma taxpayers by 2017; the total cost to the country will be an estimated $2.8
trillion. [JEC November 13th Iraq War Cost Report, available here.]
310
Health Care Premiums Rose 31.1 Percent in Oklahoma Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Oklahoma was $10,900, a 31.1 percent increase from
2000, while the average premium for individual coverage was $4,083,
an increase of 24.6 percent since 2000. Nationwide, the inflationadjusted average monthly premium for family health coverage in the
United States rose by 43.5 percent from 2000 to 2006, even as real median household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 646,000 Oklahoma Residents Had No
Health Insurance. A growing number of Oklahoma residents are living
without health insurance. During the 2006-2007 period, an average of
646,000 Oklahoma residents-I 8.4 percent of the state's populationhad no health insurance; this was 1.4 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $742 Per Month
in Oklahoma. Child care continues to be a hefty burden on the budgets
of Oklahoma parents, with inflation-adjusted monthly care for an infant averaging $393, and monthly care for two children averaging
$742. [National Association of Child Care Resource and Referral
Agencies, available here.]
Oklahoma College Tuition Rose 58.9 Percent Since 2000. Parents of
college students in Oklahoma have also been hard hit under the current
Administration, as inflation-adjusted tuition for Oklahoma's four-year
public colleges increased 58.9 percent between the 2000-2001 and
2006-2007 school years to $4,176 per year. With that 58.9 percent increase over just six years, Oklahoma families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
311
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Oklahoma, 503,000 Residents Were Living in Poverty Over the Lasi
Two Years. In Oklahoma, 503,000 residents - or 14.3 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
OREGON
The American economy is confronting immense challenges as states
have been hit with thousands of job losses, high energy and health care
prices, falling real wages, and an unprecedented loss in housing wealth.
As George W. Bush heads into his final months as president, American
families are faced with an economic downturn that follows the weakest
recovery in the past century. The sub-par gains of the last seven and a
half years only compound the burden for American families now
threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Oregon. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 200 1, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93 rd month of the Clinton administration. Since the beginning of 2008, Oregon lost 29,700 jobs - an average of 3,000 jobs
per month. The unemployment rate in Oregon now stands at 7.3 percent, up 5.4 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
312
Incomes Never Recovered from the Last Recession in Oregon. In
2006-2007, the typical household's income in Oregon remained $1,515
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Oregon, subprime mortgages in delinquency have increased
from 5,800 in the second quarter of 2006 to 9,800 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Oregon will
total 11,170 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Oregon $783 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Oregon
home prices will fall 12.4 percent between 2007 and 2009, resulting in
a net loss of $34.4 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $18,600 Per Oregon Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $27 billion for Oregon taxpay-
313
ers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 48.3 Percent in Oregon Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Oregon was $11,982, a 48.3 percent increase from 2000,
while the average premium for individual coverage was $4,253, an increase of 42.0 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 648,000 Oregon Residents Had No
Health Insurance. A growing number of Oregon residents are living
without health insurance. During the 2006-2007 period, an average of
648,000 Oregon residents-I 7.3 percent of the state's population-had
no health insurance; this was 4.6 percent more than during the 19992000 period. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,046 Per
Month in Oregon. Child care continues to be a hefty burden on the
budgets of Oregon parents, with inflation-adjusted monthly care for an
infant averaging $587, and monthly care for two children averaging
$1,046. [National Association of Child Care Resource and Referral
Agencies, available here.]
Oregon College Tuition Rose 30.3 Percent Since 2000. Parents of
college students in Oregon have also been hard hit under the current
Administration, as inflation-adjusted tuition for Oregon's four-year
public colleges increased 30.3 percent between the 2000-2001 and
2006-2007 school years to $5,598 per year. With that 30.3 percent increase over just six years, Oregon families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
314
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Oregon, 460,000 Residents Were Living in Poverty Over the
Last Two Years. In Oregon, 460,000 residents - or 12.3 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
PENNSYLVANIA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Pennsylvania. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Pennsylvania lost 24,300 jobs - an average of 2,400
jobs per month. The unemployment rate in Pennsylvania now stands at
5.8 percent, up 4.4 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
315
Incomes Never Recovered from the Last Recession in Pennsylvania. In 2006-2007, the typical household's income in Pennsylvania
remained $272 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Pennsylvania, subprime mortgages in delinquency have increased from 33,600 in the second quarter of 2006 to 44,600 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Pennsylvania will total 36,102 between the first quarter of
2008 and the end of 2009. [Mortgage Bankers Association, JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Pennsylvania $1.95 billion in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
Pennsylvania home prices will fall 3.1 percent between 2007 and 2009,
resulting in a net loss of $37 billion in housing wealth. [JEC April 1Oth
State-by-State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $21,900 Per Pennsylvania Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $107 billion for
316
Pennsylvania taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 46.4 Percent in Pennsylvania Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in Pennsylvania was $12,098, a 46.4 percent increase
from 2000, while the average premium for individual coverage was
$4,387, an increase of 44.7 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 1.21 Million Pennsylvania Residents
Had No Health Insurance. A growing number of Pennsylvania residents are living without health insurance. During the 2006-2007 period, an average of 1.21 million Pennsylvania residents-9.8 percent of
the state's population-had no health insurance; this was 1.9 percent
more than during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2
million since the current Administration took office. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $1,311 Per
Month in Pennsylvania. Child care continues to be a hefty burden on
the budgets of Pennsylvania parents, with inflation-adjusted monthly
care for an infant averaging $709, and monthly care for two children
averaging $1,311. [National Association of Child Care Resource and
Referral Agencies, available here.]
Pennsylvania College Tuition Rose 28.2 Percent Since 2000. Parents
of college students in Pennsylvania have also been hard hit under the
current Administration, as inflation-adjusted tuition for Pennsylvania's
four-year public colleges increased 28.2 percent between the 20002001 and 2006-2007 school years to $9,092 per year. With that 28.2
percent increase over just six years, Pennsylvania families are finding
it more and more difficult to afford to send their children to college,
and they are not alone. Nationally, public college tuition has risen at
317
more than double the rate of inflation in recent years. Between the
2000-2001 and 2006-2007 academic years, average inflation-adjusted
tuition and fees at U.S. public colleges and universities increased by
38.5 percent. [Institute of Education Sciences, U.S. Department of
Education. Digest of Education Statistics "Average undergraduate tui-
tion and fees and room and board rates charged for full-time students
in degree-granting institutions, by type and control of institution and
state orjurisdiction". Data for 2000-2001 available here; data for 20062007 available here.]
In Pennsylvania, 1.34 Million Residents Were Living in Poverty
Over the Last Two Years. In Pennsylvania, 1.34 million residents or 10.8 percent of the population - were living below the poverty line
during the 2006-2007 period. Nationally, 12.5 percent of Americans more than 37 million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See
the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
RHODE ISLAND
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Rhode Island. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Rhode Island lost 14,800 jobs - an average of 1,500
jobs per month. The unemployment rate in Rhode Island now stands at
318
9.3 percent, up 5.2 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Rhode Island. In 2006-2007, the typical household's income in Rhode Island
remained $2,764 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Rhode Island, subprime mortgages in delinquency have increased from 3,000 in the second quarter of 2006 to 4,700 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Rhode Island will total 5,207 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April I0th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Rhode Island $572 million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
Rhode Island home prices will fall 18.6 percent between 2007 and
2009, resulting in a net loss of $16.4 billion in housing wealth. [JEC
April I 0th State-by-State Subprime Foreclosure Report, available
here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $25,700 Per Rhode Island Household. Ac-
319
cording to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $10 billion for
Rhode Island taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 27.6 Percent in Rhode Island Since
2001. In 2006, the average inflation-adjusted health care premium for
family coverage in Rhode Island was $12,242, a 27.6 percent increase
from 2001, while the average premium for individual coverage was
$4,714, an increase of 28.7 percent since 2001. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 33.1 percent from 2001 to 2006, even as real
median household income rose just 0.2 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 102,000 Rhode Island Residents Had No
Health Insurance. A growing number of Rhode Island residents are
living without health insurance. During the 2006-2007 period, an average of 102,000 Rhode Island residents-9.7 percent of the state's population-had no health insurance; this was 3.1 percent more than during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since
the current Administration took office. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,530 Per
Month in Rhode Island. Child care continues to be a hefty burden on
the budgets of Rhode Island parents, with inflation-adjusted monthly
care for an infant averaging $839, and monthly care for two children
averaging $1,530. [National Association of Child Care Resource and
Referral Agencies, available here.]
Rhode Island College Tuition Rose 23.9 Percent Since 2000. Parents
of college students in Rhode Island have also been hard hit under the
current Administration, as inflation-adjusted tuition for Rhode Island's
four-year public colleges increased 23.9 percent between the 20002001 and 2006-2007 school years to $6,698 per year. With that 23.9
320
percent increase over just six years, Rhode Island families are finding
it more and more difficult to afford to send their children to college,
and they are not alone. Nationally, public college tuition has risen at
more than double the rate of inflation in recent years. Between the
2000-2001 and 2006-2007 academic years, average inflation-adjusted
tuition and fees at U.S. public colleges and universities increased by
38.5 percent. [Institute of Education Sciences, U.S. Department of
Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board rates charged for full-time students
in degree-granting institutions, by type and control of institution and
state or jurisdiction". Data for 2000-2001 available here. data for 20062007 available here.]
In Rhode Island, 104,000 Residents Were Living in Poverty Over
the Last Two Years. In Rhode Island, 104,000 residents - or 10.0 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
SOUTH CAROLINA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in South Carolina. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
321
through the 93rd month of the Clinton administration. Since the be-
ginning of 2008, South Carolina lost 19,800 jobs - an average of 2,000
jobs per month. The unemployment rate in South Carolina now stands
at 8.0 percent, up 6.2 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in South Carolina. In 2006-2007, the typical household's income in South Carolina
remained $2,817 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In South Carolina, subprime mortgages in delinquency have
increased from 12,200 in the second quarter of 2006 to 16,900 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in South Carolina will total 14,336 between the first quarter of
2008 and the end of 2009. [Mortgage Bankers Association, JEC April
10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost South Carolina $680
million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. [JEC April I0th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $15,200 Per South Carolina Household.
322
According to the JEC's recent report, the direct and indirect costs of
the Iraq War will be massive, especially if the Bush administration
continues to keep large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $26 billion for
South Carolina taxpayers by 2017; the total cost to the country will be
an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.)
Health Care Premiums Rose 42.6 Percent in South Carolina Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in South Carolina was $11,275, a 42.6 percent increase from 2000, while the average premium for individual coverage
was $4,130, an increase of 32.1 percent since 2000. Nationwide, the
inflation-adjusted average monthly premium for family health coverage in the United States rose by 43.5 percent from 2000 to 2006, even
as real median household income declined by 2.0 percent over the
same period. [Agency for Healthcare Research and Quality, U.S. Department of Health and Human Services, available here.]
Over the Last Two Years, 696,000 South Carolina Residents Had
No Health Insurance. A growing number of South Carolina residents
are living without health insurance. During the 2006-2007 period, an
average of 696,000 South Carolina residents-16.2 percent of the
state's population-had no health insurance; this was 2.8 percent more
than during the 1999-2000 period. Across the country, the number of
Americans without health insurance totals 45.7 million, up 7.2 million
since the current Administration took office. [Bureau of the Census,
U.S. Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $788 Per
Month in South Carolina. Child care continues to be a hefty burden
on the budgets of South Carolina parents, with inflation-adjusted
monthly care for an infant averaging $418, and monthly care for two
children averaging $788. [National Association of Child Care Resource and Referral Agencies, available here.]
South Carolina College Tuition Rose 45.1 Percent Since 2000. Parents of college students in South Carolina have also been hard hit under the current Administration, as inflation-adjusted tuition for South
Carolina's four-year public colleges increased 45.1 percent between
the 2000-2001 and 2006-2007 school years to $7,914 per year. With
323
that 45.1 percent increase over just six years, South Carolina families
are finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Departnent of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In South Carolina, 545,000 Residents Were Living in Poverty Over
the Last Two Years. In South Carolina, 545,000 residents - or 12.7
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available here.]
SOUTH DAKOTA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the-burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in South Dakota. After seven and a half
years of historically low job growth, American workers have now
faced ten consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
324
through the 93rd month of the Clinton administration. Since the beginning of 2008, South Dakota added only 4,600 jobs, an average of
just 500 jobs per month. The unemployment rate in South Dakota now
stands at 3.3 percent, up 2.9 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in South Dako-
ta. In 2006-2007, the typical household's income in South Dakota
remained $2,326 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan-
cial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unafford-
able subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In South Dakota, subprime mortgages in delinquency have increased from 600 in the second quarter of 2006 to 800 in the second
quarter of-2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
South Dakota will total 728 between the first quarter of 2008 and the
end of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, sub-
prime mortgage-related foreclosures will cost South Dakota $22.9 million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $ 100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. [JEC April I0th State-byState Subprime Foreclosure Report, available here.]
325
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $17,800 Per South Dakota Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $6 billion for South
Dakota taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 27.4 Percent in South Dakota Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in South Dakota was $10,139, a 27.4 percent increase
from 2000, while the average premium for individual coverage was
$4,043, an increase of 34.0 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 86,000 South Dakota Residents Had No
Health Insurance. A growing number of South Dakota residents are
living without health insurance. During the 2006-2007 period, an average of 86,000 South Dakota residents-I 1.0 percent of the state's population-had no health insurance; this was 0.7 percent more than during the 1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since
the current Administration took office. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $888 Per
Month in South Dakota. Child care continues to be a hefty burden on
the budgets of South Dakota parents, with inflation-adjusted monthly
care for an infant averaging $467, and monthly care for two children
averaging $888. [National Association of Child Care Resource and
Referral Agencies, available here.]
326
South Dakota College Tuition Rose 27.0 Percent Since 2000. Parents of college students in South Dakota have also been hard hit under
the current Administration, as inflation-adjusted tuition for South Dakota's four-year public colleges increased 27.0 percent between the
2000-2001 and 2006-2007 school years to $5,077 per year. With that
27.0 percent increase over just six years, South Dakota families are
finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In South Dakota, 78,000 Residents Were Living in Poverty Over
the Last Two Years. In South Dakota, 78,000 residents - or 10.1 percent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
TENNESSEE
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Tennessee. After seven and a half years
of historically low job growth, American workers have now faced ten
327
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Tennessee lost 30,200 jobs - an average of 3,000 jobs
per month. The unemployment rate in Tennessee now stands at 7.0
percent, up 5.0 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Tennessee.
In 2006-2007, the typical household's income in Tennessee remained
$1,719 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Tennessee, subprime mortgages in delinquency have increased from 21,700 in the second quarter of 2006 to 29,800 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Tennessee will total 15,678 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Tennessee $619 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
328
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $19,300 Per Tennessee Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $46 billion for Tennessee taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 31.0 Percent in Tennessee Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Tennessee was $10,287, a 31.0 percent increase from
2000, while the average premium for individual coverage was $3,856,
an increase of 25.2 percent since 2000. Nationwide, the inflationadjusted average monthly premium for family health coverage in the
United States rose by 43.5 percent from 2000 to 2006, even as real median household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 846,000 Tennessee Residents Had No
Health Insurance. A growing number of Tennessee residents are living without health insurance. During the 2006-2007 period, an average
of 846,000 Tennessee residents-14.0 percent of the state's population-had no health insurance; this was 4.1 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $810 Per
Month in Tennessee. Child care continues to be a hefty burden on the
budgets of Tennessee parents, with inflation-adjusted monthly care for
an infant averaging $438, and monthly care for two children averaging
$810. [National Association of Child Care Resource and Referral
Agencies, available here.]
329
Tennessee College Tuition Rose 45.8 Percent Since 2000. Parents of
college students in Tennessee have also been hard hit under the current
Administration, as inflation-adjusted tuition for Tennessee's four-year
public colleges increased 45.8 percent between the 2000-2001 and
2006-2007 school years to $5,009 per year. With that 45.8 percent increase over just six years, Tennessee families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Tennessee, 893,000 Residents Were Living in Poverty Over the
Last Two Years. In Tennessee, 893,000 residents - or 14.8 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
TEXAS
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Texas. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
330
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Texas added only 190,800 jobs, an average ofjust
19,100 jobs per month. The unemployment rate in Texas now stands
at 5.6 percent, up 4.2 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Texas. In
2006-2007, the typical household's income in Texas remained $2,010
lower than it had been in 1999-2000, before the recession of 200 1. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Texas, subprime mortgages in delinquency have increased
from 62,100 in the second quarter of 2006 to 81,400 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Texas will total 53,936 between the first quarter of 2008 and the end of
2009. [Mortgage Bankers Association, JEC April 10th State-by-State
Subprimne Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Texas $2.37 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
331
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $27,400 Per Texas Household. According
to the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $226 billion for Texas taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 51.2 Percent in Texas Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Texas was $12,030, a 51.2 percent increase from 2000,
while the average premium for individual coverage was $4,253, an increase of 35.1 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 5.83 million Texas Residents Had No
Health Insurance. A growing number of Texas residents are living
without health insurance. During the 2006-2007 period, an average of
5.83 million Texas residents-24.8 percent of the state's populationhad no health insurance; this was 2.6 percent more than during the
1999-2000 period. Across the country, the number of Americans without health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $870 Per
Month in Texas. Child care continues to be a hefty burden on the
budgets of Texas parents, with inflation-adjusted monthly care for an
infant averaging $478, and monthly care for two children averaging
$870. [National Association of Child Care Resource and Referral
Agencies, available here.]
Texas College Tuition Rose 56.7 Percent Since 2000. Parents of col-
lege students in Texas have also been hard hit under the current Ad-
332
ministration, as inflation-adjusted tuition for Texas's four-year public
colleges increased 56.7 percent between the 2000-2001I and 2006-2007
school years to $5,114 per year. With that 56.7 percent increase over
just six years, Texas families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Texas, 3.86 million Residents Were Living in Poverty Over the
Last Two Years. In Texas, 3.86 million residents - or 16.5 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
UTAH
The Amiencan economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Utah. After seven and a half years of historically low job growth, American workers have now faced ten consecutive months ofjob losses amid deteriorating economic conditions.
The recent downturn comes on top of the worst job creation record of
any president since Herbert Hoover. Since President Bush first took
333
office in January 2001, only 4.4 million jobs have been created nationally, as compared with 22.4 million new jobs created through the 9 3rd
month of the Clinton administration. Since the beginning of 2008,
Utah lost 9,800 jobs - an average of 1,000 jobs per month. The unemployment rate in Utah now stands at 3.5 percent, up 2.9 percent in
2008. [Bureau of Labor Statistics, U.S. Department of Labor, available
here.)
Incomes Never Recovered from the Last Recession in Utah. In
2006-2007, the typical household's income in Utah remained $2,412
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unafford-
able subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Utah, subprime mortgages in delinquency have increased
from 5,800 in the second quarter of 2006 to 7,900 in the second quarter
of 2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Utah will
total 9,041 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Utah $542 million in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Utah home
prices will fall 16.5 percent between 2007 and 2009, resulting in a net
loss of $18.6 billion in housing wealth. [JEC April 10th State-by-State
Subprime Foreclosure Report, available here.]
334
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $21,500 Per Utah Household. According to
the JEC's recent report, the direct and indirect costs of the Iraq War
will be massive, especially if the Bush administration continues to keep
large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $18 billion for Utah taxpayers
by 2017; the total cost to the country will be an estimated $2.8 trillion.
[JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 47.9 Percent in Utah Since 2000. In
2006, the average inflation-adjusted health care premium for family
coverage in Utah was $11,323, a 47.9 percent increase from 2000,
while the average premium for individual coverage was $3,971, an increase of 26.6 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 391,000 Utah Residents Had No Health
Insurance. A growing number of Utah residents are living without
health insurance. During the 2006-2007 period, an average of 391,000
Utah residents-15.1 percent of the state's population-had no health
insurance; this was 2.9 percent more than during the 1999-2000 period.
Across the country, the number of Americans without health insurance
totals 45.7 million, up 7.2 million since the current Administration took
office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Health Insurance
Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $945 Per
Month in Utah. Child care continues to be a hefty burden on the
budgets of Utah parents, with inflation-adjusted monthly care for an
infant averaging $522, and monthly care for two children averaging
$945. [National Association of Child Care Resource and Referral
Agencies, available here.]
Utah College Tuition Rose 423 Percent Since 2000. Parents of college students in Utah have also been hard hit under the current Admin-
335
istration, as inflation-adjusted tuition for Utah's four-year public colleges increased 42.3 percent between the 2000-2001 and 2006-2007
school years to $3,757 per year. With that 42.3 percent increase over
just six years, Utah families are finding it more and more difficult to
afford to send their children to college, and they are not alone. Nationally, public college tuition has risen at more than double the rate of
inflation in recent years. Between the 2000-2001 and 2006-2007 academic years, average inflation-adjusted tuition and fees at U.S. public
colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of Education Statistics "Average undergraduate tuition and fees and room and board
rates charged for full-time students in degree-granting institutions, by
type and control of institution and state or jurisdiction". Data for 20002001 available here; data for 2006-2007 available here.]
In Utah, 245,000 Residents Were Living in Poverty Over the Last
Two Years. In Utah, 245,000 residents - or 9.4 percent of the population - were living below the poverty line during the 2006-2007 period.
Nationally, 12.5 percent of Americans - more than 37 million people were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Poverty, available here.]
VERMONT
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Vermont. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
336
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 9 3 rd month of the Clinton administration. Since the beginning of 2008, Vermont lost 1,400 jobs - an average of 100 jobs per
month. The unemployment rate in Vermont now stands at 5.2 percent,
up 3.9 percent in 2008. [Bureau of Labor Statistics, U.S. Department of
Labor, available here.]
Incomes Never Recovered from the Last Recession in Vermont. In
2006-2007, the typical household's income in Vermont remained $725
lower than it had been in 1999-2000, before the recession of 2001. This
is the first economic recovery where incomes did not return to their
pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Vermont, subprime mortgages in delinquency have increased
from 600 in the second quarter of 2006 to 900 in the second quarter of
2008. According to a 2008 analysis published by the Joint Economic
Committee (JEC), the number of subprime foreclosures in Vermont
will total 1,1 11 between the first quarter of 2008 and the end of 2009.
[Mortgage Bankers Association, JEC April 10th State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Vermont $63.6 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Vermont
home prices will fall 10.0 percent between 2007 and 2009, resulting in
a net loss of $3.75 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
337
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $18,000 Per Vermont Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $5 billion for Vermont
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 22.3 Percent in Vermont Since 2001.
In 2006, the average inflation-adjusted health care premium for family
coverage in Vermont was $11,931, a 22.3 percent increase from 2001,
while the average premium for individual coverage was $4,433, an increase of 22.9 percent since 2001. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 33.1 percent from 2001 to 2006, even as real median
household income rose just 0.2 percent over the same period. [Agency
for Healthcare Research and Quality, U.S. Department of Health and
Human Services, available here.]
Over the Last Two Years, 66,000 Vermont Residents Had No
Health Insurance. A growing number of Vermnont residents are living
without health insurance. During the 2006-2007 period, an average of
66,000 Vermont residents-10.7 percent of the state's population-had
no health insurance; this was 1.4 percent more than during the 19992000 period. Across the country, the number of Americans without
health insurance totals 45.7 million, up 7.2 million since the current
Administration took office. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,228 Per
Month in Vermont. Child care continues to be a hefty burden on the
budgets of Vermont parents, with inflation-adjusted monthly care for
an infant averaging $649, and monthly care for two children averaging
$1,228. [National Association of Child Care Resource and Referral
Agencies, available here.]
Vermont College Tuition Rose 14.4 Percent Since 2000. Parents of
338
college students in Vermont have also been hard hit under the current
Administration, as inflation-adjusted tuition for Vermont's four-year
public colleges increased 14.4 percent between the 2000-2001 and
2006-2007 school years to $9,783 per year. With that 14.4 percent increase over just six years, Vermont families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Vermont, 54,000 Residents Were Living in Poverty Over the
Last Two Years. In Vermont, 54,000 residents - or 8.8 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.)
VIRGINIA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Virginia. After seven and a half years of
historically low job growth, American workers have now faced ten
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
339
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Virginia added only 3,900 jobs, an average ofjust 400
jobs per month. The unemployment rate in Virginia now stands at 4.4
percent, up 3.2 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Virginia. In
2006-2007, the typicaf household's income in Virginia remained
$2,140 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Virginia, subprime mortgages in delinquency have increased
from 14,600 in the second quarter of 2006 to 29,100 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number of subprime foreclosures in
Virginia will total 25,740 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Virginia $2.27 billion in
2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $ 100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Virginia
home prices will fall 13.5 percent between 2007 and 2009, resulting in
a net loss of $135 billion in housing wealth. [JEC April 10th State-by-
340
State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $26,100 Per Virginia Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $77 billion for Virginia
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Health Care Premiums Rose 47.7 Percent in Virginia Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Virginia was $11,832, a 47.7 percent increase from 2000,
while the average premium for individual coverage was $4,210, an increase of 36.5 percent since 2000. Nationwide, the inflation-adjusted
average monthly premium for family health coverage in the United
States rose by 43.5 percent from 2000 to 2006, even as real median
household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 1.07 Million Virginia Residents Had No
Health Insurance. A growing number of Virginia residents are living
without health insurance. During the 2006-2007 period, an average of
1.07 million Virginia residents-14. 1 percent of the state's population-had no health insurance; this was 2.7 percent more than during
the 1999-2000 period. Across the country, the number of Americans
without health insurance totals 45.7 million, up 7.2 million since the
current Administration took office. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,570 Per
Month in Virginia. Child care continues to be a hefty burden on the
budgets of Virginia parents, with inflation-adjusted monthly care for an
infant averaging $874, and monthly care for two children averaging
$1,570. [National Association of Child Care Resource and Referral
Agencies, available here.]
341
Virginia College Tuition Rose 48.7 Percent Since 2000. Parents of
college students in Virginia have also been hard hit under the current
Administration, as inflation-adjusted tuition for Virginia's four-year
public colleges increased 48.7 percent between the 2000-2001 and
2006-2007 school years to $6,447 per year. With that 48.7 percent increase over just six years, Virginia families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
Education Statistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Virginia, 657,000 Residents Were Living in Poverty Over the
Last Two Years. In Virginia, 657,000 residents - or 8.6 percent of the
population - were living below the poverty line during the 2006-2007
period. Nationally, 12.5 percent of Americans - more than 37 million
people - were living in poverty as of 2007. [Bureau of the Census, U.S.
Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Poverty, available here.]
WASHINGTON
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Washington. After seven and a half years
of historically low job growth, American workers have now faced ten
consecutive months ofjob losses amid deteriorating economic condi-
342
tions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Washington lost 29,300 jobs - an average of 2,900
jobs per month. The unemployment rate in Washington now stands at
6.3 percent, up 4.6 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Washington.
In 2006-2007, the typical household's income in Washington remained
$3,296 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Washington, subprime mortgages in delinquency have increased from 11,800 in the second quarter of 2006 to 17,900 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Washington will total 18,123 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Washington $1.56 billion in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $ 100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. The JEC estimates that
Washington home prices will fall 5.4 percent between 2007 and 2009,
343
resulting in a net loss of $19.4 billion in housing wealth. [JEC April
I0th State-by-State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $24,800 Per Washington Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $62 billion for
Washington taxpayers by 2017; the total cost to the country will be an
estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 49.4 Percent in Washington Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in Washington was $11,786, a 49.4 percent increase
from 2000, while the average premium for individual coverage was
$4,185, an increase of 25.8 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 741,000 Washington Residents Had No
Health Insurance. A growing number of Washington residents are
living without health insurance. During the 2006-2007 period, an average of 741,000 Washington residents-I 1.6 percent of the state's population-had no health insurance. Across the country, the number of
Americans without health insurance totals 45.7 million, up 7.2 million
since the current Administration took office. [Bureau of the Census,
U.S. Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,417 Per
Month in Washington. Child care continues to be a hefty burden on
the budgets of Washington parents, with inflation-adjusted monthly
care for an infant averaging $805, and monthly care for two children
averaging $1,417. [National Association of Child Care Resource and
Referral Agencies, available here.]
344
Washington College Tuition Rose 32.9 Percent Since 2000. Parents
of college students in Washington have also been hard hit under the
current Administration, as inflation-adjusted tuition for Washington's
four-year public colleges increased 32.9 percent between the 20002001 and 2006-2007 school years to $5,636 per year. With that 32.9
percent increase over just six years, Washington families are finding it
more and more difficult to afford to send their children to college, and
they are not alone. Nationally, public college tuition has risen at more
than double the rate of inflation in recent years. Between the 20002001 and 2006-2007 academic years, average inflation-adjusted tuition
and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education.
Digest of EducationStatistics "Average undergraduate tuition and fees
and room and board rates charged for full-time students in degreegranting institutions, by type and control of institution and state orjurisdiction". Data for 2000-2001 available here; data for 2006-2007
available here.]
In Washington, 581,000 Residents Were Living in Poverty Over
the Last Two Years. In Washington, 581,000 residents - or 9. lpercent of the population - were living below the poverty line during the
2006-2007 period. Nationally, 12.5 percent of Americans - more than
37 million people - were living in poverty as of 2007. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Poverty, available here.]
WEST VIRGINIA
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in West Virginia. After seven and a half
years of historically low job growth, American workers have now
345
faced ten consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation record of any president since Herbert Hoover. Since President
Bush first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, West Virginia added only 1,000 jobs, an average of
just 100 jobs per month. The unemployment rate in West Virginia now
stands at 4.7 percent, up 4.6 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in West Virginia. In 2006-2007, the typical household's income in West Virginia
remained $4,874 lower than it had been in 1999-2000, before the recession of 2001. This is the first economic recovery where incomes did
not return to their pre-recession peak. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008
Fact Sheet on Income, available here. All dollar values are inflationadjusted to 2007 dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan-
cial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In West Virginia, subprime mortgages in delinquency have increased from 2,800 in the second quarter of 2006 to 4,100 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in West Virginia will total 1,670 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost West Virginia $58.7 million in 2008 and 2009. Nationally, the expected economic costs of
forecast subprime foreclosures total nearly $100 billion in these two
years alone. Moreover, declining home prices across the country are
stripping families of their personal housing wealth, which had until
recently largely driven consumer spending. [JEC April 10th State-by-
346
State Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $13,400 Per West Virginia Household.
According to the JEC's recent report, the direct and indirect costs of
the Iraq War will be massive, especially if the Bush administration
continues to keep large numbers of troops there. Even assuming significant force reductions, the cost of the Iraq War will total $10 billion for
West Virginia taxpayers by 2017; the total cost to the country will be
an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report,
available here.]
Health Care Premiums Rose 41.6 Percent in West Virginia Since
2000. In 2006, the average inflation-adjusted health care premium for
family coverage in West Virginia was $11,611, a 41.6 percent increase
from 2000, while the average premium for individual coverage was
$4,476, an increase of 35.2 percent since 2000. Nationwide, the inflation-adjusted average monthly premium for family health coverage in
the United States rose by 43.5 percent from 2000 to 2006, even as real
median household income declined by 2.0 percent over the same period. [Agency for Healthcare Research and Quality, U.S. Department
of Health and Human Services, available here.]
Over the Last Two Years, 249,000 West Virginia Residents Had
No Health Insurance. A growing number of West Virginia residents
are living without health insurance. During the 2006-2007 period, an
average of 249,000 West Virginia residents-13.8 percent of the
state's population-had no health insurance. Across the country, the
number of Americans without health insurance totals 45.7 million, up
7.2 million since the current Administration took office. [Bureau of the
Census, U.S. Department of Commerce, available here. See the JEC
August 26, 2008 Fact Sheet on Health Insurance Coverage, available
here.]
Child Care Costs For Two-Child Families Averaged $775 Per
Month in West Virginia. Child care continues to be a hefty burden on
the budgets of West Virginia parents, with inflation-adjusted monthly
care for an infant averaging $430, and monthly care for two children
averaging $775. [National Association of Child Care Resource and
Referral Agencies, available here.]
347
West Virginia College Tuition Rose 36.9 Percent Since 2000. Parents of college students in West Virginia have also been hard hit under
the current Administration, as inflation-adjusted tuition for West Virginia's four-year public colleges increased 36.9 percent between the
2000-2001 and 2006-2007 school years to $4,063 per year. With that
36.9 percent increase over just six years, West Virginia families are
finding it more and more difficult to afford to send their children to
college, and they are not alone. Nationally, public college tuition has
risen at more than double the rate of inflation in recent years. Between
the 2000-2001 and 2006-2007 academic years, average inflationadjusted tuition and fees at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of EducationStatistics "Average undergraduate tuition and fees and room and board rates charged for fulltime students in degree-granting institutions, by type and control of
institution and state or jurisdiction". Data for 2000-2001 available
here; data for 2006-2007 available here.]
In West Virginia, 271,000 Residents Were Living in Poverty Over
the Last Two Years. In West Virginia, 271,000 residents - or 15.0
percent of the population - were living below the poverty line during
the 2006-2007 period. Nationally, 12.5 percent of Americans - more
than 37 million people - were living in poverty as of 2007. [Bureau of
the Census, U.S. Department of Commerce, available here. See the
JEC August 26, 2008 Fact Sheet on Poverty, available'here.]
WISCONSIN
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that foMlows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Jobs Are Disappearing in Wisconsin. After seven and a half years
of historically low job growth, American workers have now faced ten
348
consecutive months ofjob losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 93rd month of the Clinton administration. Since the beginning of 2008, Wisconsin lost 26,100 jobs - an average of 2,600 jobs
per month. The unemployment rate in Wisconsin now stands at 5.1
percent, up 4.8 percent in 2008. [Bureau of Labor Statistics, U.S. Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Wisconsin.
In 2006-2007, the typical household's income in Wisconsin remained
$3,327 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26, 2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Financial Crisis. Under the Bush administration's watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Wisconsin, subprime mortgages in delinquency have increased from 9,100 in the second quarter of 2006 to 13,100 in the
second quarter of 2008. According to a 2008 analysis published by the
Joint Economic Committee (JEC), the number of subprime foreclosures in Wisconsin will total 14,640 between the first quarter of 2008
and the end of 2009. [Mortgage Bankers Association, JEC April 10th
State-by-State Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring Property Values
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Wisconsin $709 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. The JEC estimates that Wisconsin
349
home prices will fall 2.5 percent between 2007 and 2009, resulting in a
net loss of $12.5 billion in housing wealth. [JEC April 10th State-byState Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $20,400 Per Wisconsin Household. According to the JEC's recent report, the direct and indirect costs of the
Iraq War will be massive, especially if the Bush administration continues to keep large numbers of troops there. Even assuming significant
force reductions, the cost of the Iraq War will total $46 billion for Wisconsin taxpayers by 2017; the total cost to the country will be an estimated $2.8 trillion. [JEC November 13th Iraq War Cost Report, available here.]
Health Care Premiums Rose 43.0 Percent in Wisconsin Since 2000.
In 2006, the average inflation-adjusted health care premium for family
coverage in Wisconsin was $11,970, a 43.0 percent increase from
2000, while the average premium for individual coverage was $4,354,
an increase of 30.9 percent since 2000. Nationwide, the inflationadjusted average monthly premium for family health coverage in the
United States rose by 43.5 percent from 2000 to 2006, even as real median household income declined by 2.0 percent over the same period.
[Agency for Healthcare Research and Quality, U.S. Department of
Health and Human Services, available here.]
Over the Last Two Years, 466,000 Wisconsin Residents Had No
Health Insurance. A growing number of Wisconsin residents are living without health insurance. During the 2006-2007 period, an average
of 466,000 Wisconsin residents-8.5 percent of the state's population-had no health insurance. Across the country, the number of
Americans without health insurance totals 45.7 million, up 7.2 million
since the current Administration took office. [Bureau of the Census,
U.S. Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,344 Per
Month in Wisconsin. Child care continues to be a hefty burden on the
budgets of Wisconsin parents, with inflation-adjusted monthly care-for
an infant averaging $734, and monthly care for two children averaging
$1,344. [National Association of Child Care Resource and Referral
Agencies, available here.]
350
Wisconsin College Tuition Rose 54.5 Percent Since 2000. Parents of
college students in Wisconsin have also been hard hit under the current
Administration, as inflation-adjusted tuition for Wisconsin's four-year
public colleges increased 54.5 percent between the 2000-2001 and
2006-2007 school years to $6,048 per year. With that 54.5 percent increase over just six years, Wisconsin families are finding it more and
more difficult to afford to send their children to college, and they are
not alone. Nationally, public college tuition has risen at more than
double the rate of inflation in recent years. Between the 2000-2001 and
2006-2007 academic years, average inflation-adjusted tuition and fees
at U.S. public colleges and universities increased by 38.5 percent. [Institute of Education Sciences, U.S. Department of Education. Digest of
EducationStatistics "Average undergraduate tuition and fees and room
and board rates charged for full-time students in degree-granting institutions, by type and control of institution and state or jurisdiction". Data for 2000-2001 available here; data for 2006-2007 available here.]
In Wisconsin, 578,000 Residents Were Living in Poverty Over the
Last Two Years. In Wisconsin, 578,000 residents - or 10.6 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
WYOMING
The American economy is confronting immense challenges as
states have been hit with thousands of job losses, high energy and
health care prices, falling real wages, and an unprecedented loss in
housing wealth. As George W. Bush heads into his final months as
president, American families are faced with an economic downturn
that follows the weakest recovery in the past century. The sub-par
gains of the last seven and a half years only compound the burden
for American families now threatened with the devastating consequences of a recession.
Vanishing Opportunities and Rising Prices
Job Growth Has Stalled in Wyoming. After seven and a half years
of historically low job growth, American workers have now faced ten
351
consecutive months of job losses amid deteriorating economic conditions. The recent downturn comes on top of the worst job creation
record of any president since Herbert Hoover. Since President Bush
first took office in January 2001, only 4.4 million jobs have been
created nationally, as compared with 22.4 million new jobs created
through the 931d month of the Clinton administration. Since the beginning of 2008, Wyoming added only 7,600 jobs, an average ofjust
800 jobs per month. The unemployment rate in Wyoming now stands
at 3.3 percent, up 3.1 percent in 2008. [Bureau of Labor Statistics, U.S.
Department of Labor, available here.]
Incomes Never Recovered from the Last Recession in Wyoming.
In 2006-2007, the typical household's income in Wyoming remained
$1,538 lower than it had been in 1999-2000, before the recession of
2001. This is the first economic recovery where incomes did not return
to their pre-recession peak. [Bureau of the Census, U.S. Department of
Commerce, available here. See the JEC August 26,2008 Fact Sheet on
Income, available here. All dollar values are inflation-adjusted to 2007
dollars.]
The Subprime Mortgage Crisis Has Become a Full-Blown Finan- cial Crisis. Under the Bush administrations. watch, unregulated mortgage originators were given financial incentives to sell risky, unaffordable subprime mortgages to vulnerable borrowers. Declining home
prices mean many families owe more than their homes are currently
worth. In Wyoming, subprime mortgages in delinquency have increased from 500 in the second quarter of 2006 to 900 in the second
quarter of 2008. According to a 2008 analysis published by the Joint
Economic Committee (JEC), the number-of subprime foreclosures in
Wyoming will total 793 between the first quarter of 2008 and the end
of 2009. [Mortgage Bankers Association, JEC April 10th State-byState Subprime Foreclosure Report, available here.]
High Foreclosure Rates Drag Down Neighboring PropertyValues
and Household Wealth. The mortgage foreclosure crisis is reducing
home values and declining property taxes. According to the JEC, subprime mortgage-related foreclosures will cost Wyoming $34:7 million
in 2008 and 2009. Nationally, the expected economic costs of forecast
subprime foreclosures total nearly $100 billion in these two years
alone. Moreover, declining home prices across the country are stripping families of their personal housing wealth, which had until recently
largely driven consumer spending. [JEC April 10th State-by-State
352
Subprime Foreclosure Report, available here.]
Bush Retrospective: Looming Debt and the High Cost of Living
The Iraq War Will Cost $27,100 Per Wyoming Household. According to the JEC's recent report, the direct and indirect costs of the Iraq
War will be massive, especially if the Bush administration continues to
keep large numbers of troops there. Even assuming significant force
reductions, the cost of the Iraq War will total $6 billion for Wyoming
taxpayers by 2017; the total cost to the country will be an estimated
$2.8 trillion. [JEC November 13th Iraq War Cost Report, available
here.]
Over the Last Two Years, 73,000 Wyoming Residents Had No
Health Insurance' A growing number of Wyoming residents are living without health insurance. During the 2006-2007 period, an average
of 73,000 Wyoming residents-14.1 percent of the state's population-had no health insurance. Across the country, the number of
Americans without health insurance totals 45.7 million, up 7.2 million
since the current Administration took office. [Bureau of the Census,
U.S. Department of Commerce, available here. See the JEC August 26,
2008 Fact Sheet on Health Insurance Coverage, available here.]
Child Care Costs For Two-Child Families Averaged $1,009 Per
Month in Wyoming. Child care continues to be a hefty burden on the
budgets of Wyoming parents, with inflation-adjusted monthly care for
an infant averaging $526, and monthly care for two children averaging
$1,009. [National Association of Child Care Resource and Referral
Agencies, available here.)
In Wyoming, 54,000 Residents Were Living in Poverty Over the
Last Two Years. In Wyoming, 54,000 residents - or 10.4 percent of
the population - were living below the poverty line during the 20062007 period. Nationally, 12.5 percent of Americans - more than 37
million people - were living in poverty as of 2007. [Bureau of the Census, U.S. Department of Commerce, available here. See the JEC August 26, 2008 Fact Sheet on Poverty, available here.]
353
MINORITY VIEWS
MINORITY VIEWS OF SENATOR SAM BROWNBACK AND
REPRESENTATIVE JIM SAXTON
OVERVIEW OF CURRENT AND RECENT MACROECONOMIC CONDITIONS
The economy entered into a recession in December of 2007, according
to the Business Cycle Dating Committee of the private, nonpartisan
National Bureau of Economic Research. The prior expansion, which
began in November of 2001, lasted 73 months, longer than the average
52 month duration of expansions in the period from 1945 through
2001, but below the durations of the past two expansions: 92 months
between November 1982 and July 1990; and 120 months between
March 1991 and March 2001. The recession in the U.S. has, unfortunately, been accompanied by downturns in economic activities abroad,
making the current environment especially challenging as American
families face domestic and global recessionary forces.
The economy began 2008 with a low annualized growth rate of 0.9%
in the real (inflation-adjusted) gross domestic product (GDP) in the
first quarter, followed by 2.8% growth in the second. Second quarter
growth was buoyed by another solid contribution from net exports, as
U.S. exports continued to grow at a robust rate and imports contracted
smartly (imports are a subtraction in the calculation of GOP). While it
is impossible to know the counterfactual of what would have occurred
in the absence of a government stimulus program, there is little evidence to suggest that tax rebate payments to low- and middle-income
taxpayers helped the economy in the second quarter, when many tax
rebate checks were mailed or deposited. In the third quarter, the economy contracted, with real GDP declining at a -0.5% annualized rate.'
Most analysts expect that GDP will continue to contract in the fourth
quarter of this year and the first half of next year. 2 The current recession is expected by many to be sharper and more protracted than most
post-World War II recessions. Positive, but below trend, growth is
expected by most analysts to resume in the second half of next year
and then return to more trend-like rates of around 3% sometime in
2010.
Data used to produce this report are those available through December 15,
2008. Data such as those on GDP and employment are, of course, subject to
future revision.
2This year, in this report, means 2008.
355
American families are facing challenging economic and financial
times:
* Economic conditions have deteriorated throughout 2008 and
financial markets remain under stress.
* Financial market stresses, which began in early August of
2007, became amplified following the collapse of investment
bank Lehman Brothers according to many measures. There
have, however, been some recent signs of improvement.
* Adjustments in the Nation's housing markets continue, with
continuing declines in home-building activities, reductions in
home sales, declines in home prices, and high inventories of
unsold homes relative to historic standards.
* With continuing declines in home prices, more and more
Americans have found themselves with negative housing equity, leading to increased mortgage delinquencies and foreclosures. Increased foreclosures, in turn, lead to increased numbers of homes put up for sale in an already oversupplied market. In addition, increases in mortgage defaults lead to further
losses on assets backed by residential mortgages, which leads
to further losses in financial markets.
* There have been 11 consecutive months with declines in payroll employment through November of 2008 leading to a cumulative net loss of over 1.9 million payroll jobs over that period.
* The unemployment rate has risen to 6.7% from 4.9% at the
beginning of this year.
Too many American families have experienced job losses, declines in
housing wealth, and declines in values of their retirement accounts- and
stock holdings. The economy faces significant challenges in the
months and years ahead. In facing these challenges, there are a number
of noteworthy points to consider, including:
* A need to keep taxes low. In the current environment of global
recession, it is important that taxes not be raised on American
individuals, families, and businesses. It is equally important to
preserve, extend, and build upon pro-growth tax changes that
have been implemented in recent years, including lowering tax
rates on capital gains, dividends, and income. Economic policy decisions that have lowered taxes on American households
and allowed American families to keep more of their hardearned incomes have paid dividends for the Nation's citizens.
356
A need to promote free and fair trade. It is important, especially in light of the robust contributions to domestic growth
from U.S. exports over the past five years, to resist the disturbing trend toward protectionist sentiments and policy recommendation.
* A need to leave a small footprint in crafting regulations. It is
important, in considering how best to reform regulation and
oversight of our Nation's financial system, not to implement
excessively onerous regulations. Consumers and other financial market participants deserve protections that ultimately
flow from transparency and judicious oversight. Nonetheless,
regulations that are too restrictive and onerous only serve to
inhibit free enterprise and often hurt those who benefit from
financial innovations, including the needy and low-income
Americans.
* A need to use focus on the distinction between economic stimulus measures and measures designed to implement increased government spending and expanded government.
Should fiscal stimulus be deemed appropriate, the choices are
among deficit financed tax reductions and deficit financed increases in government spending. Measures to expand the size
of government through long-term spending projects are not
stimulus measures, even if implemented under the guise of
stimulus. While the Nation could benefit from large-scale infrastructure spending, such spending should be implemented
using analyses of long-term costs and benefits and not through
the writing of large government checks to everyone purporting
to have "shovel ready" projects. Government efforts to implement large projects in short periods of time do not have a
solid history of success.
* A need to avoid the temptation to implement social and industrial planning under the guise of stimulus. Government has
not historically done an efficient job of picking winners and
losers in industry.
Despite the daunting challenges facing the American and global economies, we remain confident that the entrepreneurial spirit and drive of
America will emerge-not with the interference of an expansive government, but with the hard work, thrift, and determination of its people.
Harnessing that work, thrift, and determination requires that government help provide a transparent and fair playing field, but also requires
that government let its working families and productive enterprises
*
357
flourish by allowing them to reap the benefits of their activities. Higher taxes and expanded government serves to diminish rewards to entrepreneurial efforts, however well intentioned are policymakers who
seek to serve as social and economic planners.
Employment Has Fallen and Unemployment Has Risen
Following a record of 52 consecutive months of payroll job gains, payrolls began to contract in January of this year and the pace of job losses
has accelerated in recent months. Total non-farm payroll employment
fell by 533,000 jobs in November, following declines of 320,000 in
October and 403,000 in September.
There have been 11 consecutive months with job losses, with the cumulative decline in employment over that period totaling 1.9 million
jobs.
Payroll Enployment Slnce 2000
(Charge in empioynent, Inthousands)
*
y
7100
----- -
*
*
2000 2001 2002
Saou: mwauo Lb
i-5
--------------------------
2003
2004
2005
--
-
:--------
2006
-00
-700
2007
2008
The unemployment rate has increased from a near-term low of 4.4% in
March of 2007 to 6.7% in November of this year. The unemployment
rate has risen by 1.7 percentage points since the recession began in December of 2007.
358
ChilIan Unemployment Rate
(Percent of civilianlabor force unemployed)
--
J-
-- --
_-
:-
--
-
- - - - - --
-
-- -.
-
-
- - - - - --- - - - - - - -
2
- - - - --,
41..
I O D.0
I
I
I - I
1I
1
I
I
I
IS I
I
1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008
Sowe:Bueau of Labor Statistics
Note: Grybas denote cessom, the last of wdi ts presuned not to hawe yet aided at
2008)
thetimethis eSt wasmade(DeemberM
Economic Growth Has Turned Negative
Following the low 0.9% annualized growth in real GDP in the first
quarter of 2008, growth accelerated to 2.8% in the second quarter, led
by rapid growth in net exports. The economy then contracted in the
third quarter, at a -0.5% annualized rate, reflecting a continuation of
declines in residential investment and a significant decline in consumer
spending.
Econonic Growth Since 2000
(Inflation-adjusted annualized GDP growth)
- -_ - -_ - - -- - -
--- J 1
- -
-- - - - - - ---
---- - - ----- -
--
6%
2X
-- --
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Soces: Biaeau omomik Aewsis; 8wGp Ewnomkickts 1/0O/2008
Private forecasters see a large decline in real GDP in the fourth quarter,
with GDP expected to fall at an annualized rate of around -4.1%, followed by a -2.4% rate of decline in the first quarter of next year and -
359
0.5% in the second quarter. Positive, but below trend, growth is expected to resume in the second half of 2009, with a return to more
trend-like growth rates of around 3% anticipated in 2010.
Consumer Spending Has Been Declining
Annualized growth in consumer spending had remained resilient for
many years, despite a sequence of adverse shocks to the economy including the tragedy of September 11, 2001, the aftermath of corporate
accounting scandals, two wars, devastating hurricanes, a prolonged
period of significant increases in energy costs, fallout from losses and
risks associated with subprime mortgage lending, and the correction in
the housing market. The robust and resilient growth in consumer
spending began to wane in the second half of 2007 and consumer
spending declined significantly in the third quarter of this year.
Consumer Spending Growth
(Inflation-acusted annualized growth)
8%
-
X
--------6% --- --- --
-------
- ~~~~~-a4%~~~~~~~~~~4
----
-
2%
051
2000
2001
Sawwe:Buou
2002
2003
2004
200S
A~~~~~~~~-%
2006
2007
208.
F-OkAaulp .
The -3.7% annualized rate of decline in consumer spending in the third
quarter was the first decline since the fourth quarter of 1991 and the
largest decline since the second quarter of 1980. The decline in consumer spending in the third quarter served to pull overall growth down
by 2.7 percentage points.
360
Contribution of Consumption to Percent Change In GDP
(Percentage points at annual rates)
-~~~~~~~~~~~~6x
: -_--_-__-_--_------
__-_--_-__-_- --- --------- ----- - ---------- -------____1
_1_
-----
-- 4X
--- ---- -------------------
4%
- - -----------
2%
-
0%
;--------------4%
-----------------2000
2001
2002
2003
2004
2005
2006
2W7
2008
Same: Baud o Labr Satstkc
Data from October on consumer spending, the most recent available,
suggests that consumer spending continued to decline moving into the
fourth quarter of this year. On a month-over-month basis, personal
consumer expenditures fell by over 1% in October, the largest decline
since the 2001 terrorist attacks.
Personal Consumption Expenditures
(Month-over-month percent change)
---------------------------------------------------
I------
4.0X
4I0%
_- ---.
--
--
-
o
a
N
a
a
N
N
N
N
e
------
N
--
-
-
--
-
------
3~~~-.0%
0.0%
--
-- - ----
m----------------------n
-
-
-
-
-
-
- --
---
-------------------
to
a,
a
Nm
N
N
2
1
Sate: Beau of Economic Arndys
Supports for consumer spending, including employment growth and
housing and stock-market wealth, have eroded over the year. That erosion has contributed to the recent declines in consumer spending. Prior
to the recent declines, for a number of years, households' consumption
expenditures were assisted by home equity extractions in the form of
home equity loans. In recent periods, however, declines in home prices
361
have shut down the ability of many households to borrow against home
equity.
Earlier this year, sensing the threat of a significant downturn in the
economy, Congress and the administration attempted to boost economic activity by enacting the Economic Stimulus Act of 2008. That legislation, enacted on February 13, 2008 at an estimated budget cost of
$152 billion for 2008, provided for several types of economic stimulus
measures, including a relatively small amount of tax incentives intended to stimulate business investment spending and a larger amount
of tax rebates to low- and middle-income taxpayers intended to stimulate consumer spending.
The major component of the Economic Stimulus Act of 2008 was the
$115 billion of temporary tax rebate payments, targeted at individuals
and families, which phased out with increases in income. Most of the
rebate checks were mailed or deposited during May, June, and July.
As the figure below shows, disposable (i.e., after tax and transfer) personal income displays a significant increase and then retreat surrounding the bulk of the rebate payments in May through July. The figure
also shows, however, that personal consumption spending by households showed no noticeable increase around the time of the rebates.
The data strongly suggest that the rebate checks did little, if anythingto stimulate consumer spending and, hence, aggregate demand (consumption plus investment plus government spending plus net exports)
and the general economy.
Disp=Wel Inome wid Consm er Sp*ncI'g
(Bilisof dollars)
-~~
hSm-- -- -- -- mmawd
------ -- --- -- -~-- 1----- -- --a -- ---l
----------
---- ----
..-.
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lb
--- ---
M AWio
-,.
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lb
Al
s$111-.-a-a-0o
------
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Eb a its0
.da
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^
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,_,
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I
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-
ch i
^
6
,$10200
$I 300o
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6
Soe~u~mud
Ewnamic *aucms
The timely, targeted, and temporary tax rebates to households was
touted as a worthwhile measure to try, in Keynesian demandmanagement fashion, to boost consumer spending and aggregate demand. The Keynesian policy seems to have failed to reach its targeted
362
goal, as consumer spending showed no noticeable boost. As the figure
below strongly suggests, most of the rebate checks were placed by
households into saving, thus defeating the Keynesian intention. The
end result of the Keynesian experiment was that government savings
fell, because the stimulus rebate payments were deficit financed, and
household savings increased at the same time leading to little, if any,
net effect on national savings or the economy as a whole.
Personal Saving Rate
(Personal saving as a percentage of disposable personal income)
6.0%
------------ 4.0X
I-------
----------------------- A
;--,
_------
2.0%
.._/---
-----.....
-------
2.0%
51
N
,75
it
01
1
v
CDa0
cm
1
cm
T
0C3
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C
N
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03
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Soc:Bieau odEcanal Ariu~is
Investment Spending Has Been Declining
Business (non-residential) investment has waned over the past four
quarters through the third quarter of this year and declined in the third
quarter. Annualized growth in real private fixed non-residential investment declined from over 10% in the second quarter of 2007 to below 2.5% in the first two quarters of this year. In the third quarter of
this year, business investment declined at a -1.5% annual rate. As
businesses, perhaps sensing and anticipating declines in demand for
their products, cut back on investment expenditures, it is useful to take
a lesson from the experiences following the recession of 2001.
Prior to the pro-growth tax relief under the Jobs and Growth Tax Relief
Reconciliation Act (JGTRRA) enacted in May of 2003, growth in real
business investment declined at an average -5.6% annualized rate from
the first quarter of 2001 through the second quarter of 2003. The declines in business investment served to lead and prolong the recessionary forces of 2001. In sharp contrast, growth in real business investment spending averaged a robust 6.3% following the enactment of progrowth tax relief in JGTRRA, which included lowering of taxes on
income from dividends and capital gains. Continuation and expansion
of pro-growth tax relief, including low taxes on income from dividends
and capital gains, would prove useful in the current environment where
363
recessionary forces are likely, again, to be acting to pull business investment spending down.
Non-Resdentsle Investment Growth
(Inflatlon-acwusted annuallied growth)
.
. .......
...
. . .... .......
--0........
%
......
Ranwed
ProGot Tu M
- ------------ -- 116,11.E
.
......
2001
2000
_ -_
_
- ---- - -- -__ - - --- - ---20X
.
....
_ a Em
--
Z002
2004
200
_
--
_
_.
Z007
2006
2005
---- 20%
_----
2008
Sourm Bureu d oEcmk Arteh
The housing market correction from the bubble that peaked in 2006 has
proved, through significant reductions in residential investment, to be a
significant drag on overall economic growth. Residential investment
has declined for 11 consecutive quarters through the third quarter of
this year, reducing real GDP growth over that period by an average of
0.92 percentage point.
Residentim Investmmnt Growth
(Inflation-acusted annualized growth)
- -.----
. - -- -
--
-
- ----- -- -
-5.11i.L
0 -0 -_-
~.
-------------
-
---
- -
- - --
- - --
-
- - -
-
-
-
- -
30o
l
11
%
0%
------ T
---------_ __
2000
200
2002
5solz:
suau o
OK
_4
___
_------ -- -- -- -- -- -- -- -- -- -- -- -- ---- --------
2003
2004
2005
2006
2007
-10%
-3096
2008
A=Wjs
Government Spending Growth is Accelerating
There are two forces that should be at work regarding government
spending in the current environment. One is the need for fiscal austerity over the long run, which argues for reductions in the rate of government spending growth in light of the daunting fiscal challenges ahead
as baby boomers retire en masse with unsustainable promises to them
and their children embedded in the major entitlement programs (e.g.,
Medicare and Social Security).
364
The other force is the expected increase in government spending
growth in-these times of economic slowdown and recessions as "automatic stabilizer" expenditures rise (automatic stabilizers refer to elements of the tax and spending system that automatically increase
spending on relief programs such as Unemployment Insurance in a
downturn and automatically lead to reduced revenues as incomes. and
economic activity wanes). In addition to increases in spending that
occur from automatic stabilizer features of government programs, unusually large amounts of resources have been committed in recent periods in attempts to offset what many expect will be a deep and protracted recession.
Goiernment Spending Growth
(lrination-alusted annualized growth inFederal plus State and
Local government spending)
- ---- ------ - --- - ------ -- - -- ----- -10%
_--- -- -- -- -- ----
--- -
e ,!I. 1.111
IE9Efh
- _ - -_
20M0 2001
-- - -- - - - -26%
----
*iismoJI
I
^
- --- - - - - - - - - - - - - - - - - - - - -
4%
2002
2003
2004
2005
2006
1111
2007
2008
SoUe. Bweu d Eiamk AlMpi
Growth Benefits from Trade
Increased exports from the U.S. to our trading partners along with declines in imports into the U.S. from our trading partners have provided
a solid boost to overall economic growth over the past two years. Indeed, while the declines in residential investment associated with the
downturn in housing markets have shaved an average of 0.92 percentage point off of GDP growth in the 11 consecutive quarters with residential investment declines, through the third quarter of this year, net
exports have added' an average of 0.92 percentage point during the
same period. Strong growth in exports, perhaps assisted by earlier declines in the foreign-exchange value of the dollar, along with reductions in import growth, have cushioned the blow to the overall economy from the housing downturn (imports are a subtraction in the calculation of GDP, so declines in imports lead to increases in GDP).
The recent performance of net exports and their solid contributions to
overall economic growth are a testament to benefits associated with
free trade. Preserving and expanding those benefits requires preserva-
365
tion and expansion of trade agreements with our trading partners and,
importantly, requires that recent protectionist sentiments be avoided.
While net exports have provided a solid contribution to overall economic growth over recent years, the contribution may be diminished in
the near term as economies of most of our trading partners also experience effects of recession.
Contributions to Percent Change InGDP
(Percentage points at annual rates)
ONet Exports
* Residential nvestnent
03%
.-- -- -- - --------
2%
- - -- 2006li-200
-- ~200-- - 200 ------204005
200
200
2000
2001
2WD2
-1%
1-
J ___--- -_- - -5
_
----------- W--to
--
2003
2WD4
2005
2W6
2007
20081
396
200t
Ansis
Soufce: B0WU of Ecormkni
Growth InExports an Imports
(Inflation-adjusted annualized growth)
l ExportGrowth
a
0 Import Growth
3 0%
* -- -
-3-----
&
F
-- --- -_-
-
r
20I%
0%
- - - - - - -- - -- -- - - - - - -- - - --
2000
200
2002
2003
2004
2005
2006
2007
30%
2008
Soure: Burwu of Eacnmic Amtris
Business Activity is Receding
Economic activity in both the manufacturing and the service sectors of
the economy turned decidedly worse in recent months, according to
surveys by the Institute for Supply Management (ISM). The ISM in-
366
dex of manufacturing activity has fallen from a value of 50 in July of
this year to just above 36 in November. A value of the index above 50
indicates expansion in the manufacturing sector; below 50 indicates
contraction. The ISM index of non-manufacturing (service-sector) activity has also been below 50 in the past two months through November.
ISMActivtrIndexes
(Above 50 means expansion, below 50 means contraction)
-
EM Mainertuf
hid
Index
…
SM Non-Manufwturing hdex
---------------------------------------------------------
------- -- - - - -- - - - - - -
--------------------------------------------------------2000 2001 2002 200
2004 2005 2006 2007 2008
70B
6~ ~~~~~0.0
30.0
Sm!: Ham Anaydo
Capacity utilization in the industrial sector (manufacturing, mining,
and utilities) has fallen from 81.0% in the beginning of the year down
to 75.4% in November, another indicator of receding production activity. A value of 81.4% is the long-term average capacity utilization rate
The Housing Market Correction Continues
With the exception of a slight increase in existing home sales in September, new and existing home sales have fallen on a year-over-year
basis in each month since December of 2005. Housing starts and
building permits have also continued to decline, on a year-over-year
basis, generally since the end of 2005. The inventory of unsold new
homes at current sales rates remains elevated at 11.1 months, significantly higher than inventories averaging around four months in years
prior to 2006.
367
Existing and New Horne Sales Growth
(Year-over-year percent change)
*
-Existng Home Sales
Home Sales
-New
---- -
-----
- -
-- -- -
- -- - - - - 2 0%
-s
0%
----- --- ---- ------- - - - - -
20X
-40%
-- -- - - - - - - - - - --- - - - - -_-- --
------------
__-a-------------------------------------2000 2001 2002
Somue: Hawer Aautyf
2004
2003
2005
2006
2007
-60%
2008
Housing Starts and Permits
(Year-over-year percent change)
Starts -Housing
-Housing
Permits
_- - - - -- - - - - -- - _ - -- - - - - -- - - - - - ----j- I
_
~
-30X~
--------
~~ -
----
l-
---------~~~~~~~
-
2000 2001 2002
Soaurce: Hater Auulydo
2003
2004
-
0%
20%
0%
-10%
-- --- - --- -- -----
~~~~~~--- -- -- -- -- -- --
-------------------
--
------
------- -- -----------
...-
- -- ---
- - -- --------
1
_----------
2005
-20%
---------------- -
2006
2007
2008
New Hone Inventory
(Months of supply at existing sales rate)
--- - -- ------ ------- ------- ----- ------------------- -- - --- - --~-- -- -- ----- - -- - ---
1 02
---- I---
----------- 6
...-- -- -- -- - -- - -
-- - -- - --
- -- -
-
-.-- - - -
- - -
~~~~~~~~~~---------
4
- -- -
- ---
2
0
- -
- -
I
I
I
I
i
I
I
I
I
2000
2001
2002
2003
2004
2005
2006
2007
2008
Soauce: HaverAnabtks
368
While there is some hope that existing home sales have leveled out,
new home sales have continued a steady downward path given the glut
of inventory on the market.
By all available measures, home prices have decline throughout the
year.
Home Prices
(Year-over-year percentchange)
-
-----
--
RH--
hPainP
Catwfng %IotHpm
S&PlCam4hih
Newne-FaniHomePrim
Mian Euiang HafA Pake
------------
-------
20%
I-- - --- ---- - - 0%
--
- -- -
-
--
-
-
-
-
-
-
--------------2000
2001 2002
Smaf: HawrAm
-
-
--
--2003
2004
2005
,-------
--
- --
-
10
s
-20%
2006
2007
2008
Mortgage Delinquencies and Foreclosures Continue to Rise
Declines in home prices have contributed to increases in mortgage delinquencies, especially for subprimne mortgages with adjustable interest
rates (which recently have accounted for as much as 70% of subprime
first-lien mortgages and about 9% of all first-lien mortgages). 3
3A
first-lien mortgage represents a claim on a property that secures the mortgage loan and is a claim that takes priority over all other encumbrances over
the same property.
369
Mortgne Delinquencies
(Installments past due 90 days)
.........
Subprime
----- AI Mtg
- - -- - ---- --- -
-- ---
Fbed Rate -SupiumeAdt
-- -- - - -- - - -- --
- ---
e Rate
10 %
8X
----
-------- ~
_
I
_
2000
2001
2002
-
~~
~
I
2003
4%
-
-
~
I
2004
2005
~
I
2006
~
I
2007
,--_--I
2X
0%
2008
Somre: Hoer Aulytsa
The rise in delinquencies has shown through to foreclosures.
ForedosuresStarted
(Loans set to foreclosure process as percent of toal mortgages)
-----All Mgag ..---.jzz
imefixedRate -
SubprimeApatble Rate
-8~~~~~~~~~~~~~%
------------------7---7
2000
2001
2002
Sowce: Hve Analyslc
2003
---------------
2004
2005
2006
2007
1
2008
^
370
Loons In Foreclosure
(Loans Inthe foreclosure process as percent of toal mortgages)
A hbngags
.Spipteftedfate -S--p- meA ixbleRate
- - - *-- * - - - - - - - -- -- ----- - ----- --- -- ----24%
-- -- -- --- --- ----- -- --- ----- - -...----- --- -- ------
------
------
---- -- ---
-
----
16%
-- -- - ----
_
2000
20%
--
8X
-
2001
2002
2003
12X
2004
2005
2006
2007
2008
Soauce: Haer An.ydcs
At a time when builder inventories of homes for sale are high, housing
markets may continue to decline through next year as foreclosed properties are put on the already sluggish new-sale and re-sale housing
markets. There remain, in addition, significant interest rate resets
scheduled to occur next year on many adjustable rate mortgages initiated in recent years.
Recent Problems in Mortgage Markets and Spillovers to the General Financial System and to the Economy
With rising mortgage delinquencies and defaults, especially associated
with subprime mortgages and significantly so for subprime mortgages
with adjustable interest rates, many mortgage originators have gone out
of business and many have suffered financial losses. Holders of securities that are backed by mortgages ("mortgage-backed" securities) have
also suffered losses.
There has been vast development over the past decade or so of secondary markets for mortgages. In those markets, loan originators sell
mortgages to investors who then package them according to risk into
other derivative securities (backed by the mortgages and, hence, by the
properties on which those mortgages are claims). Those securities are
then sold to other investors with various appetites for risk in the form
of mortgage-backed securities.
Mortgage-backed securities bundle a large number of mortgages together into a pool, and shares of that pooled bundle are then sold. The
buyers of these mortgage-backed securities receive a share of the payments made by the homeowners who borrowed the funds. The pooling
creates a form of insurance for investors. Pooling of mortgages gives
investors a greater degree of precision in predicting the quantity of defaults and the repayment rates (i.e., in assessing risk-in much the
371
same way that auto insurers bundle together drivers to get a greater
degree of precision in predicting what fraction of the insured will have
collisions, but not exactly which individuals).
Depending on the terms of the sale, when an originator sells a loan and
its servicing rights, the risks (including risks associated with poor underwriting) are largely passed on to the investor rather than being
borne by the originator. Perhaps because of increases in perceived risk
among investors, upon seeing the significant increases in defaults on
subprime mortgages, supply of credit to subprime lenders, to mortgage-backed security issuers, and to funds with possible exposure to
subprime mortgages, has fallen or dried up altogether.
Problems in the subprime mortgage market, which is a relatively small
part of the financial system, became systemic and adversely affected
the entire financial system. This occurred on or about Thursday, August 9 of 2007. Many believe that continued declines in the value of
certain mortgage-backed securities and observations of fund losses rather suddenly led to a sharp increase in investors' risk intolerance in
early August of last year.
The heightened risk aversion in financial markets has led in recent periods to an aversion of many lenders to lend to anyone with less than
the highest possible level of creditworthiness. In such circumstances,
we have observed flights to quality and safety in which lenders cut off
lending to most counterparties and seek safe havens for their funds in
the form of very safe assets such as U.S. Treasury securities.
Reductions in credit availability to many households and businesses
and increases in borrowing rates have very likely contributed to the
economic downturn that began at the end of last year.
Since the onset of financial market stresses in early August of 2007,
there have been many efforts and large amounts of resources devoted
to resuming more normal credit flows, assisting homeowners facing
foreclosures, and generally promoting financial and economic systemic
stability.
Included among the many Federal agencies and other entities at work
are: The Federal Reserve (Fed), U.S. Treasury, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Office of
Thrift Supervision, Federal Housing Finance Agency, U.S. Department
of Housing and Urban Development, U.S. Securities and Exchange
Commission, Financial Accounting Standards Board, the Veterans
Administration, foreign central banks and banking regulators, and State
governments.
372
A complete listing of all public and private efforts and resources devoted to homeowner assistance, resumption of systemic stability, and
resumption of normal credit flows and intermediation would likely fill
volumes and is beyond the scope of this report. There are, however,
two especially noteworthy Federal responses to recent difficulties in
financial markets and the economy: Federal Reserve responses; and the
Troubled Assets Relief Program (TARP), authorized under the Emergency Economic Stabilization Act of 2008 enacted in early October of
this year to provide the U.S. Treasury with up to $700 billion to purchase distressed assets and make capital injections into banks. These
noteworthy responses are discussed in more detail below.
Inflation is Moderating
Over the past year, through October, inflation in the overall (headline)
consumer price index (CPI) averaged around 4.5% on a year-over-year
basis, boosted by rapid growth during much of the year in energy prices and commodity prices. In recent months, however, energy and
commodity prices have fallen at rapid rates, after rapid earlier run-ups
in prices through September of this year.
Crude Oil Pric
(West Texas Intermedate spat price, dollars per barrel)
- -- ---- - -
--- - --- ---
~~~-
---------------------
I
2000
- - - - - - - - --- - - - - - ---
-
-------
-
A
-
$SO
I
I
I
I
I
I
I
I
2001
2002
2003
2004
2005
2006
2007
2008
:Hae hWs
S
$4)
0
373
CommdityPrices
(Year-over-yearpercent dnge In Commodity Research Bureau wrnmWn spot pric Index)
*------
----
--- ----
----
- -
-
-
30%
20%
10X
.. . . .
11.. . -- - - - - -
*
z0o0
SagHwANal
2000
2003
200Z
20o4
200s
- - --------
- -
200
2007
-
30%
zo0s
Inflation in the "core" CPI, which excludes volatile energy and food
prices and is used partly to gauge the extent to which energy price increases are feeding into more general inflation in prices of other goods
and services, has been moderate. Core CPI inflation has averaged just
below 2.4% on a year-over-year basis over the past year through October. Many analysts view core CPI inflation of around 2.4% to be
above Fed monetary policymakers' comfort zone for consumer price
growth.
Conumer Price Inflation
(Year-over-year percent change in consumer price index [CPu1)
_CPoedlle
-CPWCre
4%6
-- -- -- -- --- I--- -- -- -- -- - ---- - - - --
3%
I
2000
I
I
I
2001
2002
I
2003
2004
I
I
I
I
2005
2006
2007
2008
0%
Sau9e: Bweau of La1m Sutsiks
Inflation in the core personal consumption expenditures (PCE) price
index, one of the Fed's preferred measures of consumer prices, has fallen from rates just above 2.5% as recently as August to 2.1% in October, the most recent period of data availability. October's rate of core
PCE inflation lies just above what many regard to be the ceiling on the
Fed's comfort zone for core PCE inflation of around 2.0%.
374
Consumr Pric W
(Year-over-year percent change In personal consunption
expendtue [PCEJ price Index)
-
PCE-Headline
-
PCE-Core
~~6x
-- ---%
- --
--
-
--
- -
-
-- -------------^ ---- 1
3
4
3%
E
1%
I
I
2000
I
I
2001
I
2002
2003
2004
I
I
I
I
200S
20o6
2007
2008
0%
S9w.: 6uwu d Efmi*nk AmaIob
A recent concern of some analysts has been the possibility of deflation-persistent and widespread declines in prices. On a month-overmonth basis, there have been declines in recent months in alternative
measures of consumer prices.
Consumer Primce lInfion
(Month-aver-month percent change In consuner price Index [CR11)
-cPHemdne
*
--------
- -
-CPare
--
- -
-
-
15%
-
-W
05X%
---- . - --- -- -- --- -- -- -- ' - --- U -- - - ..... . . . ... .. . . . . .. . . . .......
2000
2001
2002
2003
2004
200S
OAX%
.-.-.-.-.-..-.-
2006
2007
-a5
.-
2003
Seam: BuDu d La5 Surd~a
Conunmer
m hnfletion
(Month-aer-month percent change In personal consmpton
expenitre PCEJ price Index)
-PCE4#edle
.
.
..
.
...........
..
...........
O NFAME
aww
. .......
. ..... . . . .
*
2000
2001
S=Wavawr
2002
.
- - --1.5X
..... -
----
A
~~~~~~0.0%
Mv,VIV
..*
..... .
.
2003
-
......
"'AMA hi.."- 05%
1 A
-PC-Cre
.
-
-
-- 0 .5%
- .-.
2004
2005
2006
2007
~~~~~~~~~~~~~~~
2006
EkuinElk:ph
Should declines in general consumer prices persist over a long period
of time, the economy runs the risk of general deflation. Deflation, as
375
Japan has recently experienced, presents several risks to the economy.
A general unexpected deflation would mean that the real, or purchasing
power, value of debts would unexpectedly increase through time, presenting financial pressures on debtors and possibly sparking debt defaults.
Another risk from deflation is that, as deflation leads to increases in the
purchasing power of money through time, people have an incentive to
postpone purchases in order to capture the increasing value of their
monetary holdings. This can lead to sluggish growth in overall spending and, perhaps, declines in spending.
While it is too early to tell whether the economy faces a threat of deflation, the discussion of deflation is reminiscent of U.S. experiences in
2003 when declines in inflation and some evidence of price declines
led the Fed and others to consider contingent policy responses in the
event of a deflation threat. Even with a very low setting of the Fed's
monetary policy target for overnight interest rates, the Fed has tools,
including some unconventional ones, and the ability to counter a deflation threat if necessary.
The Federal Open Market Committee, the Fed's monetary policymaking committee, has taken its overnight interest rate target down from
5.25% in mid September of last year to the current target range of between 0% and 0.25% in a sequence of rate cuts. The current setting of
the Fed's overnight rate target range leaves little room for further cuts,
which opens the door to possible use of more unconventional policy
tools should efforts to reduce interest rates further be deemed necessary. The Fed could, for example, act to bring longer-term interest
rates down in attempts to stimulate economic activity by purchasing
longer-term U.S. government securities in the open market to boost
prices of those assets and, correspondingly, lower yields on those securities.
In its December 16 monetary policy statement, the Fed noted, regarding future Fed monetary policy, that:
"The focus of the Committee's policy going forward will be to
support the functioning of financial markets and stimulate the
economy through open market operations and other measures
that sustain the size of the Federal Reserve's balance sheet at a
high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to
the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securi-
376
ties as conditions warrant. The Committee is also evaluating
the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses.
The Federal Reserve will continue to consider ways of using
its balance sheet to further support credit markets and economic activity."
Fedral Furnb Rate
(Percent per argon)
-Tat
FgdtFaF RMts
MOW__v FedFaw Rt
Tind.ee 'OX to 02S%
-----------------------------------
-------
-
-------
2%
Jxn17 r7
Apr25 Jun3 AlOI SnpiS Nw7 De2CFe13 AprZ M21 JuI9 Aug27 WU D&O
2W7 2W7 2007 2
2W7 2W7 2007 2007 200
2008 2006
N 2
2008 2006
Sao:
HNamAhawo.
Normal Credit Flows Have Not Yet Returned and Many LongTerm Rates Remain Elevated
Despite significant reductions in short-term monetary policy interest
rates throughout the year, long-term nominal interest rates have not
fallen as significantly.
377
long-Term Interest Rate vs. Fed Funds Rate
(Percent)
FedFundstarget
MortgeRate
G-YearTreasury
-
10%
I-
---- - -- - - -- - ------- - --*------
6%
*
4*
4%
0
t
,
_
-----------
----- --
-----
2X
I
I
I
I
I
I
I
I
I
2000
2001
2002
2003
2004
2005
2006
2007
2008
0%
Sme0: HsE Anat ia
Interruptions in normal flows of credit have persisted in financial markets, raising the cost of borrowing for many households and businesses
(see, for example, the first graph below) and, through tightening lending standards, lowering the availability of funds (see, for example, the
second graph below).
Some corporate borrowing rates remain relatively high, despite cuts in
short-term monetary policy interest rates, which is likely a reflection of
heightened risk aversion of lenders. Many lenders are wary of lending
to households and businesses who, in more normal times, would likely
be deemed creditworthy because lenders are especially fearful of risks
of losses and because lenders, themselves having already suffered significant losses, are rebuilding their own capital bases.
Corporate Bond Rates
(Percent yield per anwnu
on Moody's seasoned corporate bonds)
-Aa
-Baa
--- ----- ----------
------------
- ------- ---- ------
{
0X
<
~ ~~~-----6X
------
1I%
I
2000
2001
Sarue: Haw A
2002
pstds
2003
2004
I
I
I
I
2005
2006
2007
2008
~~~~4%
378
Comnmrdcl PaprOutstuding
(Trillons of dollars, all issuers)
--- -- -- -- ----- - --- -- -- - --- -- -- -- -- -----------
- -- ----
$
i
I
I
I
2000
2001
2002
I-F-
2003
52.0
$-
I
I
I
I
2004
2005
2006
2007
_
$1.0
200
Sa3m: Ham AMhft
Another reflection of heightened risk aversion in financial markets is
displayed by yields on short-term U.S. Treasury securities. Some such
securities, like the 4-week Treasury bill, have had their yields recently
pushed to around zero, with brief periods of negative yields (when,
essentially, investors are paying to have their wealth stored in the form
of short-term Treasuries). Because of significant ongoing stresses in
financial markets, there have been many recent episodes characterized
by "flights to quality" or "flights to safety." In such flights, investors'
risk aversion becomes elevated and they flee more normal investments
in preference for the safety of virtually riskless U.S. government obligations. As a result, prices of relatively riskier securities fall and their
yields rise. Commensurately, prices of the relatively safe U.S. Treasury securities rise and their yields fall.
4-Week TreasuryBIII Rate
(Percent yield per annum at constant maturity)
----------------
----------
2002
2003
4%
------
;-------
i
i
2004
2005
-2%
i
2006
-----------
;
i
2007
2X
09O
2008
Sawr:e.HaverAnTflda
Equity Prices Posted Significant Declines This Year
379
Relative to prior peaks, most major stock price indexes have fallen by
over 40%. The Dow Jones 30 Industrials Index, for example, had a
value of 8,434 on December 5of this year, down 40% from its value in
October of 2007. Other indexes, of course, registered different percent
losses, but most major indexes have fallen significantly. One major
economic consequence, aside from the implied increase in the cost of
capital to U.S. companies, is that American families and investors have
seen large reductions in their wealth, including retirement holdings for
many Americans. Such a significant decline in stock market wealth,
coupled for many with declines in housing wealth, serves to reduce
spending and, hence, overall economic growth.
Stock Price Indexes: Dow Jones, NYSE
(Average closing prices)
VSE Composite
ls
-DowMies Indusbrias
- -
-
-
- -
-
-
- -
-
-
-
-
-
- -
-
16000
-
-
14000
1200O
10000
8000
6000
4000
FJ
o
B.a
a
i
.J
i
°
o.
aS
°w
°£
a
a
Sd
SJ
'o
-J
o
S.cr Harer Analyacs
Stock Price Indexes: NASDAQ
(Average closing prices)
-- - -
-hi,
-----
-
-MASOAQComposd
-- - - -- - - - --- - -- --- ---
- - - - - - - - - - - - - -_--
a
pi
a
pi
0
a
a
If
If
if
ad
- - - - - - - - - -
%
hI
-a
a2
-1
Sawce: Haver AiIUon
- ----- ------
- - - - - - - - - - - - - - - - - - - - -I-
-
pi
a
,f
-d
Pi
a~
§I
-
hi
a
a3
5
*J
-
I
hpi
CD
-J
5000
34000
3 0D0
II-- -- ---......2000
hi
a
hi
a
a
-
-
a
380
Stock Price Indexes: S&P
(Average closing prices)
-Standard
~~~------- - - --~~~-~~
and Poor's 100
-9
- -------------
- - -
- - -
--------
4t~-
----
--------
,.--
- -
--
- - - - - -
i
hi
i
l
I
Ii
hi
I
i
I
hi
0
CD
0
0
a0
hi
0DC
0
0
0
0
0
03
0
0
C
0
0
Is
0
-J
-
0
-
h
I
J
0
-J
0
*1
0
-J
0
700
400
-------------------
o,
o
I
900~o
300
0
06
Surce: Howt Aalytla
The Fed's Responses Have Expanded Its Balance Sheet Significantly
The Fed has become very active, in the face of significant stresses in
financial markets, in intermediating activities that have typically been
intermediated in the private sector. In so doing, the Fed has taken onto
its balance sheet increasing amounts of private-sector risk in efforts to
relive the stresses in markets.
Traditionally, the Fed has relied on two major tools in the conduct of
monetary policy: open market operations, involving the purchase or
sale of U.S. government securities in the open market in order to increase or decrease, respectively, the money supply to, in turn, reduce or
raise overnight interest rates to meet the Fed's target for those rates;
and traditional discount window lending where the Fed lends funds to
depository institutions, overnight or up to several weeks, in exchange
for a full range of eligible, high-grade Discount Window collateral.
Facing often severe stresses in financial markets that began in early
August of 2007, the Fed has vastly expanded its operations in efforts to
stabilize markets and thaw frozen credit channels. The expansion of
the Fed's operations includes:
Forms of FederalReserve Lending to FinancialInstitutions
*
Collateralized Loans of Funds
o Regular Open Market Operations (Fed lends funds to primary dealers, overnight to days, in exchange for U.S. Treasuries,
agencies, or agency mortgage-backed securities [MBS]... Fed
absorbs funds in the case of reverse repos).
381
o Traditional Discount Window (Fed lends funds to depository
institutions, overnight to several weeks, in exchange for a full
range of Discount Window collateral).
o
Single-Tranche Open Market Operation Program (announced March 7, 2007; Fed lends funds to primary dealers,
for 28 days, in exchange for U.S. Treasuries, agencies, or
agency MBS, but typically agency MBS).
Term Discount Window Program (announced August 17,
2007; Fed lends funds to credit-eligible depository institutions,
for up to 90 days, in exchange for a full range of Discount
Window collateral).
o Term Auction Facility (TAF) (announced December 12,
2007; Fed lends funds to primary credit-eligible depository institutions, for 28 days or 84 days, in exchange for a full range
of Discount Window collateral).
o
o
Primary Dealer Credit Facility (announced March 16, 2008;
Fed lends funds to primary dealers, overnight, in exchange for
a full range of tri-party repo system collateral).
o Asset-Backed Commercial Paper Money Market Fund Liquidity Facility (AMLF) (announced September 19, 2008;
Fed lends funds to depository institutions, bank holding companies, U.S. branches and agencies of foreign banks, to the maturity date of the asset-backed commercial paper up to a maximum of 270 days, in exchange for first-tier asset-backed
commercial paper).
o
Transitional Credit Extensions (announced September 21,
2008; Fed lends funds to U.S. and London broker-dealer subsidiaries of Goldman Sachs, Morgan Stanley, and Merrill
Lynch, overnight, in exchange for a full range of Discount
Window collateral and tri-party repo system collateral).
o
Commercial Paper Funding Facility (CPFF) (announced
October 7, 2008; Fed lends funds to eligible commercial paper
issuers, for 3 months, in exchange for newly issued 3-month
unsecured and asset-backed commercial paper form eligible
U.S. issuers).
o
Money Market Investing Funding Facility (MMIFF) (announced October 21, 2008; Fed lends funds and subordinate
notes to eligible Money Market Mutual Funds in exchange for
U.S. dollar-denominated certificates of deposit, bank notes,
382
and commercial paper issued by highly rated financial institutions).
o
*
Term Asset-Backed Security Loan Facility (TALF) (announced November 25, 2008; Fed lends funds to holders of
certain AAA-rated asset-backed securities-including auto
loans, student loans, credit card loans, or small business loans
guaranteed by the Small Business Administration-backed by
newly- or recently-originated loans, in exchange for those securities as collateral, for a term of at least one year).
Collateralized Loans of Securities
o
Term Securities Lending Facility (TSLF) (announced March
11, 2008; Fed lends U.S. Treasury securities to primary dealers, for 28 days, in exchange for Schedule 1 assets = U.S.
Treasuries, agencies, agency MBS; Schedule 2 assets = Schedule 1 plus all investment grade debt securities).
o
Term Securities Lending Facility Options Program (announced July 30, 2008; Fed lends U.S. Treasury securities to
primary dealers, typically for 2 weeks or less, in exchange for
Schedule 2 Term Securities Lending Facility collateral).
*
Interest on Reserves
o Congress authorized, in 2006, the Fed to pay interest on depository's reserve balances with the Fed beginning in 201 1. That
authorization was accelerated to October 1, 2008 effective on
October 9. Payment of interest on reserves is intended to provide the Fed with greater monetary control over overnight interest rates by, in principle, imposing a floor on overnight inter-bank lending rates. If a bank has an option of holding a reserve balance with the Fed and collecting interest on those reserves, the bank in principle faces an opportunity cost of lending to another bank at any lower rate-the cost is the opportunity to earn the interest rate promised by the Fed on the reserve
balance.
As a consequence of the Fed's massive expansion of its operations, its
balance sheet has ballooned in size. Prior to the onset of major stresses
in financial markets, which occurred in early August of 2007, the Fed
held around $850 billion in assets (on July 25, 2007 for example), primarily in the form of U.S. government securities. Because of the vast
expansion of Fed lending activities, including lending of funds as well
as lending of securities, the Fed's assets most recently have ballooned
383
to over $2.2 trillion, with $492 billion in U.S. government securities
and the rest distributed across assets associated with the various lending operations described above.
Federal Reserve Bank Credit
(Billions of dollars)
- -
_--
- - ---
- -- -
- -- - - - - - - - - -
~~~~~~~~~--------------- ~~is~~~~~~ ------_------- ---------------
I
-------
I
December10, 2008
$500
SoI
July25, 2007
Soaue.fedeoal Reserve
It is noteworthy that the Fed has been recording losses associated with
some assets taken onto the Fed's books (under the title "Maiden Lane
LLC") in the March, 2008 takeover of investment bank Bear Stearns
by JPMorgan Chase. The result has been that the Fed, by taking private risk onto its and, hence, the taxpayers' balance sheet has suffered
losses on behalf of taxpayers. Moving forward, once stresses in financial markets recede and more normal credit flows resume, it must be a
priority of Congress and the administration to unwind the significant
exposure faced by taxpayers from the Fed's undertaking of privatesector risks.
The U.S. Treasury's recent actions in undertaking such risks, too, must
be promptly unwound in an orderly fashion. The U.S. government
must avoid using taxpayer funds to undertake private-sector risk; investing taxpayer money in risky private ventures is not a proper role of
government once more normal credit flows and private-sector intermediation is restored.
Treasury and the TARP
The TARP, initially intended as a vehicle for Treasury to purchase, by
auction and other mechanisms, difficult to value assets from banks and
other financial institutions, has focused resources on making direct equity investments in banks. The TARP involves a revolving purchase
facility under which the Treasury may devote funds to purchase assets
or inject equity into banks. The law which created the funding authorized the Treasury to draw up to $250 billion for immediate use and
384
then requires the President to certify any need for up to an additional
$100 billion in funds. A final $350 billion allotment, bringing the total
possible TARP funds up to $700 billion, is subject to future Congressional approval. As of November 25, 2008, Treasury provided more
than $150 billion in capital to 52 institutions through a "Capital Purchase Program" within the TARP, which is essentially a preferred
stock and warrant purchase program.
While it is too early to measure successes and failures of a new program of such a large magnitude and broad charter, Congressional and
other efforts to ensure the program's transparency, accountability,
planning, and internal controls are essential. There have already been
ample pleas for access to TARP funding from a variety of interests,
often under the guise of systemic threats to the financial system or general economy. It is important that any further use of TARP funding be
used to carry out the intended function of providing stability to U.S.
financial markets and the banking system and not to pursue various
special interests.
Indicators of Stress in Financial Markets
Since Mid-August of 2007, financial markets have been under considerable stress, with difficulties accelerating following the September
15 bankruptcy filing by investment bank Lehman Brothers.
After nearly a year of credit-market stress, concerns of investors and
creditors about lending and funding risks intensified following the
Lehman bankruptcy given a slowing of economic growth, increased
uncertainty about the economic outlook, and further deterioration of
mortgage-backed assets.
Companies became increasingly fearful about abilities of certain firms
to meet their financial obligations, which led to reduced borrowing and
lending between what otherwise were normal finance counterparties.
Some large financial companies essentially lost access to capital markets and short-term funding markets became increasingly impaired,
including the government-sponsored enterprises (GSEs) Fannie Mae
and Freddie Mac, Lehman Brothers, and insurance company American
International Group (AIG).
Fearing threats to overall financial system stability, the Federal Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac into
conservatorship in September, and the U.S. Treasury provided financial support given authority recently granted by Congress.
The financial problems at Lehman Brothers and at AIG also potentially
posed systemic threats and the Fed and the Treasury sought privatesector solutions, to no avail. A public rescue of Lehman Brothers was
385
also not forthcoming (the Fed did not feel that it could lend to Lehman,
because the Fed only has authority to commit public funds for loans to
private companies if the loans are sufficiently secured to provide reasonable assurance that the loan would be fully paid off-an assurance
that the Fed did not feel was present in the Lehman case).
In AIG's case, the Fed perceived a threat to financial system stability
in the event of failure, given AIG's central role in a number of markets
that other companies use to manage risks (such as debt default insurance) and given the size of AIG. To prevent default of AIG, the Fed
provided emergency credit that was judged to be adequately secured by
assets of the company.
The difficulties at AIG and Lehman Brothers, combined with concerns
about the housing sector and overall economic conditions, led to accelerated stresses in global financial markets that have just recently been
showing signs of easing. Included in signals of those stresses were
deep reductions in stock prices, sharp increases in the costs of various
types of short-term credit and the outright freezing up of some credit
outlets, and reduced liquidity in many markets. In some money market
funds, losses led them to "break the buck" (when the value of the money market assets falls below par, an extremely unusual occurrence) as
large-scale withdrawals from the funds took place from money market
funds.
In turn, money market funds responded to surges in withdrawals by
reducing their holdings of commercial paper and large certificates of
deposit (CDs) issued by banks. Commercial paper markets became
severely impaired, with significant increases in the costs of issuing relatively long-term commercial paper, declines in lending in the longterm commercial paper market, and significant increases in the costs of
issuing even short-term commercial paper.
Concurrently, with heightened risk aversion among lenders and investors, there was a significant increase in demands for safe assets in a
flight to quality which resulted in further declines in values of mortgage-backed assets and in marked reductions in the yield on Treasury
bills down to only a few hundredths of a percent.
Depository institutions also felt financial pressures this past summer,
including Washington Mutual and Wachovia, with substantial outflows
of deposits and reduced access for the banks to normal funding channels. In response to financial difficulties at Washington Mutual, the
Office of Thrift Supervision closed the bank and appointed the Federal
Deposit Insurance Corporation (FDIC) as receiver. The FDIC
promptly sold Washington Mutual to JPMorgan Chase. For Wachovia,
386
the Secretary of the Treasury, sensing a systemic threat from failure,
authorized the FDIC to use its funds to facilitate the sale of the company's banking operations to Wells Fargo.
Responses to perceived threats to stability of the global financial system by the Fed, Treasury, FDIC and others has not been directed with
the sole objective of merely keeping large financial institutions afloat.
Rather, the objective has been to reduce or eliminate the potential of
severe restrictions in credit flows to households and businesses following financial failure of one or a group of large financial institutions.
Such severe restrictions in credit to households and businesses would
pose a significant threat to economic growth and day-to-day life on
Main Street.
Included among alternative indicators of stresses in financial markets
are:
* Treasury-Bill Yield: Yields on short-term Treasury securities fell
precipitously following the collapse of Lehman Brothers in MidSeptember, and have remained low, in a flight to quality.
Three Month TresurV Yield
(Yield at constant maturity, percent per annum)
-~~~~~~~~~~~~6X
-
-
--
------------5%
-
--------*_
-
-
--
uaaiDa4X ---------------- -- - --- - --
-4
3%
- -- - ---
-
tI
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ID
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Sumce: Haw Amulti
*LIBOR (London Interbank Fixing Rate): LIB3OR is a measure
of the rate at which banks borrow and lend among each other. LIBOR is also the basis for some financial contracts, including home
mortgages and student loans. A LIBOR rate reflects many considerations on the part of both the borrowing bank and lending bank.
Increases in a LIBOR rate can reflect increasing concerns on the
part of banks about the creditworthiness of other counterparty
banks with which the lending would occur. Roughly speaking,
higher LIBOR rates can signal that banks are less willing to lend
money to one another. Following the collapse of Lehman Broth-
387
ers, LIBOR rates spiked up precipitously, but have since retreated
following aggressive actions by central banks and fiscal authorities
around the globe.
Three Month UBOR
(Rate based on U.S. dollares)
- - ---------~~~~~~------ ---
6%
--- -- - -- -- ---- - - -- - -----
=
4%
3%
A
---
--
-1~~~~~~~~~~~~%
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Saxu*: Haw AnOitfi
*
TED Spread: The so-called "TED spread" is the difference between the 3-month LIBOR and the yield on a 3-month Treasury
bill. The TED spread is a measure of liquidity and is an indicator
of the degree to which banks are willing to lend to one another. It
is also an indicator of perceptions of credit risks facing commercial
banks. Treasury bills are considered virtually risk free, while LIBOR reflects credit risks associated with one bank lending to
another bank-the so-called "counterparty risk." As the TED
spread goes up (because the 3-month LIBOR has risen or the 3month T-bill yield has fallen, for example), there is an indication
that banks perceive an increase in counterparty risk and/or inves-
tors have a stronger preference for safe investments. Roughly
speaking, a higher TED spread indicates higher anxiety among
lenders and creditors.
The TED spread spiked up significantly following the Lehman
Brothers collapse and, given a number of interventions in financial
markets by the Fed, Treasury, and monetary and fiscal authorities
abroad, has only recently been showing signs that banks' perceptions of counterparty risks are abating. The TED spread averaged
around 25 basis points between 2002 and 2006 (a basis point is a
hundredth of a percent). By contrast, the spread spiked to over 400
basis points (4%) following Lehman's collapse, but has since re-
388
treated given aggressive actions by central bankers and fiscal authorities around the globe.
TEDSpremd
(30month UBOR - 3-month T4bI1 yield at constant maturity)
5%
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Commercial Paper: How do stresses in credit markets, judged by
Treasury yields or inter-bank lending rates, relate to Main Street?
One answer is that businesses, large and small, increasingly find it
hard, expensive, or even impossible to obtain credit that they need
to continue operations (producing, making payrolls, and buying inputs) as bank lending freezes up.
Many businesses rely on something called Commercial Paper to
fund their ongoing operations-it is normally an efficient, low-cost
way of funding operations. Commercial paper is an often unsecured promissory note with a fixed maturity of one to 270 days.
Commercial paper markets have been under stress recently. The
supply of funds to the commercial paper market dried up following
the collapse of Lehman Brothers as the normal suppliers, such as
money market investors, withdrew in order to hoard cash to meet
their own possible depositor withdrawals and funding needs.
For many weeks following the collapse of Lehman Brothers commercial paper lending that did take place had increasingly been at
higher rates and at shorter maturities as lenders feared being locked
into commitments for long periods. Indeed, the Federal Reserve at
one point was temporarily unable to calculate interest rates on
some non-financial commercial paper issued by AA-rated companies (companies having nothing directly to do with Wall Street or
bad mortgage debt) because of lack of trading activity. For a time,
funding had all but dried up in many segments of the commercial
paper market, as investors funded only very short-term notes of
one to a few days, but were very reluctant to fund notes lasting
389
much longer than a few days. That forced many who typically
fund their operations through commercial paper to fund on a rolling short-term basis and to tap existing lines of credit, often at
higher rates than would typically be paid in commercial paper
markets.
Following the collapse of Lehman Brothers, issuance of very short
term commercial paper spiked up, as longer term commercialpaper financing was less available and, when available, was much
more costly to obtain. Following aggressive actions by central
bankers and fiscal authorities around the globe, commercial paper
market lending has been thawing-with increasing amounts of
lending at relatively longer terms and lower rates than prevailed
immediately after Lehman's collapse.
One-Four Dwy Comnrcdal Paper issuance
(Milliors of dollars)
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(i.e., the yield required by lenders) shot up for financial paper and
asset-backed paper following the collapse of Lehman Brothers,
both for short-term and relatively longer-term paper. In addition,
spreads between lower rated issuing firms (A2/P2/F2) and safer
(AA rated) issuing firms and between AA asset-backed paper and
paper not backed by assets increased, reflecting heightened risk
aversion and uncertainty about counterparty risk and asset quality.
Following aggressive actions by central banks and fiscal authorities around the globe, most commercial paper yields have been declining.
390
One-Day Connmercial Pper Yield
(Percent per annum)
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The indicators of credit market stress above all paint a similar picture:
financial markets, already under considerable stress, became very
stressed and turbulent following the collapse of Lehman Brothers; the
post-Lehman-collapse stresses and turbulence have been subsiding in
the aftermath of aggressive actions by central banks and fiscal authorities around the globe; but stresses remain and credit markets have yet
to return to more normal functioning.
International Developments
Following a general decline in the foreign-exchange value of the dollar
since early in this decade, the trade-weighted value of the dollar has
increased since August of this year. The increase partly reflects strengthening of demand for dollar denominated assets, Treasury securities in
particular, in a global flight to quality following the demise of investment bank Lehman Brothers in early September of this year.
Xt
391
Trade-Weighted Value of the Dollar
(Nominal broad trade-weighted exchange rate, 2/1997=100)
140
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following a trend decline that lasted from 2002 until roughly September of this year.
US. Dollar per Euro
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A declining dollar makes imports more costly and less competitive in
U.S. markets and makes U.S. exports more competitive in world markets. As we have seen, robust recent growth in U.S. exports helps fuel
overall GDP growth and has been a fortuitous benefit associated with
free trade, coming at a time when the housing market has served as a
drag on GDP growth.
By contrast, an increasing value of the dollar makes imports less costly
and U.S. exports less competitive in world markets. Increases in the
value of the dollar, combined with expected continued weakness in
economies abroad, threaten to attenuate some of the fortuitous recent
developments in U.S export and import behavior. Many believe that in
the longer-term, further depreciation of the dollar may arise against
currencies of many of our trading partners. That belief stems from the
fact that, despite recent improvements in our Nation's current account
deficit, the U.S. current account deficit remains large at over 5% relative to GDP. (The current account is a broad measure of wealth flows
between countries, with a large part accounted for by the balance of
trade in the U.S.).
393
CurrentAccount Balance
(Percent of GDP: - means deficit, + means surplus)
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The current account deficit means that U.S. savings are not sufficient
to fund U.S. investment; on the other hand, it also reflects the fact that
investors abroad continue to view the U.S. as a particularly attractive
place to invest.
The Federal Budget
The Federal government recorded an estimated total budget deficit of
$455 billion in fiscal year 2008, or around 3.2% of GDP. Total receipts
were around 17.8% of GDP, while total outlays were around 21% of
GDP, according to the U.S. Treasury's September 2008 Monthly Treasury Statement. The deficit represented an increase from the $162 deficit in fiscal year 2007.
The deficit for fiscal year 2009 is expected by many to exceed $1 trillion. In the first two months of fiscal year 2009, the deficit already cumulates to $402 billion.
There are needs to address short term challenges associated with the ongoing housing correction, general economic recession, and stresses in
labor markets. Many of those needs have required and may continue to
require that the Federal government engage in aggressive deficit-
financed actions to stabilize financial markets, strengthen financial institutions, and push against recessionary headwinds.
There is also, however, also a need to keep in mind fiscal responsibility
and to work to reform unsustainable promises embedded in our major
entitlement programs-most notably Medicare and Social Security.
The serious and major threat to stability in longer-term government
finances comes from the projected runaway growth in mandatory
spending, including Social Security, Medicare, and Medicaid. The rel-
394
atively certain demographic outlook involves large-scale retirement of
the "baby boom" generation, meaning fewer workers per beneficiary in
Social Security. Currently, around 3.25 workers contribute to the Social Security system per beneficiary. The number of beneficiaries by
2030 will have doubled and the ratio of workers to beneficiaries will
have fallen to around 2.00. At the same time, Medicare spending per
beneficiary is expected to rise with increases in the costs of medical
care.
The Nation faces important questions as it examines whether promises
imbedded in the Social Security system, Medicare, and Medicaid are
sustainable, given budget and social priorities. Many fear that these
systems have committed more resources to the baby boom generation
than they can realistically deliver without imposing massive burdens
on younger generations. If those commitments are untenable, then
making changes to the promises should come sooner rather than later,
giving people as much time as possible to adjust their work, savings,
and retirement plans.
Stimulus Spending by Government: An Option for Policy?
Fiscal policy governs taxes and government spending. Fiscal stimulus
refers to stimulation of aggregate demand, and potentially also supply,
using deficit-financed increases in government spending and/or reductions in taxes.
Aggregate demand consists of demand for goods and services from
consumers, from business in the form of investment demand for things
like machines, from government, and from the net of exports sold
abroad over imports purchased from abroad. If government spending
increases, with all else held constant, aggregate demand for output in
the economy will increase. If taxes are cut, with all else held constant,
after-tax incomes will rise, which will tend to stimulate aggregate demand from those receiving the tax cuts.
Fiscal stimulus differs from other countercyclical fiscal policies called
automatic stabilizers. Elements of tax policy that automatically provide fiscal stimulus if economic growth falls or if employment and
output decline are what are referred to by the term automatic stabilizers. When economic activity and aggregate demand weaken, these
stabilizers exert forces into the economy that tend to dampen the weakening, to stabilize demand and output.
Typical examples of automatic stabilizers are Unemployment Insurance and Food Stamp outlays from the government, which automatically tend to rise when employment and economic activity falls. When
the economy slips into a recession, for example, unemployment rises.
395
This leads to increases in the number of people receiving Unemployment Insurance compensation and, consequently, increases in outlays
from Unemployment Insurance programs.
Current discussions of fiscal stimulus are focused on deficit-financed
temporary tax cuts and/or additional government spending that can, in
principle, serve to temporarily boost aggregate demand as additions to
the automatic stabilizers already in place. The intent is to further offset
weakness in demand in or before a recession. Fiscal stimulus actions
correspond to traditional Keynesian-style "demand management" policies designed to fine tune the economy so that it does not stray into
recession or experience a deep recession. The extent to which such
fine tuning exercises can be effective or have been effective in the past
is a very controversial issue in macroeconomic research, and hard answers have not been established.
Financing Fiscal Stimulus: One question surrounding fiscal stimulus
is whether stimulus spending by government should be paid for now or
later. For a temporary stimulus to have the greatest chance of success
in stimulating aggregate demand, it should be deficit financed in the
very short term. If, to pay contemporaneously for fiscal stimulus,
some taxes are raised or some government spending is cut, those actions will work against the intent of providing fiscal stimulus to boost
aggregate demand. However, deficit financing of temporary fiscal stimulus adds to the government's deficit which requires, for long-run
budget balance, some offsetting spending cuts or tax increases in the
future.
While contemporaneous deficit financing of fiscal stimulus runs counter to a strict notion of pay-as-you-go (PAYGO) budgeting, some have
argued that existing informal PAYGO "rules" allow for violation of the
PAYGO principle in emergency events, with the possibility of a recession evidently qualifying as an emergency. Others argue that informal
PAYGO "rules" allow for a temporary deficit that would arise from
short-term fiscal stimulus if any addition to the overall deficit is resolved within a five year window using spending cuts or tax hikes
within that window.
If stimulus spending is adopted, it would be highly beneficial for Congress to map out an explicit plan for how to pay for the spending in
later periods. Such an explicit mapping could help assure financial
markets on the fiscal outlook for the future, especially since the Nation
faces further major challenges ahead on the fiscal front from promised
spending in the unsustainable promises embedded in mandatory spending-especially Social Security and Medicare.
396
What Should the Size of a Fiscal Stimulus Package Be? There is no
correct answer. A better question might be: What magnitude of government spending and/or tax cuts would provide a significant boost to
aggregate demand measured, say, by the size of the stimulus package
relative to the size of the overall U.S. economy?
Stimulus packages under current debate cover a wide range of anywhere between $300 billion and $1 trillion. The annualized dollar value of the Nation's total output of goods and services, GDP, in the 3 d
quarter (the latest period of data availability) was $14.4 trillion. To
simplify matters, suppose that the entire amount devoted to fiscal stimulus was comprised of additional government outlays. Additional
government outlays of $300 billion and $1 trillion represent, respectively, roughly 2% and 7% GDP.
How much additional GDP would a fiscal stimulus package of $300
billion or $1 trillion generate? According to a report by the Congressional Budget Office (CBO) in January 200: "Estimates using econometric models suggest that an assumption that a dollar's worth of stimulus at a time of economic weakness produces roughly a dollar's
worth of additional economic activity is about the right order of magnitude."4 Keep in mind, however, that it is unlikely that the full impact
of a fiscal stimulus package on GDP would occur within a quarter or
two. To the extent that aggregate demand increases because of stimulus, the increases will likely be spread out over a longer period. This
would be especially true for spending on long-term infrastructure
projects, many of which are spread out, in terms of construction and
spending, over years even if initiated immediately, because of long
time lags to project completion.
What Stimulus Options are Available? In general, fiscal stimulus
measures include those directed at:
* Households-tax cuts (or "rebates"), or increases in transfer payments from the government (e.g., Food Stamps or Unemployment
Insurance benefits).
* Businesses-tax cuts designed to stimulate business investment
spending or cuts in corporate income taxes.
* Government-government purchases of goods and services (e.g.,
infrastructure spending) or increases in Federal transfers to state
and local governments.
"Options for Responding to Short-Term Economic Weakness," January
2008, CBO, available at http:H/www.cbo.gov/ftidocs/89xx/doc8916/01-15Econ Stimulus.pdf
4See
397
What about making tax cuts permanent? Extending the pro-growth
tax relief that began in 2001 and continued in 2003 is highly desirable,
especially if matched with policies in the future to rein in health care
costs and to stem the growth of government spending through reform
of the system of unsustainable promises contained in the Nation's entitlement programs.
A channel through which extending tax relief today can lead to increased economic activity today is an expectations channel. To the
extent that households and businesses currently believe that taxes will
be raised in the future, current spending will tend to be dampened because households and businesses are forward looking-they take into
account not only current tax rates in deciding current actions, but also
what they expect their taxes to be in the future.
If extension of tax relief today causes people to change their expectations from higher taxes in the future to no tax increases or lower taxes
in the future and this leads them to perceive that their lifetime wealth is
higher, then current spending will rise. Expectations about the Nation's long-run fiscal picture is also important as is, potentially, resolution of uncertainty today concerning what tax rates are likely to be in
the future.
Will Keynesian Style Fiscal Stimulus Measures Work? There is no
agreement among economists, and no strong empirical evidence, to
suggest that a short-term fiscal stimulus program is at all effective in
stimulating aggregate demand to a degree necessary to pull the economy out of a recession or significantly cushion the impact of recession
on the economy. Proponents of short-term stimulus rely often on theoretical possibilities that have not received overwhelming support from
empirical evidence.
Much discussion has recently been placed on infrastructure spending.
Infrastructure spending is likely not to be a very effective way to stimulate the economy in the near term. Even if there are "projects on the
shelf' that can be started the day after legislation is enacted (i.e., are
"shovel ready"), spend-outs on infrastructure projects often take many
years. Thus, it is not very effective, in terms of immediate bang for the
buck, to spend on infrastructure projects. Indeed, according to the Jan-
uary CBO report:
"Practically speaking, however, public works [a.k.a. infrastructure] involve long start-up lags. Large-scale construction
projects of any type require years of planning and preparation.
Even those that are 'on the shelf generally cannot be undertaken quickly enough to provide timely stimulus to the economy.
398
For major infrastructure projects supported by the Federal government, such as highway construction and activities of the
Army Corps of Engineers, initial outlays usually total less than
25 percent of the funding provided in a given year. For large
projects, the initial rate of spending can be significantly lower
than 25 percent."
"Some of the candidates for public works, such as grantfunded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most
of these projects could end up making the economic situation
worse because they would stimulate the economy at the time
that expansion was already well underway."
Shovel ready does not mean productive and efficient. Long-term investments into the economy can be productive, but planning and ranking according to costs and benefits is essential. Planning and ranking
is unlikely to be done effectively enough to ensure productive infrastructure investment in an environment of demands for quick stimulus
spending. The Federal government has a poor track record of throwing
money at problems without sufficient planning and oversight.
THE OUTLOOK
The economy is in a recession, and many expect this recession to be
especially deep and prolonged. While there are signs of some thawing
in credit market flows that have been frozen, especially since the demise of investment bank Lehman Brothers in early September, financial markets remain stressed. Job losses continue and incoming data
suggest that spending, productions, and a variety of economic activities
have receded significantly. Moreover, recessionary forces and financial market stresses are global.
Looking forward, most forecasters see declines in the economy, in
terms of overall GDP, through the first half of next year. Positive, but
below trend, growth is expected to resume in the second half of next
year with a return to trend-like rates of growth of around 3% beginning
sometime in 2010.
Of course, risks and uncertainties remain, many of which are unusually
severe. The extent to which the housing market correction is behind us
or has a way to go remains uncertain. Uncertainties and turbulence in
global and U.S financial markets continue. Effects of the global spread
of recession may yet to have been fully realized. There also remains a
risk of the U.S. economy, and perhaps others, falling into a deflation,
with forces that adversely consumed the Japanese economy for over a
399
decade and likely contributed to Japan's "lost decade" of no growth.
And there are uncertainties concerning effects of near-term budget
pressures associated with financial and economic recovery actions and
pressures on top of that from the demographic tidal wave of babyboomer retirees in conjunction with existing entitlement promises.
Despite our Nation's challenges, we maintain our confidence in our
free market system, our devotion to free and fair trade with our global
trading partners, and the economy's ability to expand and provide improved job opportunities for all Americans. We must work to insure
that fiscal and regulatory burdens are not expanded to hinder economic
growth and job creation and we must continue to fight protectionism
against our trading partners that would prevent Americans from benefiting from the gains of free and fair trade.
We are eager to continue discussions of possible Congressional measures to help boost economic activity and ease financial market pressures and results of those pressures on American families. Continuing
and expanding tax relief for individuals, families, producers, elderly
Americans, retirees, and homeowners are very worthy of considerations.
We are concerned, however, with rhetoric from the other side of the
aisle suggesting that the current economic and financial difficulties
facing American families, the overall economy, and financial markets
are a welcome call for reckless, undisciplined, and massive expenditures on special-interest projects.
We are concerned that some of our Democrat colleagues view the current situation as an invitation to abandon all fiscal discipline, open the
spigots of big-government spending, and create vast new government
programs.
We are concerned that some on the other side of the aisle may choose
to use calls for a regulatory overhaul of financial markets as a welcome
mat for imposing overly onerous regulations that end up stifling growth
and hurting American pursuits.
We are also concerned that some of our Democratic colleagues will
attempt, under the guise of economic stimulus and recovery and energy
conservation, to effectively engage in industrial engineering policies
which attempt to pick winning and losing industries and technologies.
Governments have a very poor record, at best, in picking winners and
losers in industry and technologies.
It is best to harness the industry of American workers and entrepreneurs, within the confines of a set of rules of the road which ensure
transparency and fairness, by allowing them the economic freedom to
400
prosper and hold on to the hard-earned incomes, wages, dividends, and
gains that ultimately flow from their hard work and industry.
In light'of renewed recent uncertainties and heightened risk aversion in
financial markets, expectations of a deepening recession, and stresses
placed on American families facing difficulties with their mortgages,
one thing seems perfectly evident: Now is not the time to raise taxes on
any American families or businesses. Now is an opportune time to
guide expectations of taxpayers of a continuation and expansion of progrowth tax policies that reward American families, entrepreneurs,
workers, producers, and employers by allowing them to keep their
hard-earned rewards to work effort, rather than surrendering those rewards in taxes to expanded government activities guided by special
interests.
Representative Jim Saxton
Ranking Republican
Senator Sam Brownback
Ranking Republican Senator
401
MINORITY STAFF REPORTS
402
GOVERNMENT POLICY BLUNDERS LARGELY
CAUSED THE GLOBAL FINANCIAL CRISIS
Macroeconomic and microeconomic policy blunders by both the
U.S. government and foreign governments inflated an unsustainable
housing bubble in the United States and other developed economies.
When this bubble inevitably popped, a global financial crisis ensued.
Although misaligned private incentives, methodological errors in rating
structured credit products, and the recklessness of some private financial institutions and investors did play a contributory role in the recent
financial turmoil, individuals and firms could not have created and sustained such a large housing bubble over so long a time without major
macroeconomic and microeconomic policy mistakes. These policy
mistakes were:
1. The exchange rate policy of the People's Republic of China (PRC)
and the shadow exchange rate policies of governments in other
Asian economies caused large and persistent international trade
imbalances, suppressed price increases on tradable goods and services, and channeled monetary inflation in the United States and
other developed countries with floating exchange rates disproportionately into housing prices;
2. The Federal Reserve pursued, at least in retrospect, an overly accommodative monetary policy after 2000 that kept U.S. interest
rates too low for too long. Moreover, central banks in the PRC and
other Asian economies invested most of their surging foreign exchange reserves in U.S. Treasury, Fannie Mae, and Freddie Mac
debt securities, flatting the long-end of the yield curve in the United States. These policies combined to produce extremely low
long-term interest rates that stimulated housing demand.
3. Financial regulators in the United States and other developed
economies failed to exercise adequate prudential supervision over
highly leveraged non-depository financial institutions in the alternative financial system;
4. Regulations mandating the use of value-at-risk models to determine the capital adequacy of financial institutions (1) caused both
these institutions and their regulators to underestimate risk exposure, and (2) encouraged these institutions to increase their leverage;
5. Regulations mandating the use of "fair value" accounting (also
known as "mark-to-market" accounting) for illiquid financial assets exacerbated liquidity problems at financial institutions after
the housing bubble burst.
403
6. The strengthening of affordable housing regulations governing
Fannie Mae and Freddie Mac in October 2000 had the unintended
consequence of creating a large regulatory-induced demand for
subprime residential mortgage loans that mortgage banks proceeded to satisfy.'
Macroeconomic Policy Factors. During the last decade, the governments of the world's major economies have pursued two different
exchange rate policies: freely floating exchange rates and pegged exchange rates. In the "floating zone," the United States along with Australia, Canada, the European Union member-states using the euro, and
the United Kingdom allowed market forces to determine the foreign
exchange value of their currencies. In the "pegging zone," the
People's Republic of China (PRC), Indonesia, India, Japan, South Korea, Malaysia, Taiwan, and Thailand intervened heavily in the foreign
exchange market by buying dollars and selling their currencies to
maintain politically determined, below market exchange rates pegged
to the U.S. dollar to give their manufactured exports a price advantage
in American and European markets.
Pegged exchange rates produced persistent distortions in relative
prices around the world. Over time, these price distortions exacerbated
imbalances in the global economy, especially large, persistent current
account surpluses in the PRC and large, persistent current account deficits in United States.
Consequently, the governments of these Asian economies added
$2.7 trillion to their foreign exchange reserves between December 31,
2000 and December 31, 2007. About 70 percent of this increase in
foreign exchange reserves was invested in the United States, mostly in
U.S. Treasury debt securities and U.S. Agency debt securities (e.g.,
Fannie Mae and Freddie Mac).
The exchange rate-induced price distortions influenced macroeconomic policy decision-making around the world. In the United States
and other economies in the floating zone, central banks pursued, at
least in retrospect, overly accommodative monetary policies that expanded the availability of credit at low interest rates. In turn, these pol' For more detailed analyses, see: Robert P. O'Quinn, Chinese FXlnterventions CausedInternationalImbalances, Contributedto the US. Housing Bubble, Prepared for the Joint Economic Committee (I 10" Cong., 2 nd sess., March
2008); Robert P. O'Quinn, The US. Housing Bubble and the Global Financial Crisis: Housing and Housing-RelatedFinance,Prepared for the Joint
Economic (110' Cong., 2 nd sess., May 2008); and Robert P. O'Quinn, The
US. Housing Bubble and the GlobalFinancialCrisis: Vulnerabilities of the
Alternative FinancialSystem, Prepared for the Joint Economic Committee
(110' Cong., 2nd sess., June 2008).
404
icies inflated unsustainable housing price bubbles. In the PRC and
some other economies in the pegging zone, macroeconomic policy errors caused price inflation in goods and services to surge.
After these housing bubbles popped, massive overinvestment (i.e.,
the accumulation of assets in excess of the demand for these assets)
and malinvestment (i.e., the accumulation of the wrong types of assets)
was revealed in the housing sectors of the United States and most of
the other major economies in the floating zone. This triggered a global
financial crisis that began on August 9, 2007.
Specifically:
1. Low-cost imports, especially labor-intensive manufactured goods
from the pegging zone, intensified competition for tradable goods
in the United States and other economies in the floating zone. Because of this competition, various indices used to measure changes
in the prices of goods and services registered very low inflation
rates in the United States and other economies in the floating zone.
2. Low reported inflation rates persuaded officials at the Federal Reserve and other central banks to pursue relatively accommodative
monetary policies throughout most of the last decade.
3. Because asset prices are generally excluded from inflation indices,
higher housing prices did not increase reported inflation rates and
did not trigger more restrictive monetary policies in the United
States or other economies in the floating zone.
4. At least in retrospect, the Federal Reserve and other central banks
in the floating zone pursued overly accommodate monetary policies during most of the last decade. This fed a rapid expansion of
credit relative to GDP. In the United States, total credit outstanding (including total debt securities outstanding in U.S. credit markets and total loans and leases outstanding at U.S. depository institutions) grew from $17.1 trillion (equal to 205.8 percent of GDP)
on December 31, 1997 to $38.3 trillion (equal to 276.8 percent of
GDP) on December 31, 2007.
5.
Central banks in the pegging zone invested a large portion of their
accumulation of foreign exchange reserves in medium- and longterm U.S. Treasury debt securities and U.S. Agency debt securities.
These investment decisions flattened the yield curve in the United
States, pushing medium- and long-term U.S. interest rates below
what they would have otherwise been. Of course, the housing sec-
tor is especially sensitive to changes in long-term interest rates.
Microeconomic Policy Factors. During the last three decades, an
alternative financial system has developed to the traditional bank-
405
centric financial system. This alternative system is based on (1) the
securitization of loans, leases, and receivables into structured credit
products (e.g., residential mortgage-backed securities), and (2) the purchase of these structured credit products by highly leveraged nondepository financial institutions (e.g., investment banks, financial government-sponsored enterprises including Fannie Mae and Freddie Mac,
hedge funds, and off-balance sheet entities).
Highly leveraged non-depository financial institutions now perform the same economically vital, but inherently risky functions of (1)
intermediation 2 and (2) liquidity and maturity transformation 3 that
banks, savings institutions, and credit unions have historically performed. In the United States at the end of 2007, highly leveraged nondepository financial institutions held $12.7 trillion of financial assets
compared with $13.5 trillion of financial assets in depository institutions.
However, this alternative system, which developed largely outside
of the regulatory and supervisory structure that has been necessary to
contain financial contagion, proved vulnerable to a modem version of
19th century bank runs. Instead of depositors "running" to banks to
withdraw their deposits, unleveraged financial institutions such as
money market mutual funds that lose confidence in highly leveraged
non-depository financial institutions (e.g., Bear Stearns) refuse to rollover their overnight repurchase agreements while banks curtail their
secured lines of credit, forcing such troubled institutions to either declare bankruptcy or seek government assistance in a matter of hours.
Unintended Consequences from Financial Regulations. Federal
regulatory policies that addressed legitimate problems (i.e., inconsistent capital regulations for multinational banks, and inadequate accounting standards that allowed Enron to conceal its true financial condition before its collapse in 2001) had the unintended consequences of
encouraging excessive leverage and risk-taking especially among these
highly leveraged non-depository financial institutions. In particular,
two policies encouraged financial institutions to behave pro-cyclically:
1. Promoting the use of value-at-risk models to determine the risk
exposure in financial institutions without sufficient consideration
of the inherent limitations in these models, especially the lack of
sufficient historical data to draw statistically valid conclusions
refers the economic function of channeling funds from savers
to borrowers.
3 Liquidity and maturity transformation refers to the economic function of
turning illiquid financial assets such as term loans to households and firms
into liquid financial assets such as deposits payable on demand or marketable
securities.
2Intermediation
406
about (a) the credit performance of new products, and (b) institutional liquidity under rare episodes of financial stress; and
2. Requiring financial institutions to use fair value (also known as
mark-to-market) accounting for illiquid financial assets that such
institutions intend to hold.
Reliance on value-at-risk models caused both financial institutions
and their regulators to underestimate the risk exposure at these institutions. This underestimation encouraged aggressive lending and underwriting practices at financial institutions during upswings.
Small changes in the price factors that econometric models use to
estimate the fair value of illiquid financial assets can cause large drops
in the recorded value of these assets during downturns, forcing financial institutions to take large write-downs. These write-downs can
trigger "fire sales," in which financial institutions rush to sell similar
financial assets at any price, possibly reducing the value of these assets
well below what they actually fetch during orderly sales. Widespread
illiquidity may force financial institutions to contract the availability of
credit and increase its cost.
Unintended Consequences from Housing Policies Promoting
Home Ownership. The shift from FHA-insured mortgage loans to
subprime mortgage loans among low income households in the United
States and the widespread issuance of subprime mortgage-backed securities by investment banks during the first half of this decade is, in
large part, the unintended consequence of well-meaning, but poorly
conceived federal policies to increase the home ownership rate among
low income households. On October 31, 2000, the U.S. Secretary of
Housing and Urban Development issued affordable housing regulations for Fannie Mae and Freddie Mac during the years 2001 to 2004.
These regulations significantly increased the goals at Fannie Mae and
Freddie Mac for purchasing residential mortgage loans to low income
households. To meet these goals, Fannie Mae and Freddie Mac
stepped-up their purchases of privately issued AAA-rated tranches of
subprime mortgage-backed securities beginning in 2001. Responding
to this regulatory-induced demand, mortgage banks greatly increased
their extension of subprime mortgage loans, while investment banks
placed these loans into subprime mortgage-backed securities.
Misaligned Private Incentives. Misaligned private incentives encouraged excessive risk-taking in financial institutions:
1. Unlike the originators of other loans, leases, or receivables, the
originators of residential mortgage loans were not required to retain an equity interest, known as "skin in the game," in (a) the
loans which were sold or (b) the mortgage-backed securities into
which these loans were placed. Thus, originators such as mortgage
407
banks had no incentive to apply sound credit standards when underwriting residential mortgage loans.
2. The "issuer pays" business model of credit rating agencies made
them financially dependent upon a few investment banks whose
structured credit products the agencies were assessing. These
agencies pressed their analysts to give favorable ratings to maintain
or increase market share with these banks.
3. Banks had "up-front" incentive compensation packages for investment bankers that did not adjust their compensation for the
long-term profitability of their deals for the banks or their customers.
Methodological Errors. Credit rating agencies employed flawed
methodologies to evaluate structured credit products. These methodologies did not fully account for the likely correlation of delinquency and
default rates for similar loans, leases, and receivables that constitute the
collateral in structured credit products. This error caused credit rating
agencies to give higher ratings to many structured credit products than
they deserved.
Conclusion. Macroeconomic policy errors both here and abroad
combined with regulatory policy deficiencies and misaligned private
incentives to inflate unsustainable bubbles in housing prices in the
United States and most of the other major economies in the floating
zone. After these bubbles popped, the alternative financial system
proved vulnerable to a modern version of 19th century bank runs. This
sparked a global financial crisis that is ongoing.
DANGERS FROM THE POLITICAL ALLOCATION OF CAPITAL
In many ways some of the ideas of [Friedichl Hayek and
[Milton] Friedmanabout how markets best provide incentives, and best provide information, and best collect information may in a sense be even more true today, because of the changes that information technology is bringing, than they were at the time when they were propounded If you think about it, it cannot be an accident
that it is the same 15-year period when communism fell,
when command-and-control corporations like General
Motors and IBM had to be drasticallyrestructured, when
planningministries throughout the developing world were
closed down, and when the Japanese model of industrial
policy proved to be a complete failure. There is something about this epoch in history that really puts a pre-
408
mium on incentives, on decentralization, on allowing
small economic energy to bubble up rather than a more
top-down, more directed approach, that may have been a
morefruitful approachin earlieryears I
Lawrence J Summers
715' Secretary of the Treasury andAdvisor to PresidentElect Barack Obama
Since the financial crisis began in August 2007, the federal government has become increasingly involved with U.S. banks and other
financial institutions and U.S. financial markets. The Federal Reserve
has greatly expanded the size, duration, and scope of its credit facilities
(see Appendix). The Department of the Treasury has agreed to (1) inject up to $100 billion of taxpayer funds into Fannie Mae and another
$100 billion into Freddie Mac, (2) purchase up to $250 billion of preferred shares in banks, and (3) purchase $40 billion of preferred shares
in American International Group (AIG). Now, Chrysler, Ford, and
General Motors along with the United Auto Workers (UAW) union are
seeking emergency financing to help these automakers to avoid reorganizations under Chapter I I of the federal bankruptcy code.
Although central governments play a large role in allocating capital
in many Asian and European economies (1) through governmentowned banks, government pension funds, and other government-owned
financial institutions, or (2) through industrial policies that direct credit
to and encourage investment in favored firms, industries, regions, or
groups, a historical strength of the U.S. economy has been the relatively small role that the federal government has played in allocating credit
and making investment decisions. The limited number and scope of
government-owned financial institutions and the absence of an industrial policy in the United States has allowed private investors, private
banks, and other private financial institutions to allocate credit and
make investment decisions based on economic criteria without undue
political interference. Subject only to general laws and regulations,
private investors, banks, and other financial institutions may seek the
highest returns consistent with their risk tolerance.
While recent federal interventions were designed to encourage
banks and other financial institutions to replace government capital
' Interview with Lawrence Summers, Commanding Heights on PBS (conducted on April 24, 2001). Found at:
http://www.pbs.org/wabh/commandingheights/shared/minitextlo/int lawrence
summers.html# I.
409
with private capital after market conditions improve, policymakers
may nevertheless be tempted to use the leverage arising out of these
federal interventions to affect credit and investment decisions. This
raised an important question - how would the political allocation of
capital affect the performance of the U.S. economy?
The political allocation of capital misdirects investment based on
political criteria. Product innovation and process improvement in firms
suffer. Over time, diminishing productivity gains slow real income
growth and reduce real GDP well below its potential. Economists
attribute the deterioration of economic performance under the political
allocation of capital to several factors:
*
Inability of policymakers or bureaucrats to incorporate all of the
widely diffused and rapidly changing knowledge conveyed by
prices into allocating credit and making investment decisions;
*
Both legal and practical restraints on political decision-making in a
constitutional republic that:
o Reduce responsiveness to changing conditions and prospects,
and
o
Produce biases
*
Against entrepreneurship and innovation, and
*
For existing constituencies;
*
Division of firm resources away from managing the business toward lobbying policymakers and influencing the bureaucracy; and
*
Potential for corruption.
Information problems. The knowledge necessary to allocate capital efficiently is widely diffused throughout the global economy and
costly to obtain. It is impossible for any one person or organization to
acquire and to update constantly all of the information necessary to
allocate capital efficiently in a complex economy.
Prices reflect the collective judgment of global markets on all
available information. Under the market allocation of capital, price
signals from changes in interest rates and share prices allow households and firms to coordinate their investing and lending activities and
rapidly adjust their behavior to reflect changing conditions or prospects.
410
Under the political allocation of capital, however, policymakers or
government bureaucrats substitute their judgment for the collective
judgment of global financial markets expressed through prices. Because of the high cost and extreme difficulty in obtaining and constantly updating information, this substitution necessarily ignores some of
the information incorporated in market prices. With less than complete
information, politically determined credit and investment decisions are
less efficient than market-determined credit and investment decisions.
Unresponsiveness. A constitutional republic such as the United
States places many restraints both legal and practical upon policymakers and bureaucrats. These restraints necessarily slow the response of
policymakers or bureaucrats to changing conditions or prospects.
It takes time for policymakers to perceive funding needs. Congress
must enact enabling legislation to allow a political allocation of capital.
Normally, federal agencies must then devise implementing regulations
before decisions can be made. While laws and regulations can be
amended, change is often slow. In contrast, market participants have
no such time constraints.
Bias against entrepreneurship and innovation. Extending credit
and making investments involves risk. Loans may not be repaid, and
the value of equity investments may dwindle. To reward lenders for
assuming risk, riskier loans bear higher interest rates. Likewise, riskier
equity investments require higher expected rates of return.
Entrepreneurs experience a high rate of failure. While only a small
number of new firms grow into large prosperous multinational corporations, the rewards for investors in these few are enormous. Under the
market allocation of capital, venture capital firms can provide funds to
promising new firms with innovative products or breakthrough technologies because the vast returns from investing in the next Microsoft
or Starbucks can offset many failed investments.
Under the political allocation of capital, neither policymakers nor
bureaucrats receive large returns from successful investments in new
firms. Instead, policymakers and bureaucrats that extend credit to or
make investments in new firms that ultimately prove unsuccessful may
suffer from press derision and public ridicule. As a result, policymakers and bureaucrats may lose their positions.
The differences in the balance between risk and returns in private
firms and in government bias the political allocation of capital against
funding entrepreneurship in emerging industries producing new goods
and services using innovative technologies, and toward funding existing firms in established industries producing known goods and services
411
using conventional technologies. Thus, the political allocation of capital discourages entrepreneurship, slows product and process innovation, and retards the development of new technologies.
Bias for constituents. Under the separation of powers system
with legislatures whose members are elected by separate constituencies, the public expects individual lawmakers to respond to special
needs of their constituents, while the public expects the chief executive
to defend general interests. Under the political allocation of capital,
the natural tendency of legislative policymakers to serve the special
interests of their constituents may cause such policymakers to direct or
at least to influence the flow of credit and investment to their constituencies.
Struggling firms that have trouble raising funds in capital markets
often seek funding from government. Because of constituency bias,
many policymakers may support extending credit or investing funds to
struggling firms that employ the constituents of policymakers to avoid
layoffs or facility closures.
Layoffs and facility closures are never popular, but such restructuring is often necessary for struggling firms to recover. To secure governmental funding, however, firms may make popular commitments
that are often not in the long-term interests of the firm or its shareholders. For example, firms may commit to maintain their current level of
employment, to keep inefficient facilities open, or continue to produce
unprofitable products.
Resource diversion. The political allocation of capital encourages
firms to devote management time and firm resources to lobbying activities to secure funding from policymakers or bureaucrats. At a minimum, this distracts entrepreneurs and firm managers from their business. Firms may redirect resources from product innovation and
process improvement toward lobbying activities. As dependence on
government funding increases, the diversion of attention and resources
may become severe. Such diversions retard product innovations and
process improvements. Over time, diminishing productivity gains slow
real income growth and reduce real GDP below its potential.
Corruption and crony capitalism. Finally, the political allocation of capital may foster corruption. When policymakers and bureaucrats make credit and investment decisions, entrepreneurs and firm
managers may be tempted to bribe policymakers and bureaucrats to
secure funding for their firms or to prevent their rivals from securing
funding. Both policymakers and bureaucrats may seek to exploit the
considerable economic power that they are exercising when they allo-
412
cate capital. Thus, policymakers and bureaucrats may seek bribes from
entrepreneurs and firm managers.
In a number of countries, the political allocation of capital has led
to crony capitalism, in which politically connected firms receive favors
from the central government in exchange for various types of bribes to
policymakers and bureaucrats. Under crony capitalism, politically favored firms are largely immune from competition with less well connected firms. This discourages both domestic entrepreneurship and
foreign direct investment. By diminishing the incentive to innovate,
productivity gains lag, reducing real GDP growth over time.
Conclusion. While the severity of the financial crisis may justify
some of the recent federal interventions, these interventions, if not reversed once the crisis has dissipated, may retard the efficient allocation
of capital in the United States and thus diminish its long-term growth
prospects. Private firms and households make their credit and investment decisions based on economic criteria. While federal policymakers may incorporate economic criteria, federal policymakers must necessarily incorporate political criteria into their decision-making. This
fundamental difference between decision-making in private financial
institutions and markets and decision-making in government inevitably
fosters certain biases in the political allocation of capital and creates
the opportunity for corruption that reduces long-term economic
growth.
Appendix: Federal Reserve Actions
On August 17, 2007, the Federal Reserve established the Term
Discount Window Facility (TDWF) to allow banks and other depository institutions to borrow at the discount window for a term of up to 90
days instead of overnight.
On December 12, 2007, the Federal Reserve established the Term
Auction Facility (TAF) to allow banks and other depository institutions
to bid for funds for 28 or 84 days. The size of these auctions has been
increased several times.
On March 11, 2008, the Federal Reserve established the Term Securities Lending Facility (TSLF). Through the TSLF, the Federal Reserve lends up to $200 billion of Treasury securities held by the Federal Reserve to primary dealers secured for a term of 28 days (rather than
overnight) by a pledge of other securities, including federal agency
debt, federal agency residential-mortgage-backed securities (MBS),
and non-agency AAA/Aaa-rated private-label residential MBS. On
September 14, 2008, the Federal Reserve expanded the eligible collateral for the TSLF to include all investment grade securities.
413
On March 16, 2008, the Federal Reserve established the Primary
Dealer Credit Facility (PDCF) to allow primary dealers to borrow
funds overnight. Collateral may include tri-party repurchase agreements (repos) and investment grade securities.
On May 2, 2008, the Federal Reserve established temporary currency swap lines of $50 billion with the European Central Bank and
$12 billion with Swiss National Bank. On July 30, 2008, the Federal
Reserve increased its temporary currency swap line from $50 billion to
$55 billion with the European Central Bank. On September 18, 2008,
the Federal Reserve increased its temporary currency swap lines with
the European Central Bank from $55 billion to $110 billion and with
the Swiss National Bank from $12 billion to $27 billion. The Federal
Reserve established new lines with the Bank of Canada ($10 billion),
the Bank of England ($40 billion), and the Bank of Japan ($60 billion).
On September 24, 2008, the Federal Reserve established temporary
currency swap lines with the Reserve Bank of Australia ($10 billion),
the Sveriges Riksbank ($15 billion), the Danmarks Nationalbank ($5
billion), and the Norges Bank ($5 billion). On September 29, 2008, the
Federal Reserve increased its temporary currency swap with the Bank
of Canada from $10 billion to $30 billion, with the Bank of England
from $40 billion to $80 billion, and with the Bank of Japan from $60
billion to $120 billion, for the Bank of Japan, with the Danmarks Nationalbank from $5 billion to $15 billion, with Norges Bank from $5
billion to $15 billion, with the Reserve Bank of Australia from $10 billion to $15 billion, and with the Sveriges Riksbank from $15 billion to
$30 billion, and with the Swiss National Bank from $27 billion to $60
billion. On October 13 and 14, 2008, the Federal Reserve announced
that it had increased its temporary currency swap lines with the Bank
of England, the Bank of Japan, the European Central Bank, and the
Swiss National Bank to whatever is requested. On October 28, 2008,
the Federal Reserve announced that it had established a temporary currency swap line with the Reserve Bank of New Zealand ($15 billion).
On October 29, 2008, the Federal Reserve announced that it had established temporary currency swap lines with the Banco Central do Brasil
($30 billion), the Banco de Mexico ($30 billion), the Bank of Korea
($30 billion), and the Monetary Authority of Singapore ($30 billion).
On September 19, 2008, the Federal Reserve established the assetbacked commercial paper (ABCP) money market mutual fund facility
to lend to banks and other depository institutions on a non-recourse
basis to purchase ABCP from money market mutual funds.
On September 21, 2008, the Federal Reserve approved the applications of Goldman Sachs and Morgan Stanley to become bank holding
companies.
414
On October 6, 2008, the Federal Reserve announced that it would
begin paying interest on both required and excess reserve balances of
banks and other financial institutions held at Federal Reserve Banks.
On October 7, 2008, the Federal Reserve established the commercial paper funding facility (CPFF). Through the CPFF, the Federal
Reserve finances the purchase short-tenn unsecured commercial paper
and asset-backed commercial paper that is rated at least A-i/P-I/Fl by
a special purpose vehicle (SPV).
On October 21, 2008, the Federal Reserve established Money
Market Investor Funding Facility (MMIFF) to finance of up to 90 percent of the purchase of up to $600 billion of U.S. dollar-denominated
certificates of deposit, bank notes and commercial paper issued by
highly rated financial institutions from money market mutual funds
(MMMFs) by a series of private sector special purpose vehicles
(PSPVs). The PSPVs will finance the remaining 10 percent of their
purchases by issuing asset-backed commercial paper (ABCP).
On November 25, 2008, the Federal Reserve established the Term
Asset-Backed Securities Loan Facility (TALF) through which the Federal Reserve will extend up to $200 billion of non-recourse loans to the
holders of recently issued AAA-rated asset-backed securities collateralized by student loans, auto loans, credit card loans, and small business
loans guaranteed by the Small Business Administration (SBA).
On November 25, 2008, the Federal Reserve announced that it
would purchase up to $100 billion of Fannie Mae and Freddie Mac
debt securities and up to $600 billion of residential mortgage-backed
securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac.
416
POLICY LESSONS FROM JAPAN'S LOST
DECADE
Japan experienced large asset price bubbles in its stock and commercial real estate markets during the second half of the 1980s. These
bubbles peaked in 1989 and 1990, respectively. Subsequently, both
Japanese share prices and land values fell, surrendering all of their
gains during the bubble years by 1993 and 2000, respectively.
After these bubbles popped, real GDP growth slowed abruptly.
However, a series of fiscal and monetary blunders by the Japanese
government transformed the inevitable post-bubble recession into a
"lost decade" of deflation and stagnation. U.S. policymakers can learn
valuable lessons of what to do and not to do by studying these blunders.
Sowing seeds. During the second half of the 1980s, Japan enjoyed
both rapid economic growth and low inflation (as recorded in price
indices for goods and services). The Japanese yen appreciated from
Y260/US$ in February 1985 to a then all-time high of 150/US$ during
the summer of 1986. Fearing a loss of price competitiveness for Japanese manufactured exports in the United States, the Japanese government changed the thrust of its economic policy from non-inflationary
real GDP growth in Japan to containing the appreciation of the yen
relative to the U.S. dollar.
Despite a booming economy, the Bank of Japan loosened its monetary policy to stem the appreciation of the yen by reducing its policy
interest rate in steps from 5.0 percent in January 1986, to 2.5 percent in
February 1987. This overly accommodative monetary policy fueled
unsustainable price bubbles in the Japanese stock and commercial real
estate markets.
To prick these bubbles, the Bank of Japan began to tighten its
monetary policy, raising its policy interest rate from 2.5 percent in May
1989 in steps to a peak of 6.0 percent in August 1990. This tightening
caused these bubbles to pop:
The Nikkei 225 index, which was 13,000 at the end of 1985,
e
peaked at 38,916 on the last trading day of 1989 and then fell by
one-half in 1990. By 1993, all of the gains in share prices since
1985 had been eliminated. The Nikkei 225 index declined to a
post-bubble low of 11,820 on March 13, 2001.
*
The urban land price index rose by 199 percent from 35.1 in September 1985 to a peak of 105.1 in September 1990. The index then
417
gradually declined over the next ten years to 34.6 percent in September 2000, eliminating all of the gains in real estate prices since
1985.
The collapse of these bubbles wrecked Japanese banks and other
depository institutions:
* Japanese banks and other depository institutions were allowed to
invest directly in stocks. The unrealized capital gains on these
shares fell from V49.1 trillion ($355 billion) in 1989 to X55 trillion
($42 billion) in 2001, reducing bank capital.
* Japanese banks and other depository institutions secured almost all
of their commercial and industrial loans through commercial real
estate mortgages. As commercial real estate values escalated, credit standards deteriorated. Instead of examining whether nonfinancial firms could service their loans out of their cash flow from
operations, Japanese banks and other depository institutions increasingly relied on rapidly escalating collateral values for repayment. Weak credit standards during the bubble years boosted
problem loans and credit losses in Japanese banks and other depository institutions during the lost decade.
This weakness in Japanese banks and other depository institutions
had especially devastating effects on the non-financial business sector
in Japan because Japanese non-financial firms were more dependent on
bank loans than their counterparts in the United States and other developed countries during the 1980s:
* Japanese non-financial firms generally had higher debt-to-equity
ratios than their U.S. or European counterparts.
* The Japanese corporate debt market was relatively shallow. With
less ability to issue commercial paper and corporate bonds, Japanese multinational firms (MNFs) relied more heavily on bank loans
to finance investment than U.S. and European MNFs.
* Many Japanese non-financial firms, whose primary operations had
nothing to do with real estate development, began speculating on
commercial real estate as the bubble inflated. Widespread speculation devastated the balance sheets of these firms after the commercial real estate bubble popped.
Banking crisis. Once these bubbles burst, Japanese banks and other depository institutions were saddled with mountains of non-
418
performing loans. At first, the Japanese government played for time
through a policy of forbearance. Japanese banks and other depository
institutions delayed recognizing their losses on non-performing loans
to insolvent non-financial firms. Instead, Japanese banks and other
depository institutions continued lending to insolvent non-financial
firms to keep them from filing for bankruptcy. This lending expanded
the size of the non-performing loan problems at Japanese banks and
other depository institutions during the first half of the 1990s.
By the middle 1990s, unrealized stock losses, loan charge-offs, and
write-downs depleted the capital of many Japanese banks and other
depository institutions. The failure of several jusen (specialized housing lenders) in 1995 forced the Japanese government to abandon its
policy of forbearance.
Instead of forbearance, the Japanese government encouraged Japanese banks and other depository institutions to (1) "stop throwing good
money after bad" and (2) charge-off non-performing loans to insolvent
non-financial firms. Cumulative loan charge-offs from 1995 to 2003
were V37.2 trillion ($318 billion). Despite these loan charge-offs, nonperforming loans did not peak until 2002 when they reached X43.2 trillion ($330 billion), or 8.4 percent of total loans.
The Japanese government also decided to (1) provide taxpayer
funds to aid capital-impaired banks and other depository institutions,
and (2) assist stronger banks to acquire failing banks and other depository institutions. Because of widespread public opposition, however,
this policy of government assistance and consolidation proceeded in
fits and starts. Over the next decade, the Japanese government provided total assistance of X46.8 trillion ($399 billion) to Japanese banks
and other depository institutions through grants, asset purchases, equity
injections, and other means. As of March 31, 2007, X22.8 trillion
($195 billion) of this assistance has been recovered.
Although this policy of government assistance and consolidation
cost Japanese taxpayers Y24.0 trillion ($204 billion), it worked. Japan
now has a handful of well capitalized banks and other depository that
are capable of providing the credit to Japanese households and firms
necessary for sustained economic growth.
Lost decade. As the financial condition of Japanese banks and
other financial institutions deteriorated, credit for both entrepreneurs
and new ventures of existing non-financial firms became scarce. Japanese non-financial firms slashed their research and development expenditures, retarding the diffusion of new technologies. These factors
slowed productivity gains and stymied real GDP growth.
419
In July 1991, the Bank of Japan began to loosen its monetary policy. The Bank of Japan reduced its policy interest rate in steps to 0.5
percent by year-end 1995. As its policy interest rate approached zero,
the Bank of Japan engaged in quantitative easing. Nevertheless, the
real GDP growth rate stalled, averaging only 0.7 percent from 1992 to
1994, and disinflation morphed into deflation. This accommodative
monetary policy failed to spark real GDP growth because:
* Weighed down with non-performing loans, Japanese banks and
other depository institutions were unwilling to extend new loans to
non-financial firms despite very low funding costs; and
* Japanese non-financial firms wanted to reduce their leverage and
repair their balance sheets before borrowing additional funds tot
expand their operations.
As for fiscal policy, the Japanese government tried to stimulate real
GDP growth by increasing infrastructure spending from 6.5 percent of
GDP in 1990 to 8.3 percent of GDP in 1996. Instead of boosting real
GDP growth, additional infrastructure spending actually hurt the Japanese economy:
* Since the Japanese government had spent far more on infrastructure as a percent of GDP than the United States or other developed
countries, Japan had very few unfunded infrastructure projects that
would increase productivity.
* In Japan, the choice of infrastructure projects is highly politicized
and prior to 2002 was made without any cost-benefit analysis.
Japanese politicians have traditionally competed for Diet seats
based on their ability to "bring home the bacon" especially to rural
constituencies. As a result, Japanese infrastructure projects are notoriously wasteful (e.g., rural roads with little traffic, bridges to islands with few residents, and expensive seldom-used harbor facilities for small fishing villages).
* Japanese construction firms are very inefficient compared with
their counterparts in the United States and other developed countries. Infrastructure spending channeled taxpayer funds to one of
Japan's least efficient sectors.
* Japanese politicians and political parties are heavily dependent on
contributions from Japanese construction firms, while Japanese
construction firms are heavily dependent on public infrastructure
projects. This co-dependency has caused numerous "pay to play"
scandals involving large illegal campaign contributions and
payoffs from construction firms to policymakers.
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The exposure of these scandals and widespread waste in infrastructure spending by the Japanese media forced the government to reverse
its policy in 1997. By 2004, infrastructure spending fell to 4.8 percent
of GDP.
When infrastructure spending did not spark a recovery, the Japanese government implemented temporary income tax reductions in
1994. These reductions boosted real GDP growth to 2.8 percent in
1996. However, concerns about Japanese government budget deficits
caused the government to couple these temporary income tax reductions with a permanent increase in the consumption tax from 3 percent
to 5 percent, effective April 1, 1997. After this permanent tax increase
was implemented, real GDP contracted at an annualized rate of 3.3
percent in the second quarter of 1997, and real GDP continued to
shrink in both 1998 and 1999.
Moreover, this tax increase did not reduce the Japanese government budget deficit. Instead, it rose from 3.8 percent of GDP in Japanese fiscal year 1997 to 7.2 percent of GDP in Japanese fiscal year
1999.
Differences. Before discussing lessons learned, it is important to
observe several important differences between the Japanese experience
and the current situation confronting U.S. policymakers:
1. The asset price bubbles in the Japanese stock and commercial real
estate markets were country-specific. The residential real estate
bubble was global, occurring simultaneously in the United States
and many other developed countries with floating exchange rates,
including Australia, Ireland, Spain, and the United Kingdom.
2. The Japanese policy to pursue an overly accommodative domestic
monetary policy to contain the appreciation of the foreign exchange value of the yen caused the stock and commercial real estate price bubbles in Japan during the second half of the 1990s.
The causes of the residential real estate bubbles in the United
States and other developed countries with floating exchange rates
are complex and involve many macroeconomic and microeconomic policy errors by both the U.S. government and foreign governments.
Macroeconomic causes include the interaction between (I) the exchange rate policy
of the People's Republic of China (PRC) and the shadow exchange rate policies of
other Asian countries to keep the foreign exchange values of their currencies below
market-clearing levels after the Asian Financial Crisis of 1997-1998, and (2) implementation by either practice or rule of inflation-targeting by the Federal Reserve and
central banks in other developed countries with floating exchange rates. This interaction distorted price signals globally. Over time, these price distortions produced (I)
overinvestment and malinvestment in finance and housing sectors in the United States
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3. In Japan, non-financial firms were overleveraged and had weak
balance sheets, while the household sector was in better shape
when the stock and commercial real estate bubbles popped. In the
United States, households were overleveraged and had weak balance sheets, while the non-financial business sector was in better
shape when the residential real estate bubble popped.
4. Japan maintained significant current account surpluses during the
bubble years and the lost decade. The United States has run significant current account deficits.
Lessons for U.S. policymakers. The bursting of the stock and
commercial real estate price bubble in Japan and the subsequent lost
decade offers many lessons for U.S. policyrnakers during the current
global financial crisis and recession:
1. A recession inevitably follows the popping of a large asset price
bubble. However, policy decisions made during the recession will
affect both (1) its severity, and (2) the trajectory of the economy
following the recession.
2. The banking system must become financially healthy before a sustained expansion can occur. U.S. banks and other financial institutions recognized their losses more rapidly than Japanese banks and
other financial institutions. Moreover, the U.S. government injected taxpayer funds into U.S. banks and other financial institutions during this financial crisis far more quickly than did the Japanese government during the lost decade.
3. The balance sheet of the economic sector (business or household)
that suffered the most damage from the collapse of a large asset
price bubble must be repaired before a sustained expansion can occur. In Japan, non-financial firms had to reduce investment and
use their profits to reduce their debt and rebuilt their balance sheets
during Japan's lost decade before sustained growth resumed. Now,
financially stressed U.S. households must reduce consumption and
increase their saving rate to reduce their debt and rebuild their balance sheets. Thus, any portion of federal income tax reductions or
rebates that households save should not be regarded as a failed stimulus. Normal economic growth cannot resume until this strucand many other developed countries with floating exchange rates, and (2)overinvestment and malinvestment in the manufacturing sector in the PRC and many other Asian
countries. Microeconomic causes include (l) lacunas in the Basel capital standards, (2)
a fundamental conflict in the business model of credit rating agencies, (3)fundamental
flaws in the "originate to securitize" model of residential mortgage finance, (4) the
inherent mission conflict in Fannie Mae and Freddie Mac, and (5)various policies that
promoted home ownership among low- to moderate-income households that were not
able to shoulder these responsibilities.
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tural adjustment in the U.S. household sector is complete. "Saved"
federal tax relief may speed this necessary adjustment.
4. Unlike Japan, international imbalances were a major macroeconomic cause of the residential real estate price bubble in the United
States and many other developed countries with floating exchange
rates. The correction of these imbalances may require difficult international negotiations to limit the ability of national governments
to manipulate exchange rates.
5. While temporary income tax reductions helped Japanese economy
in 1995 and 1996, the simultaneously enacted permanent increase
in the consumption tax to reduce the Japanese government budget
deficit in 1997 extinguished the benefits of these temporary reductions, sending the Japanese economy back into a recession. The
automatic termination of the federal income tax reductions enacted
in 2001 and 2003 on December 31, 2010, may diminish the stimulus from any temporary federal tax reductions or rebates during
2009 and 2010 and may further weaken the U.S. economy in 2011.
6. Additional infrastructure spending may not bolster either shortterm or long-term economic growth. First, there are lengthy delays
between when infrastructure projects are authorized and when actual construction starts. Because of such delays, the desired boost
in employment may occur months after a recession is over.
Second, the ability of infrastructure projects to increase productivity and real GDP growth are unequal. To boost productivity longterm growth, policymakers must carefully select which projects
they fund to screen out "boondoggles." Such a thorough selection
process and a rapid funding of infrastructure projects to create jobs
during a recession are in conflict. A rush to approve a large number of infrastructure projects may lead to wasteful expenditures
that do not increase productivity and boost real GDP growth over
time.
@FedFRASER