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tSC2
Union Calendar No. 225
1stHSesson
1
HOUSE OF REPRESENTATUVES
111POR88
THE 2009 JOINT ECONOMIC REPORT
REPORT
OF THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ON THE
2009 ECONOMIC REPORT
OF THE PRESIDENT
TOGETHER WITH
MINORITY VIEWS
DECEMBER
19, 2009.-Ordered to be printed
U.S. GOVERNMENT
89-006
RIUNTING OFFICE
WASHINGTON
2009
JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES
SENATE
CAROLYN B. MALONEY, New York,
CHARLES E. SCHUMER, New York,
Chair
Vice Chairman
MAURICE D. HINCHEY, New York
BARON P. HILL, Indiana
LORETTA SANCHEZ, California
ELIJAH E. CUMMINGS, Maryland
VIC SNYDER, Arkansas
KEVIN BRADY, Texas
RON PAUL, Texas
MICHAEL B. BURGESS, M.D., Texas
JOHN CAMPBELL, California
JEFF BINGAMAN, New Mexico
AMY KLOBUCHAR, Minnesota
ROBERT P. CASEY, JR., Pennsylvania
JIM WEBB, Virginia
MARK R. WARNER, Virginia
SAM BROwNBACK, Kansas
JIM DEMINT, South Carolina
JAMES E. RISCH, Idaho
ROBERT F. BENNETT, Utah
GAIL COHEN, Acting Executive Director
JEFF SCHLAGENHAUF, Minority Staff Director
'
(ii)
LETTER OF TRANSMITTAL
CONGRESS OF THE UNITED STATES,
JOINT ECONOMI CCOMMITTEE,
Washington, DC, December 18, 2009.
HON. NANCY PELOSI,
Speaker of the House, House of Representatives,
Washington, DC.
DEAR MADAM. SPEAKER:
Pursuant to the requirements of the
Employment Act of 1946. as amended. I hereby transmit the 2009 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,
Carolyn B. Maloney,
Chair.
(iii)
CONTENTS
Overview of the 2009 Economy ....................................... ,.... I
MAJORITY STI AFEF REPORiS ...
28
Vicious Cycle: How Unfiair Credit Card Practices Are Squeezing
Consumers and Undermining the Recovery ...
29
"Easing the Squeeze" Series ...
41
Easing the Squeeze on Women and Their Families
,.
41
Easing the Squeeze on Older.Families .45
Easing the Squeeze on Young Families .48
Easing the African American Families ........................... 51
Easing the Hispanic Families .54
Easing the Veterans and Their Families .57
Women in the Recession: Working Mothers Face High Rates of
Unemployment ......
.............................................. 60
Comprehensive Health Care Reform: An Essential Prescription for
Women .....................
68
Income, Poverty, and Health Insurance in America: 2008 .
91
MINORITY VIEWS .
105
(v)
111TH CONGRESS
1st Session
HOUSE OF REPRESENTATrVES
I
REPORT
111-388
THE 2009 JOINT ECONOMIC REPORT
DECEMBER 19, 2009.--Committed to the Committee of the Whole House on the State
of the Union and ordered to be printed
Mrs. MALONEY, from the Joint Economic Committee,
submitted the following
REPORT
together with
MINORITY VIEWS
Report of the Joint Economic Committee on the 2009 Economic Report of
the President
OVERVIEW OF THE 2009 ECONOMY
Executive Summary
The American economy has suffered the deepest and most protracted recession since the Great Depression. The financial crisis
that began in the fall of 2008 had enduring effects on economic performance. The economy looked bleakest in January 2009, when
741,000 jobs were lost in a single month. In the first quarter of
2009, real gross domestic product (real GDP) fell by 6.4 percent.
Real GDP fell for four straight quarters, from third quarter 2008
through second quarter 2009.
2
After the first year of the Obama administration, the economic outlook
has improved. The magnitude of job losses diminished each month
after January, and job losses were just 11,000 in November of 2009. In
the third quarter of 2009, real GDP rose by 2.8 percent, in large part
due to the Recovery Act passed in February 2009. An analysis
conducted by the non-partisan Congressional Budget Office reports
that third-quarter real GDP in 2009 was between 1.2 to 3.2 percentage
points higher than it would have been in the absence of the Recovery
Act.
American families have been squeezed during the Bush administration,
which ended with median income, house prices, and retirement savings
lower than when President Bush took office in 2001. The recession
drove an increase in unemployment, especially among women heads of
households who don't have a second earner to count on. Long-term
unemployment rose - almost half of the unemployed have without a
job for over six months and almost one quarter have been without a job
for over a year.
Congress provided a safety net to those whose jobs were eliminated
during this recession by passing a series of extensions to
unemployment benefits and providing support for the portion of
healthcare costs usually borne by the worker's employer. The severe
number of jobs lost has made clear to Americans that the current
employer-based system of providing health insurance leaves too many
families without affordable options for health insurance. The House of
Representatives has already passed health insurance reform and, at the
time this was written, the Senate was attempting to pass health
insurance reform before recessing in 2009.
Additionally, in order to minimize the depth and severity of another
financial crisis, the House of Representative passed a comprehensive
regulatory reform proposal. The Senate is still debating regulatory
reform. Congress. has recognized the importance of moving away from
the regulatory neglect of the Bush administration. If passed and signed
into law, regulatory reform should provide transparency in the overthe-counter derivatives markets, consumer protection so that predatory
lending cannot proliferate as it did prior to the crisis, systemic risk
regulation to effectively monitor the health of the financial system, and
resolution authority so the government will have an option other than
lending or bailing out large, complex institutions that are intertwined
with other financial institutions.
3
Although some workers and employers found a mutually beneficial
solution to the economic downturn through flexible work arrangements
that facilitated work-life balance, other workers and employers
abandoned flexible work schedules during the recession.' Flexibility
deteriorated as fears of unemployment gripped those workers who
remained employed and some employers chose not to reward workers
with additional tools to manage work-life balance, even if those tools
might have been low-cost options for rewarding loyal, productive
workers.
INTRODUCTION
The Obama administration and Congress headed into 2009 with an
economy teetering on the brink of depression; the housing bubble had
burst and a financial crisis had rippled through every part of the
economy. 741,000 jobs were lost in January 2009 alone. Real GDP
dropped by 6.4 percent in the first quarter of 2009, continuing the fall
that began in the third quarter of 2008. In an October Joint Economic
Committee hearing, Dr. Christina Romer, Chair of the President's
Council of Economic Advisers, testified that the "shocks that hit the
U.S. economy last fall were, by almost any measure, larger than those
that precipitated the Great Depression." 2 Between 2007 and 2008,
household wealth plunged by 17 percent, more than five times the
decline seen from 1928 to 1929. Stock prices were more volatile than
they were during the onset of the Great Depression and the yield spread
between the least-risky (AAA rated) corporate bonds and riskier, but
investment-grade (BAA rated) bonds rose by much more in Fall 2008
than during the panic that precipitated the Great Depression. (See
Figure 1)
4
Figure 1. Shock Indicators: Great Depression vs. Current Recession
187
17
16.3
12.0lll
1928-1929
2007-2008
Decline at Household Wealth
(Perecot)
l1 -
Sep. 1929-Dmc. Sep. 2008-Dec.
1929
2008
Stock Market Volatility (Variance of
Daily Retutns)
Sep. 1929-Dec.
Aug. 2008-Dec.
1930
2008
Chatge m Moody's BAA-AAA Spread
(Basis Points)
Source: RoameTestiony before JoustEconooic Contntttee, Octobr 22, 2009.
The possible collapse of the financial system, by itself, would have
caused much economic hardship among American families. However,
eight years of economic mismanagement by the Bush administration
further diminished the ability of American households especially
low- and middle-income households - to weather an economic crisis
of epic proportions. The recession has hit middle class and other
vulnerable families even harder as a result of the prior Administration's
policies.
The once-vibrant labor market stagnated during the Bush
administration. The job creation engine stalled. While an average of
8.1 million total jobs were created each quarter during the Clinton
Administration, only 7.6 million total jobs were created each quarter
during the Bush administration. Controlling for the impact of the two
recessions during the Bush administration does not improve the private
sector job creation story. Even during the expansion following the
2001 recession, the Bush administration averaged only 7.7 million
private sector jobs created each quarter. (See Figure 2)
Moreover, the job creation that did occur during the Bush
administration likely came at great cost to the economy. According to
Nobel Laureate economist Joseph Stiglitz, private sector job creation
during the Bush-era expansion was fueled by a bubble in housing
prices and overleveraging by households, which artificially spurred
5
consumption and hiring.3 This may be a kcy cause of the precipitous
decline in job creation during the recession.
Figure 2. Private Sector Gross Job Gains and Losses
9000
-i
c
8500i
J[t,
% ,
Jobcreic. n-serreum.s o
-kd
"t'
~I" ',~
4;
7
I
7SOO
A 7000
65oO
6000
Cl nto- Ad.;mtratom
B.,h AdGm,itmiaon
N
I
.i
19?2
Soun
996
EC Mao~nty StufftC'k.i1tnn
20M0
b-nd on q-rwclry d.t, fnt [h. iiunu
20C4
.
i ahr Stnt~tw,,
RusmirsEmoyrncnt D~rno-.'S.
The average annual growth rate in employment rose only 0.2 percent
during the Bush administration, the lowest of any administration since
the Hoover Administration. (See Figure 3)
Figure 3. Change in Nonfarm Employment, 1929-2009, by Adminstration
60
3.F.
40
3.
2.3
25
24
-60
-SO
P'e
/s
"e
/~
/J
'oe'
SOUC.JECMajpnty StaWl
Ca/o-arconsba.d -n data/tom thF.
l
9
Irwimita Entahliihn.-
S-r-y
'es
oauo[.Lobr
/o
'bw
/vty,
6
The unemployment rate rose from 3.9 percent heading into the Bush
administration to 7.2 percent by the end of it. Female heads of
households - a growing segment of the population - already faced
difficulties maintaining an income while taking care of their children.
The recession has only increased the challenges faced by these
vulnerable families. Over the course of the Bush administration, the
unemployment rate for female heads of households rose from 6.7
percent to 9.5 percent, and single mothers' joblessness may have
negative long-run consequences for their children. 4 Among the
unemployed, even those who put in tremendous effort to find a job
faced a labor market that was growing more strained by the year. For
each unemployed worker at the start of the Bush administration, there
was one non-farm job opening. By the end of the Bush administration,
there were three unemployed workers per non-farm job opening.5
The punishing losses in the labor market afflicted both low- and
middle-income families during the Bush administration. The number
of individuals with incomes below the poverty level rose by 8.25
million people, which put a large burden on the social safety net. 6 Real
median household income fell by almost $2,200 during the Bush
administration, compared to a $6,400 increase during the Clinton era.'
This loss of economic security for low- and middle-income families
was accompanied by uncertainty over health care coverage. When
workers were laid off, many also- lost employment-based health
insurance. Over three million workers lost their employment-based
health insurance during the Bush administration. 8
In 2009, it was imperative that Congress, the Obama administration,
and the Federal Reserve take extraordinary actions to pull the United
States back from the brink of an economic abyss. Together and
separately, they pursued a broad economic agenda that, among other
things, would:
*
*
*
*
Continue to stabilize the financial market and ease the flow of
credit.
Stimulate economic growth.
Restore the health of the labor market and support those who
lost their jobs.
Address the home foreclosure crisis.
To implement this agenda, the Administration and Congress worked
together to pass the $787 billion American Recovery and Reinvestment
Act (Recovery Act), which was the largest countercyclical fiscal
response in American history. To address the problems facing the
7
financial markets, Congress approved the release of the second tranche
of funds (totaling $350 billion) from the Troubled Asset Relief
Program (TARP), and the Federal Reserve continued or expanded
many of the creative policies and lending facilities it established during
the heart of the financial crisis.
Because of this overwhelming response, economic depression was
averted in 2009, and the economy, although still reeling from
numerous problems, was on the path toward recovery.
STABILIZING FINANCIAL MARKETS AND EASING THE FLOW OF
CREDIT
Because the breakdown of financial markets was at the center of the
recession, continuing the actions taken by the Obama administration
and the Federal Reserve was vital to stabilizing the financial system. A
crucial feature of any free market economy is that borrowers can
receive funds from lenders in order to fund investments and returns to
those investments spur lenders- to extend credit to those borrowers.
Financial institutions are at the center of this essential credit flow.
When the flow of credit stops, financial markets cannot perform their
function adequately. As we saw during the financial crisis, this failure
can generate ripple effects that weaken all sectors of the economy.
Therefore, a sound financial system is a necessary condition for the
economy to grow and create jobs.
Contrary to the beliefs of many economists and policymakers, financial
markets cannot always regulate themselves. Until the near collapse of
the financial system, the Bush administration believed that it was
possible to wait until the financial system collapsed before financial
regulatory
reform
was
needed,
stating "...
the
Administration
supported new rules for financial reporting when it became clear that
existing laws did not adequately reduce information asymmetries
between investors and management." 9
In order to prevent a future crisis from occurring, or at least to
minimize the duration and frequency of financial crises, the 11 1
Congress has been debating regulatory reform. On December 11,
2009, the House of Representatives passed a comprehensive bill to
reform the financial system, H.R. 4173, which addressed consumer
protection issues, systemic risk, resolution authority, executive
compensation, and additional transparency and regulation of the overthe-counter derivatives market. At the time this report was transmitted
8
to the Speaker of the House, the Senate version of financial reform had
not yet been voted out of the Senate Committee on Banking, Housing,
& Urban Affairs.
When a financial crisis occurs, a helping hand from the government is
required to restore stability. That was the context for the extraordinary
measures taken to inject capital and increase liquidity in the financial
system and prop up failing institutions. The complicated nature of the
intervention reflected both the extent of the crisis and a financial
system that was growing ever more complicated. The use of taxpayer
money to fund TARP reflected far-sighted thinking on the part of
policymakers - taxpayers could either bear the burden for the reckless
behavior of some financial institutions now or face much more severe
economic hardship in the future.
Congress and the Bush
administration had to make the difficult choice for the long-run
prosperity of the nation, and the Obama administration has continued
the work in managing TARP funds and implementing creative
programs aimed at stabilizing the financial system.
These actions have restored interbank lending and helped the financial
sector to recover. One measure of the health of the financial sector is
the so-called TED spread, the difference between the 3-month London
Interbank Lending Rate (LIBOR) and the 3-month Treasury Bill yield.
The TED spread measures the premium over the risk-free rate that
banks charge to each other for unsecured short-term loans. This
premium rises when banks are fearful of lending to each other. The
TED spread peaked in 2008. However, at the start of 2009, the TED
spread was more than 133 basis points, well above its normal level,
which indicated a continuing unwillingness of banks to extend credit to
each other. By the end of August 2009, the TED spread had fallen
below 25 basis points, consistent with a normal level. (See Figure 4)
9
Figure 4. The TED Spread
5.0
Difeferrtteee3.Moath Laodaalawnrk SBoRro.ing
RZe(LIBOR).d 3-MoNoh
Trcsary BWyickL
Febr.uy 2007.PreF
,-t
4.5
40O
35
3.0
20
10
of
00o _
Feb0?
_-
Apr 07
_
J.! 07
_
Oct 07
_
__
Jan08
_
Mac 0
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Jua08
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__
Sep00
[De.08
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F-b09
May 0') Ag 0') No- 09
Sounds:
JECMajontyS!.ffCaicolo-fons
bhoed
ondatatf.. theU.S.Depa..nrnet
of theTntea.v andtheFiraoctal
runs
Table I highlights the major actions taken by Congress, the Obama
administration, and the Federal Reserve to promote financial stability
and encourage economic growth. One of the lending facilities opened
by the Federal Reserve to ensure access to short-term funding have
been closed, the Money Market Investor Funding Facility, and the
Term Asset-Backed Securities Loan Facility is set to expire on
December 31, 2009. Other facilities have been enhanced and expanded
to help creditworthy small businesses obtain access to credit to help
spur job creation.
10
Table 1. Key Economic Stabilization Actions in 2009
Department
Program
Description
Federal Reserve
Board
Money Market
Investor Funding
Facility
The Fed expands
MMIFF
eligibility to
include certain
local government
investment pools,
trust funds, and
collective
investment funds.
The Fed also
adjusts the
minimum yield
on assets eligible
to be sold to the
January 30, 2009
Federal Reserve
Board
Asset-Backed
Commercial
Paper Money
Market Fund
February 3, 2009
Federal Reserve
Board
Extension of
Liquidity
Programs
February 10,
2009
Department of
Treasury
Financial
Stability Plan
Date of
Announcement
January 7, 2009
MMIFF.
The Fed finalizes
rules pertaining
to the AMLF
excepting banks
from the Fed's
leverage and riskbased capital
rules.
The Fed extends
its liquidity
programs (e.g.
Commercial
Paper Funding
Facility) and
temporary
currency
arrangements
with foreign
central banks to
October 30,
2009.
The Treasury
Department
announces a new
set of measures
including a
capital assistance
program, publicprivate
11
Date of
Announcement
February 17,
2009
February 18,
2009
Department
Legislation
Program
American
Recovery and
Reinvestment Act
of 2009
Description
investment fund,
and term assetbacked securities
lending facility
(consumer and
business lending
initiative) to
restore
confidence in
domestic
financial
institutions.
President Obama
signs a $787
billion stimulus
bill that provides
$288 billion in
tax cuts, $224
billion for
entitlement
programs (e.g.
extension of
unemployment
benefits), and
$275 billion for
federal contracts,
.______________
________________
grants, and loans.
Department of
Treasury
Homeownership
Affordability and
Stability Plan
The Treasury
Department
announces plans
to help
homeowners by
reducing monthly
mortgage
._________________
paym ents.
February 25,
2009
Department of
Treasury
Capital
Assistance
Program
February 25,
FDIC; Federal
Forward-Looking
The Treasury
Department
announces the
terms of its
lending program
for financial
institutions
without a
sufficient capital
buffer.
The FDIC, along
12
Date of
Announcement
2009
Department
Program
Description
Reserve Board;
Office of the
Comptroller of
the Currency;
Office of Thrift
Supervision
Department of
Treasury;
Federal Reserve
Board
Economic
Assessments
with three other
agencies, will
conduct "stresstests".
Launch of Term
Asset-Backed
Securities Loan
Facility
March 13, 2009
Securities and
Exchange
Commission
Exemption of
Chicago
Mercantile
Exchange
March 16, 2009
Department of
Treasury
Credit for Small
Business
March 17, 2009
FDIC
Extension of Debt
Guarantee
Component of
Temporary
Liquidity
Program
March 19, 2009
Department of
Auto Supplier
The Fed begins
purchasing $1
trillion in AAArated ABS (assetbacked securities
such as auto
loans). Unless
extended by the
Fed, lending
through TALF
will cease in
2010.
The SEC
approves the
conditional
exemptions
which will allow
the Chicago
Mercantile
Exchange, Inc. to
operate as a
central
counterparty to
all credit default
swaps.
The Treasury
Department
begins
purchasing
securities backed
by SBA loans.
The FDIC allows
insured
depository
institutions to
continue issuing
guaranteed debt
through October
31, 2009.
The Treasury
March 3, 2009
13
-
-
Date of
Announcement
Department
Treasury
Program
Support Program
March 23. 2009
Department of
Treasury
Public-Private
Investment
Program
March 31, 2009
Department of
Treasury
Extension of
Money Market
Guarantee
Program
April 3, 2009
Department of
Treasury
Build America
Bonds and School
Bonds
May 22, 2009
FDIC
Imposition of
Special
Assessment on
Insured
Depository
Institutions
June 17, 2009
Administration
Regulatory
Reform
Description
Department
announces a
program to help
stabilize the auto
supply base
The Treasury
Department
partners with the
private sector to
address legacy
loans and legacy
securities.
The Treasury
Department
extends a
program that
provides
coverage to
shareholders of
participating
money market
funds to
September 18,
2009
The Treasury
Department helps
states pursue
capital projects
by introducing
new bond
programs that
lower the cost of
borrowing for
these projects.
The FDIC levies
a special
assessment on
insured
depository
institutions in
order to rebuild
the Deposit
Insurance Fund.
President Obama
announces a
comprehensive
14
October 19, 2009
Federal Reserve
Board
Extension of
Several Liquidity
Programs
Department of
Treasury
Initiative for State
and Local
Housing Finance
Agencies
most of its
facilities (except
the Term Auction
Facility and Term
Asset-Backed
Loan Facility) to
February 1, 2010.
The Treasury
provides HFAs
access to a new
bond purchase
program and a
temporary credit
and liquidity
program.
ECONOMIC GROWTH
The devastating drop in real GDP in the fourth quarter of 2008 and the
first quarter of 2009 contributed to fears that the United States was on
the verge of entering an economic depression.
15
Figure 5. Quarterly Percentage Change in GDP at a Seasonaily Adjusted Annual Rate
6.0-
4.0
3.6
3.2~~~~~~~~~~~~~~~~~2
-5.
240
2.1-.7
6
1
07
-4 0~*
-26~~~~~~~~~~~~~~~~~~~~~-.
-8~~~~~~~~~~~~~~~
.0
.
--.
-3~0
-6.4
62.0
Q12007
Q22007 Q32007
Q42M7 Q2(209
Q22008 Q72008 Q42008
Q12009 Q22009
Q32009
Source: Beu nfrElon--k Ar.ySis
Real GDP fell by 5.4 percent in the fourth quarter of 2008, followed by
a plunge of 6.4 percent in the first quarter of 2009, representing the
largest quarterly fall in 27 years. (See Figure 5) In starker terms, the
fall in real GDP between the fourth quarter of 2008 and first quarter of
2009 was the greatest half-year decline in real GDP since 1958.
Extraordinary and immediate measures were required to prevent the
economy from entering a full-scale depression. A fiscal stimulus of
dramatic size and scope --- the $787 billion Recovery Act -was
necessary to confront a growing recession of equally dramatic size and
scope; it was the largest countercyclical fiscal policy measure mounted
in American history.
Prior to the financial crisis, many prominent economists embraced the
idea that fluctuations in economic growth - otherwise known as the
business cycle --- could be moderated through monetary policy alone,
and viewed fiscal policy as ineffective (although many conservative
thinkers believed that tax cuts could play a strong role in stimulating
the economy). This belief was reinforced by the experience of
developed countries in the 1980s and 1990s, and the strong economic
growth and low unemployment the United States enjoyed during the
1990s. Implicitly, many economists believed that the Federal Reserve
could effectively manage the business cycle. This belief was reflected
in the popularity of Federal Reserve Chairman Alan Greenspan in the
1990s.
16
The logic was simple. If the economy was growing too rapidly and the
specter of inflation was on the horizon, the Federal Reserve could raise
interest rates to slow down business investment and personal
consumption, two of the key components of real GDP. If the economy
was growing too slowly and the unemployment rate had the potential
to rise substantially, the Federal Reserve could lower interest rates.
The recession turned this belief on its head.
Despite the innovative lending facilities the Federal Reserve introduced
and the lowering of interest rates to unprecedented levels (as described
previously), monetary policy alone could not fix the economy. Fiscal
policy was necessary. Business investment and personal consumption
were dangerously low and stubbornly resistant to change, and this
caused real GDP to fall dramatically. The situation was a classic case
of excessively low aggregate demand - the sum total of expenditures
on the part of businesses, consumers, government and other entities in
the economy. When aggregate demand dissipates, as it did in the
beginning of 2009, fiscal stimulus -in the form of tax relief, direct
government expenditures, monetary incentives for business investment,
and other measures - is necessary to restore aggregate demand and
put the economy back on track toward economic growth.
The logic is that fiscal policy has a "multiplier effect." As an example,
for each dollar that the government gives to consumers, part of that
dollar is spent on goods and services, which businesses then spend
building up their inventory, and the recipients of this spending then
increase their own purchases. Thus, as that dollar filters its way
through the economy, it generates spending in excess of one dollar. In
other words, the single dollar could increase spending by a "multiple"
of the dollar.
The critical importance of fiscal stimulus was one of the main
economic lessons of the Great Depression. Government spending and
tax relief play a crucial role in stimulating aggregate demand and
preventing a recession from becoming a depression. Indeed, an
important report issued by the Obama administration leading up to the
passage of the Recovery Act, "The Job Impact Recovery and
Reinvestment Plan," spelled out the role of fiscal policy in raising real
GDP.'°
In addition to an array of direct government spending programs, the
Recovery Act provided tax relief to 95 percent of working households
17
via the Making Work Pay tax credit. In addition, the Earned Income
Tax Credit (a refundable credit for working individuals who earn
below a certain income level) was expanded. Many Americans including retirees, the disabled, and others receiving Supplementary
Security Income - received one-time payments of $250.
The Recovery Act also included a first-time home buyer tax credit of
up to $8,000 for individuals eaming below a certain income who
purchased their homes after January 1, 2009 but before December 1,
2009. In November, Congress passed the Worker, Homeownership,
and Business Assistance Act of 2009, which extended the credit to
homes purchased on or before April 30, 2010. Evidence suggests that
the home buyer tax credit increased home sales. However, it is unclear
whether the credit merely expedited the timing of home purchases that
would have occurred in the absence of the tax credit.
In 2009, Congress also passed the Car Allowance Rebate System
(CARS), commonly known as "Cash for Clunkers," which provided
rebates to car owners who traded in their cars for more energy-efficient
cars. The $3 billion program spurred automobile sales and nearly
700,000 more fuel efficient cars were purchased in fewer than 30 days,
by which time the CARS fund was exhausted. The CARS program
made a significant contribution to third-quarter real GDP growth
Substantial evidence supports the argument that the Recovery Act
raised real GDP as well. The Recovery Act's contribution to thirdquarter real GDP growth was particularly notable, because the thirdquarter real GDP growth rate of 2.8 percent was the first time that GDP
grew after four consecutive quarters of real GDP declines. Most
forecasters did not predict that real GDP growth would occur that
quickly. This return to growth was a turning point that signaled the
effectiveness of the Recovery Act. Figure 5 shows the turnaround in
real GDP growth from the third quarter of 2008 to the third quarter of
2009.
According to the President's Council of Economic Advisers' first
quarterly report on the economic impact of the Recovery Act (along
with updated real GDP figures released after the report), the Recovery
Act raised real GDP growth by 2.6 percent in the second quarter of
2009 and by 3.3 percent in the third quarter of 2009.11 (See Figure 6)
18
Figure 6. Effect of Recovery Act on GDP
Quarterly Percentage Change Ia GDP at a Seasonally Adjusted Annual Rate
4.0
3.0
2.8
2.0
1.0
0.0
-0.5
-1.0
-0.7
Without Stimuts
*
-2.0
a WithStimtulus
-3.0
-3.3
-4.0
QI2009
Q22009
Source: JEC Majonty Staffbased on data from the Cottncl of Econotic Advisers and the Bureau of Economic Analysis.
The Administration's estimate of the impact of the Recovery Act on
GDP is in line with analysis conducted by the non-partisan
Congressional Budget Office, which reported that third-quarter real
GDP in 2009 was between 1.2 to 3.2 percentage points higher than it
would have been in the absence of the Recovery Act.' 2
Economic growth has turned the corner more quickly than analysts had
expected at the beginning of the year. Fears of entering an economic
depression have abated.
JOB MARKET
The employment outlook at the time was understandably pessimistic at
the start of 2009, and the bleak job market contributed to worries that
the nation was on the verge of entering a depression. The labor market
was shedding jobs at an extraordinary rate. Non-farm payroll
employment fell by an average of 550,000 a month in the final three
months of 2008, with employment falling at an increasing rate during
each.of those months. This alarming trend continued in January 2009,
when non-farm payroll employment fell by 741,000- the worst fall in
employment during the recession. In the first three months of 2009,
employment fell by an average of 690,000 per month. (See Figure 7)
19
As described above, the Recovery Act resuscitated an economy
teetering on the brink of depression. As a result, the labor market,
although still fundamentally weak in many regards, turned the corner
toward recovery.
Figure 7. Monthly Change in Nonfarm Payrolls
Sesonally Adjosted. Jianary 2000 -No.e-ber 2009
0
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As Figure 7 shows, the labor market began 2009 on a steep downward
trajectory, but reversed its trend over the course of the year as the pace
of job losses slowed markedly. The drop in non-farm payroll
employment levels, which were consistently in the hundreds of
thousands during 2009, slowed to just I 1,000 lost jobs in November.
Although job losses of that magnitude are still unacceptable, the
dramatic slowing of job losses is a sign that a fundamental labor
market recovery may be on the horizon, however distant.
Despite the positive signs, many. workers are still reeling from the
catastrophic blows of 2009 that left millions jobless. In November
2009, 15.4 million workers were unemployed. Job losses from January
through November of 2009 totaled 4.1 million. From the start of the
recession in December 2007 through November 2009, the economy has
shed a total of 7.2 million jobs. Some economists believe that
employment must rise by 10 million for the unemployment rate - now
at 10 percent -to get back to the November 2007 rate of 4.7 percent,
where unemployment stood in the month before the recession began.
(See Figure 8)
20
Figure 8. Unemployment Rate, 1970-Present
Note: Shaded areas indicate recessions
12.0
10.0
8.0
60
4.0
2.0
0.0
Jan
1970
Jul
1972
Jan
1975
Jul
1977
1980
lao Jul
1982
Jan
1985
Jul
1987
lan
1990
Jul
1992
Jan
1995
Jul
1997
Jan
2000
Jul
2002
Jan
2005
Jul
2007
Sources: JEC Majority Staffbased on data from the Bureau of Labor Statistics, Household Survey and the National Bureau of
Economic Research.
The job loss figures and the unemployment rate are intolerably high.
Yet even these grim figures mask the severity of the labor market
problems for several groups of workers. The long-term unemployed
- those workers who have been unemployed for 27 weeks or longer
- totaled 5.9 million as of November 2009 and represented a
staggering 38 percent of all unemployed workers. The high rate of
long-term unemployment is particularly troubling because the longer
workers are unemployed, the more their skills deteriorate. When the
labor market begins to improve and jobs return, these long-term
unemployed may have difficulty finding work due to this erosion of
skills. Many of these workers may remain unemployed, or they may
drop out of the labor force altogether.
In addition to the distressingly high levels of long-term unemployment,
there are currently six unemployed workers per job opening. This
highlights the fundamental problem in the job market: There are not
enough jobs. Moreover, the jobs that are available may not be of high
quality. The number of workers who are part-time for economic
reasons - that is, those who would like a full-time job but are working
part-time - climbed to 9.2 million in November. It is unclear when
they will be able to find full-time work.
The broadest measure of labor force utilization - the U-6 rate, which
takes into account those who are currently out of the labor force but
would like to work as well as those working part-time for economic
21
reasons -was 17.2 percent in November. The problems afflicting the
job market are so severe that many people have simply given up on
looking for work.
Given the weak labor market conditions facing workers, the expansion
of the safety net is critical in order to soften the blow of the recession.
Congress and the Obama administration have enacted programs to
accomplish this. The Recovery Act extended the expiration date of the
Emergency Unemployment Compensation (EIJC) Act of 2008 from
March 31, 2009 to December 31, 2009. The EUC provided up to 33
additional weeks of unemployment insurance, funded by the federal
government, to workers who exhausted their state unemployment
benefits.
In November of 2009, as part of the Worker,
Homeownership, and Business Assistance Act, unemployment benefits
were extended by up to 20 weeks beyond the EUC provision. The
Recovery Act further expanded the safety net for unemployed workers
by providing, for up to 9 months, a 65 percent subsidy toward COBRA
premiums for laid-off workers. The COBRA program allows laid-off
employees to continue to purchase health insurance through their
former employers' group insurance plans, and helps families maintain
continuous health coverage upon job loss. The COBRA subsidy is a
critical support for workers struggling to pay health insurance
premiums. As of this writing, Congress is set to further extend the
expiration dates of both the unemployment insurance and COBRA
subsidy programs.
Even with subsidies toward COBRA premiums, however, many
workers still find health insurance unaffordable. Rising premium costs
combined with falling family incomes have put millions of families in
a bind, forcing impossible choices between health care and other basic
necessities. This is part of why comprehensive health insurance reform
is necessary, so that even if workers are laid off, they can still maintain
affordable health insurance. As of this writing, the House has passed
its health insurance reform package, and the Senate is in the process of
considering its own package, with the possibility that it will vote on it
by the end of the year.
Moreover, by the end of 2009, Congress is expected to move on an
infrastructure package that is meant to boost job creation. The
Administration has also set out proposals to incentivize hiring and
investment in capital by small businesses. To further boost job
creation, the Administration is advocating a "Cash for Caulkers"
program that would give homeowners a cash rebate for weatherizing
22
their homes and making them more energy-efficient. These proposals
are expected to be considered seriously by Congress at the start of
2010.
While both the Administration and Congress are taking steps to create
more jobs and expand the social safety net, the employment outlook
remains bleak.
Typically, the unemployment rate is a lagging indicator, meaning that
as real GDP grows, improvements in the unemployment rate occur
later. In other words, labor market recoveries typically lag behind
broader economic recoveries.
In the United States, real GDP
historically has had to grow by more than 2.5 percent - the long-run
"normal" growth rate for the unemployment rate to fall.
Unfortunately, according to the President's Council of Economic
Advisers Chair Christina Romer, real GDP growth is not expected to
move much above 2.5 percent throughout 2010, suggesting that
unemployment will remain around its November rate of 10 percent for
some time to come.'
Moreover, reductions in the unemployment rate may require real GDP
growth rates that are substantially stronger than 2.5 percent growth.
The labor market is suffering from unprecedented weaknesses, and
some dimensions of the problems in the labor market may continue to
worsen over the coming year.
The population of long-term
unemployed workers is sizeable and growing, and it remains unclear
how easy it will be to reintegrate these workers into the ranks of the
employed. Growth rates substantially higher than 3 percent or even 3.5
percent may be necessary in order to substantially lower the
unemployment rate.
23
Figure 9. Months to Peak Unemployment during Recent Recessions
Not: Solid
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Figure 9 shows the number of months it took to reach the peak
unemployment rate, beginning at the start of each recent recession.
Will the current recession look like the 2001 recession, with
unemployment peaking sometime early next year? Or will the
unemployment rate follow the path of the 1980 recession and peak
sometime past 2010?
The unemployment rate may very well follow the trajectory of the
1980 recession, which would mean that unemployment would peak pat
some point after 2010 at a historically-high level. This grim outlook
stems from the sizeable share of the long-term unemployed in this
recession. Despite the dismal labor market of the Bush administration,
the long-term unemployed as a share of the total number of
unemployed workers remained below 24 percent - a high number, to
be sure, but well below the current share. As indicated above, longterm unemployed workers now comprise 38 percent of all unemployed
workers. Perhaps more startling is the rate at which the long-term
unemployed population is growing. The total number of unemployed
workers grew by 32 percent from January to November 2009. During
the same time period, the total number of long-term unemployed
workers skyrocketed by 122 percent.
24
HOUSING MARKET
The financial crisis was triggered by the collapse of the housing
bubble, and the housing market has yet to rebound. Since much of
household wealth is tied to home values, the home foreclosure crisis which created an oversupply of houses - diminished the wealth of
homeowners as the price of homes fell, and wiped out much of the
wealth of households whose homes were foreclosed.
Because
household wealth is closely tied to consumer spending, this erasure has
weakened the prospect for a consumption-driven economic recovery.
In the third quarter of 2009, nearly one in four homeowners had
mortgages that exceeded the value of their property.14 For households,
the collapse of the housing bubble led to a foreclosure crisis that
became a persistent and growing problem during the year, and a drop
in consumption that hurt businesses. By the third quarter of 2009,
nearly 19 million homes were vacant.
To support the housing market, both Congress and the Administration
adopted a variety of policies.
President Obama signed the Making Home Affordable (MHA) Act,
which addressed the foreclosure crisis in three ways.
First, it established the Homeowner Affordable Refinance Program
(HARP).
This program enabled homeowners susceptible to
foreclosure (those with loan to value ratios between 80 percent and 125
percent) to refinance their mortgages on more favorable terms if the
mortgages were owned or guaranteed by Fannie Mae or Freddie Mac.
By September 30, 2009, over 116,000 homes had been refinanced
under HARP.' 5
Second, it created the Homeowner Affordable Modification Program
(HAMP). This program gave loan servicers a financial incentive to
modify mortgage terms so that borrowers pay no more than 31 percent
of their monthly income toward mortgage payments. Before the loan
modification is made permanent, borrowers must undergo a threemonth trial period during which they must make their payments on
time. As of November 26, 2009, 697,026 trial modifications were
active, while only 31,382 were permanent.16 To increase the rate at
which trial modifications were made permanent, the Administration
announced a "Mortgage Modification Conversion Drive" that would
make loan servicers more accountable and make the program more
transparent to borrowers.
25
Finally, the MHA Act provided additional financial support to Freddie
Mac and Fannie Mac.
To further stem the foreclosure crisis and aid struggling homeowners,
Congress also passed the Helping Families Save Their Homes Act,
which increased the pool of individuals eligible to refinance their
mortgages into 30-year fixed rate, FHA-insured mortgages.
As of the second quarter of 2009, 3.88 percent of all loans were 90
days past due; 12 percent of conventional subprime loans were 90 days
past due.'7 These numbers are somewhat higher than they were in the
first quarter of 2009. Ascertaining whether the Making Home
Affordable Act substantially mitigated the rate of home foreclosures is
difficult, because one cannot predict what would have happened in the
absence of the program. Nevertheless, the home foreclosure crisis
remains a problem.
LIGHT AT THE END OF TIlE TUNNEL?
The new Administration headed into 2009 facing the worst economic
crisis in generations. The Obama administration, Congress, and the
Federal Reserve enacted or continued a number of bold economic
policies meant to bring the nation back from a dangerous economic
precipice.
Although many fundamental problems remain, these
initiatives had clear, positive effects on the economy as a whole.
The economic outlook is mixed. On the onc hand, financial markets
are stabilizing and real GDP growth is likely to remain positive
throughout 2010. However, small businesses still face difficulty
obtaining loans and uncertainty about consumer demand for their
goods and services. Consumer spending remains stagnant because
workers face serious income insecurity in light of a job market that
continues to limp and a housing market where prices continue to fall
due to the ongoing foreclosure crisis. Indeed, unemployment and the
home foreclosure crisis are problems that loom large heading into
2010.
26
Endnotes
'For more information, see the transcript from the July 23, 2009 Joint
Economic Committee hearing, "Balancing Work and Family In the Recession:
How Employees and Employers Are Coping."
2 Christina D. Romer, Chair, Council of Economic Advisers, "From Recession
to Recovery: The Economic Crisis, the Policy Response, and the Challenges
We Face Going Forward," Testimony Before the Joint Economic Committee,
October 22, 2009.
3 For more information, see the transcript from the December 10, 2009
hearing, "The Challenge of Creating Jobs in the Aftermath of the 'Great
Recession."'
4 Bureau of Labor Statistics (BLS), Current Population Survey. For information on
the employment situation of women during the recession, see the attached
report: Joint Economic Committee, Women in the Recession: Working
Mothers Face High Rates of Unemployment.
5 Job opening data from JOLTS survey, at
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?datatool=latestnumbe
rs&seriesid=JTSOOOOOOOOJOL.
6 From the Census Bureau report "Income, Poverty, and Health Insurance
Coverage in the United States: 2008," p. 44.
7 "Income, Poverty, and Health Insurance Coverage in the United States:
2008," p. 29.
8 "Income, Poverty, and Health Insurance Coverage in the United States:
2008," p. 59. Refer to the JEC report Comprehensive Health Care Reform: An
Essential Prescription for Women for more information.
9Economic Report of the President, January 2009, p. 29.
'0 http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf
1 This differs from the number reported in Table 3, p. 16, of the CEA
publication "The Economic Impact of the American Recovery and
Reinvestment Act of 2009: First Quarterly Report." The CEA estimated that
real GDP growth, in the absence of the Recovery Act, would have been -3.3
percent in the second quarter of 2009 and -0.5 percent in the third quarter. To
arrive at their estimate of the impact of the Recovery Act, they used the
unrevised BEA estimate of -1.0 percent growth in real GDP in the second
quarter of 2009 and the Blue Chip forecast of 2.2 percent growth in the third
quarter. However, the revised BEA figures were real growth rates of -0.7
percent and 2.8 percent in the second and third quarters of 2009, respectively.
Holding the CEA's estimate of real GDP growth in the absence of the
Recovery Act gives us our figures, explaining the discrepancy with the CEAP
report.
12 http://www.cbo.gov/ftpdocs/106xx/doc 10682/11 -30-ARRA.pdf
13 Christina D. Romer, Chair, Council of Economic Advisers, "From
Recession to Recovery: The Economic Crisis, the Policy Response, and the
Challenges We Face Going Forward," Testimony Before the Joint Economic
Committee, October 22, 2009.
14 http://online.wsj.com/article/SB 125903489722661849.html
27
'5
httJ://www.fhfa.yv/webfiles/5153/5Sept Refinance Final report and
release_ 11 2_09.pdf
16
http://I-w.financialstability.gov/docs/MHA
percent20Public
pcrccnt20121009
pcrcent20FINAL.PDF.
17
http: !/www.huduscr.org/portal/periodicais/ushmc/fal109/nat data.pdf
29
VICIOUS CYCLE
How Unfair Credit Card Practices Are Squeezing Consumers
And Undermining the Recovery
A Report by the Joint Economic Committee
Representative Carolyn B. Maloney. Chair
Senator Charles E. Schumer, Vice Chair
May 12, 2009
Executive Summary
The credit card provisions that the Federal Reserve has identified as unfair.,
deceptive, and anticompetitive are not only sending American families further
into debt, but standing in the way of economic recovery. The economic
downturn and financial crisis have accelerated the adverse impacts of these
practices on consumers, small businesses and our economy as a whole.
* As credit cardholders and small businesses struggle in the economic
downturn, significant increases in credit card interest rates have the
same impact as price increases, further depressing demand for goods
and services (and economic recovery). The average interest rate on
credit cards went up a full percentage point from the fourth quarter of
2008 to February 2009, even though the Federal Reserve's targeted
federal funds rate - the cost of money for the banks - was lowered to
between 0 and .25 percent on December 16. 2008.
* Like subprime mortgage lenders, credit card issuers have been
seeking to maximize their profits by lending to those who are
financially vulnerable and then spreading the risks by selling off
securities based on credit card receivables. But as charge-off rates
increase and the supply of credit falls because of the financial crisis,
credit card companies have increasingly made up losses by raising
interest rates to all borrowers, effectively charging creditworthy
borrowers to make up for growing deficits.
* Creditworthy borrowers cannot simply switch to a new- card when
confronted with abusive practices because the unfair, deceptive, and
anticompetitive practices identified in the legislation increase costs to
card users of searching for and switching to a new card. These
practices, which are nearly universal in the credit card industry, trap
cardholders in a cycle of debt.
* A growing share of consumers' disposable income, which largely
determines consumer spending, is being diverted to service credit
card debt rather than to help economic recovery. As of March 2009,
U.S. revolving consumer debt (almost entirely credit card debt) was
30
*
*
about $950 Billion. In the fourth quarter of 2008, 13.9 percent of
consumer disposable income went to service this debt.
As household wealth has declined in the downturn, more American
families are facing financial distress due to high debt burdens. In
2007, before the recession began, 14.7 percent of U.S. families had
debt exceeding 40 percent of their income.
Personal bankruptcy rates were up almost 30 percent in 2008.
Penalty interest rates, which raise interest rates on balances by 15
percent or more, can trigger bankruptcy on financially constrained
families.
Absent legislation eliminating unfair practices, specifically retroactive rate
increases on existing balances, universal default, and "any time any reason"
rate increases, issuers have a profit incentive to continue them. These
practices inhibit consumer spending and allow issuers to avoid sound
underwriting while forcing creditworthy borrowers to pay for the growing risk
of default. The bills currently being considered in the House and Senate are
necessary to help get our economy back on track and to restore market
discipline and fairness to the credit card sector.
Deep Recession Lowers Consumer and Small Business Spending
The real economy is undergoing a large contraction in economic activity with
real Gross Domestic Product (GDP) falling 6.3 percent at annual rate in the 4th
quarter of 2008 and 6.1 percent in the first quarter of 2009. The
unemployment rate reached 8.9 percent in April 2009, four percentage points
higher than the unemployment rate at the start of the recession. Average
weekly hours of work have declined to a historically low 33.2 hours per week,
falling 0.6 hours during this recession.
The current recession looks to be longer and deeper than any economic
downturn since the Great Depression. These mounting job losses have
weakened consumer confidence and retail sales have plummeted. While the
recession started in December 2007, the decline in retail sales began in July
2008 and accelerated downward through the end of the year. Although retail
sales were higher in January and February of 2009, retail sales were lower in
March. Even the higher sales in January and February were associated with 8
to 9 percent year-over-year declines.
While there are "glimmers of hope" that the economy is recovering,
households struggling to make ends meet have faced increases in the interest
rate on their credit cards. While a large fraction of credit card users are
"transactions only" users, paying off any balance at the end of each cycle and
not incurring interest payments, in 2007 (before the recession), the median
balance on a household's credit card was $3,000.' The average balance in
2007 was $7,300, a much higher number because a small fraction of the
population holds large balances on their credit card.
Increases in interest rates can be as much as 8 to 20 percentage points higher
than the current interest rate paid by the consumer, if the increase in the
31
interest rate goes up to the penalty interest rate.) While some of the increases
in interest rates on credit cards is due to an increase in risk of default by the
cardholder, these interest rate increases are also attempts by the credit card
companies to recoup losses experienced from other cardholders or increased
costs of funds. Currently, the charge-off rate fbr credit cards, according to the
S&P Credit Card Quality Index, has almost doubled from the start of the
recession, from 4.85 percent to 8.80 percent. 3 The charge-off rate is the
percent of total credit card balances that the company has decided that it has
no chance of collecting and has removed from its books.
The average interest charged by all credit cards was 13.08 percent in February
2009, a jump of a full percentage point from the fourth quarter of 2008.4 The
average credit card interest rate had been declining since the fourth quarter of
2007, when the effective federal funds rate was at or around 4.5 percent. 5 The
federal funds rate is now targeted between 0 and .25 percent, yet interest rates
are rising.
Opponents to any curbs on credit card companies' ability to change interest
rates. including interest rates on existing balances, argue that these practices
compensate for the greater risks posed bv cardholders who make late
payments or exhibit other risky behavior and that any limitations on the credit
card companies abilities to change rates - currently "at any time, for any
reason" - would reduce the amount of credit in an already credit-constrained
financial system or may induce riskier behavior or moral hazard by
cardholders. 6 On the other hand. consumer groups say that these fees and
practices are harmful to the financial condition of many cardholders and that
card issuers use them to generate profits.' These changes in interest rates. as
well as other practices such as double-cycle billing, also make it more difficult
for credit cardholders to switch to lower interest credit cards.
Credit card provisions that allow increases in credit card interest rates have the
same effect as increases in prices, further suppressing demand for goods and
services for both consumers as well as small business owners that typically
rely on credit cards for liquidity. In a recent hearing held by the Joint
Economic Committee. Dr. Joseph Stiglitz testified that reining in these
practices would increase demand for goods and services, stating that "one of
the things that is restricting individuals [from] purchasing goods is the
recognition that they have to pay excessive fees. [It is] like a price rise. They
look at the cost of credit; it is going up now."8
While the focus of this paper is consumer debt, these provisions also affect
small business owners. Small business owners sometimes use personal credit
cards and other consumer loans, as well as the business's credit card, as a
source of finance. A recent study found that between 16 to 28 percent of
capital in 2006 for small business owners came from credit cards. 9
"Consumer debt" consists of both revolving and non-revolving debt. This
paper focuses on revolving consumer debt, which is almost entirely comprised
32
of credit card debt. Non-revolving debt includes loans for automobiles,
education, etc. In March 2009, total U.S. consumer debt was $2.55 trillion."
A substantial fraction of household income goes toward serving this debt:
* Revolving consumer debt in March 2009 was $945.9 billion. 12
* About half (46.1 percent) of U.S. households hold credit cards with
balances, according to the 2007 Survey of Consumer Finances (SCF).13
* The median revolving credit card balance is $3000.14
* A large share of disposable income goes to service overall debt-13.9
percent in the fourth quarter of 2008.15
Unfair and deceptive lending practices by credit card companies compound
households' financial distress and increase the likelihood of bankruptcy.
Collapse of Financial Market Has Dried Up Supply of Credit
As with subprime lenders, credit card issuers have been seeking to maximize
their profits by lending to those who are economically vulnerable and then
spreading their risk by securitizing the debt. In addition, credit card
companies have spread risk to other credit cardholders by raising interest rates
to all borrowers, effectively charging creditworthy borrowers to make up for
growing defaults.
Securitization is a process whereby lenders and others create pools of loans
and then sell securities that are backed by cash flows from these loan poolsthereby replenishing funds available for lending and reducing the lender's cost
of capital. Although securitization increased the amount of credit available by
reducing capital requirements, the increase in securitization raises the risk that
credit card issuers are not adequately capitalized, especially in light of the
increase in credit card defaults. The degree to which securitization transfers
risk from the issuing bank to others depends on the amount of "implicit
recourse" retained by the issuing banks.' 6 Implicit recourse is the amount of
responsibility that the issuing banks retain for the performance of the credit
card receivables even after securitizing the debt. The issuing bank does not
have the same capital requirements when the debt is securitized as when the
debt is held on its balance sheet.
In 1996, $180.7 billion dollars of credit card debt was securitized, about 36
percent of the total outstanding revolving credit.' 7 Currently, about $300
billion in securitized credit card debt is outstanding or about 31.8 percent of
outstanding revolving credit.' 8 The amount of new credit card asset-backed
securities issued plummeted with the financial meltdown in the fourth quarter
of 2008. In 2007, the dollar value of new- credit card asset-backed securities
was about $25 billion each quarter, increasing slightly to $29 billion the first
quarter of 2008 and declining slightly to $21 billion in the second quarter.19
But after Lehman Brothers declared bankruptcy in September 2008, the
demand for asset-backed securities froze and issuances of new asset-backed
33
securities came to a halt in October 2008.20 Only $3 billion worth of credit
card asset-backed securities were issued in the first quarter of 2009.21 (See
Figure 1)
Figure 1.New Originations of Credit Card Asset-Backed Securities and Credit Card Receivahles
asa Percent of Total Revolving Debt Outstanding
1996 to 2009 QI
601
20
50
Ir0
40
so
306
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On November 25, 2008, in order to increase the availability of credit to
households and small businesses, the Federal Reserve Board announced the
Term Asset-Backed Securities Loan Facility (TAL F).22 Under TALF, which
in February was incorporated as part of the Obama administration's Consumer
and Business Lending Initiative, the Federal Reserve Bank of New York will
lend up to $200 billion on a non-recourse basis to holders of AAA-rated ABS
backed by newly and recently originated consumer and small business loans, 23
The first operation of the TALF was conducted March 17-19 this year. To
date. $9.2 billion dollars in loans have been issued through TALF for credit
card AB S.) 4
Moral Hazard Effect of Risk Spreading By Credit Card Companies
The experience with subprime mortgages and mortgage-backed securities has
proven that lenders take greater risks when they believe that this risk is shared
or sold off to others. This perception of risk-sharing led to lower underwriting
standards in both the mortgage market as well as the credit card market. At
the same time, it has become obvious from the collapse of banks issuing these
bad mortgages that the banks did not completely shift the risk of loaning to
people who were not able to pay them back.
Just as delinquency and foreclosure rates have risen in the mortgage market,
so have defaults, or charge-offs, in the credit card market. And
available credit has declined because of investors' weakened appetite for
asset-backed securities.
34
However, unlike the mortgage market, credit card companies have an
additional way of spreading the risk and cost of defaults. They can share the
risk with other, credit-worthy cardholders who hold balances on their credit
cards by increasing the interest rate on those cardholders. In this way, credit
card companies can recoup the losses of charge-offs.
If cardholders could switch to another credit card instantaneously and without
cost, credit card companies would lose customers when they raised interest
rates. However, because of the problems in the asset-backed securities market
and the declines in credit card securitization, card offers are declining. This
makes it costly for credit cardholders to search for and switch to a new, lower
interest card.25 And, as described in the Appendix, practices such as
"universal default," "any time, any reason" interest rate changes, and doublecycle billing make it much more difficult for credit cardholders to switch to
lower interest rate charges, even during good economic times.
Although data on breakdowns of credit card fees and interest revenues are not
publically available, comments submitted to the Federal Reserve Board and
related agencies during the rulemaking process generated some information
about the profitability for credit card companies to change interest rates on
existing balances. According to submitted comments, the inability to impose
penalty interest rates on the existing balances for accounts under universal
default (other than those where the account is 30 or more days past due)
would lead to a lost interest yield of 0.872 percent, or an annualized interest
loss of $7.4 billion. 26 Additionally, the inability to change the interest rate on
existing balances on other customers through a general change in terms would
lead to a lost interest rate yield of 0.321 percent or an annualized loss of $2.7
billion. 27 Together, it appears that these provisions yield approximately $10
billion in interest payments to credit card companies -- a substantial portion of
the $18 billion after-tax return on assets reported by credit card issuers in
2007.28
Investors' unwillingness to purchase new asset-backed securities will motivate
credit card companies to conduct better risk evaluations of new cardholders in
the future only if credit card companies cannot make up lost revenues from
more creditworthy cardholders. 29 In the current economy, cardholders, even
those with good credit scores, are finding it more difficult to find new credit
cards and are forced to pay higher interest rates that don't reflect their own
credit risk. These higher interest rate charges don't reflect the increased risk
of the cardholder, but instead reflect the revenue shortfall from other
delinquent cardholders. 30
If interest rates increase to high penalty levels, cardholders who would be able
to make payments when interest rates were lower may be tipped into
bankruptcy by higher rates. Some of these rates are as high as 30 percent
annualized percentage rate in interest. 3' On a balance of $3,000, an increase
in interest rates from 10 percent to 30 percent would increase payments by
$50 month, tripling the interest rate portion of their bill, a large burden for
cash-strapped families.
35
Of course, consumers who use their credit card only for transactions and not
for credit - paying off their balances at the end of every billing cycle - are less
likely to be affected by these provisions. However, making a payment even a
single day late can trigger penalty interest rates, and due to double-cycle
billing, the cardholder will have to pay that penalty rate for the next billing
cycle, even though the old balance was already paid off. According to the
most recent Survey of Consumer Finances, middle class families are most
likely to hold balances on their credit cards. (See Figure 2)
Figure 2.Middle Class Has Largest Share of Those Holding Credit Card Debt
Percent of Fatlilies with Credit Card Balances, by Income Percentile, 2007
70r
60 .r==
N-auty i-.ihird- if
.famibcr
in the f-unh
qucomcfunal,
aM.d dae_
card debt
40
/
_
/
30
:0-
0'
'20
(S12,300)
20-39.9
(S20 o00)
40-59.9
(S47.300)
60-0199
(S757300)
80-899
(5114.000)
90.100
(S206,900)
No-e Vale-. it p-urlhe rprescnirealmedian mcorn, fro ba-p Menlc rnogein 2007 d.i11aS-arce Fedcns Re-ee Board.S.ra-I oqfC-r -erFi-c-e.
Indebted Consumers Unlikely To Spend
While consumer indebtedness has fallen during this recession, the ratio of
debt-service payments to disposable personal income (13.9 percent in the
fourth quarter of 2008) is still much higher than it was from 1980 to 2004.32
A broader measure of indebtedness, the financial obligations ratio (FOR),
which adds outstanding mortgage payments for homeowners and rental
payments on tenant-occupied property to debt-service, shows the ratio of
financial obligations to disposable personal income is 17.52 fbr homeowners
and 26.31 for renters. 33 While these ratios are slightly lower than before the
recession began, they still represent a substantial portion of income and a high
degree of vulnerability to shocks in income.
Some provisions imposed by credit card companies, such as universal default
and penalty interest rates, will hurt the economy by forcing consumers to pay
more on debt payments. The sheer amount of credit card debt may also affect
36
the length and type of recovery, as more families cut back on spending to cope
with the economic downturn.
The ability of individuals to service their debt is a function of two factors: (1)
the level of the payments; and (2) the income and assets they have available to
meet those payments. The most recent measure of household wealth shows a
year-over-year decline in household net worth of 17.89 percent. 34 The
unemployment rate has risen 4 percentage points since the start of the
recession and more than 5.7 million jobs have been lost.35 The median
duration of unemployment has risen to almost 3 months with I in 7 of the
unemployed still unemployed for over a year. Furthermore, 15.8 percent of
the work force is underutilized - either unemployed, working part-time
because of the. inability to find full-time employment, or "marginally
attached" to the labor force.36 As households become more financially
strapped, they tend to carry ever-increasing balances on their credit cards.
Unlike in the past, homeowners can no longer refinance their home mortgage
to pay off their credit cards - they will now be faced with rising credit card
debt and "upside down" mortgages.
While some Americans may be able to borrow against their 401(k) pensions,
such loans take away from future retirement income. Moreover, given the
current downturn in the labor and financial markets, the balances from which
workers have to borrow are smaller. As all the bills come due, it is clear that
consumer debt financing is not a sustainable way to grow the economy.
A high debt burden, or financial distress, occurs when families have unusually
large total debt payments relative to their incomes, typically around 40
percent. The most recent Survey of Consumer Finances, conducted before the
recession, reports that 14.7 percent of American families held high debt
burdens. 37 These debt burdens are not always being repaid. Personal
bankruptcy rates were up 28.44 percent for fiscal year 2008.38
High debt burdens differ by several factors including income, age, and
homeownership. According to Survey of Consumer Finances data, 26.9
percent of families in the lowest income quintile and 19.5 percent of the
second lowest income quintile have high debt burdens, compared to 3.8
percent of the highest income decile and 8.1 percent of the second highest
income decile. 39 Thus, families with lower incomes have the greatest need to
borrow on their credit cards, and are the most economically vulnerable during
recessions.440
Conclusion
The current recession poses a significant threat to the well-being of American
families, who are likely to rely more heavily on their credit cards to make ends
meet. As families find themselves under increasing burdens, practices by
credit card companies could add to household financial distress.
37
The financial crisis has limited households' access to credit, decreasing the
competitiveness of the credit card industry. Thus, credit card companies are
more likely to be able to charge higher rates without losing all of their
customers. Credit card companies will have no incentive to conduct proper
underwriting of new accounts, since losses can be spread among the existing
account holders who have fewer opportunities to change cards.
As the complexity and availability of financial instruments have increased,
new consumer protections have become increasingly important-not just for
families, but also for the economy. Consumers facing higher costs of credit
are more likely to use any extra money to pay down existing debt rather than
engage in new spending, prolonging a vicious cycle of job losses and
reductions in consumer spending. Moreover, unfair practices by card issuers
will cause families to spend more to service their debt, instead of making new
purchases that would boost our sagging economy. The unchecked practices by
credit card issuers will only exacerbate the current crisis.
Endnotes
'Federal Reserve Board, Survey of Consumer Finances. 2007.
2
Lawrence M. Ausubel and Amanda E. Dawsey, Penalyv Interest Rates. Uiniversal
Default, and the Common Pool Problemt of Credit Card Debt, Working Paper, March
2008, pp. 1-2.
& Poor's (S&P) Credit Card Quality Index, March 2009. The most recent
data on bank credit card charge-offs from the Federal Reserve Statistical Release show
a similar increase. The credit card charge-off rate reported quarterly by the Federal
Reserve Board is lower, showing a charge-rate of 6.25 percent in the last quarter of
2008. compared with a charge off rate of 4.10 percent in the fourth quarter of 2007.
See Charge-off and Delinquency rates on loans and leases at commercial banks,
available on-line at http://www. bderaireserve.gov/releases/chargeoft/chgallsa.htm.
3Standard
4
Federal Reserve Board, March 2009, Consumer Credit, Federal Reserve Statistical
Release. Washington D.C.,
http:li.ww. federalrcscrve.gov/rcleases/g I19/current. i9.htm.
5
1'he targeted federal funds rate was lowered from 5.25 percent to 4.75 percent on
September 18. 2007. 4.50 on October 31, 2007, and 4.25 percent on December I i,
2007. It has been been between 0 and .25 percent since December 16. 2008.
6
Some have argued that if penalty interest rates are not allowed, especially penalty
interest rates attached with universal default such as the "any time, any reason"
provisions, borrowers may be less motivated to maintain a good credit rating (Jonathan
M. Orszag and Susan H. Manning, October 2007, "An Economic Assessment of
Regulating Credit Card Fees and Interest Rates," Commissioned by the American
Bankers Association, p. 11-12). Further, they argue that limiting penalty interest rates
on existing balances will reduce access to credit for some borrowers and raise interest
rates for all cardholders (Orszag and Manning, p. 38). However, the Federal Reserve
Board of Governors. Office of Thrift Supervision, and National Credit Union
Adiniistration's Final Rules concluded that, except in certain limited circumstances,
38
"increasing the annual percentage rate applicable to the outstanding balance on a
consumer credit card account is an unfair practice under 15 U.S.C. 45(n) and the
standards articulated by the FTC." (Federal Register, Vol. 74, No. 18, January 29,
2009, Rules and Regulations, Unfair or DeceptiveActs or Practices, 5521).
7
In 2004, the breakdown of U.S. card issuer revenues was as follows: net interest (65
percent), merchant fees (interchange fees) (18 percent), penalty fees (9 percent), cash
advance fees (5percent), annual fees (3 percent) (Mann, p. 23). Further, full service
issuers, who offer a broad portfolio of banking products including credit cards, may be
able to charge higher fees for all of their services because the cost to the borrower of
switching all accounts may be high (Ibid., p. 22).
Although GAO was unable to find comprehensive data to determine the extent to
which fees and penalty interest rates contributed to consumer bankruptcy, they found
anecdotal evidence in some bankruptcy cases that involved substantial penalty charges
and fees. Further, the credit card companies were unable to provide GAO with
evidence regarding the size of penalty fees or interest charges for customers who were
unable to make their payments. Additionally, GAO estimated that about 70 percent of
credit card company revenues in recent years come from interest charges and that the
share of those revenues that are associated with penalty interest rates is growing
(Government Accountability Office, Credit Cards: IncreasedComplexity in Rates and
Fees Heightens Need for More Effective Disclosures to Consumers, GAO 06-929,
Washington, D.C., September 12, 2006, p. 8).
8April 21, 2009, Joint Economic Committee Hearing "Too Big To Fail Or Too Big To
Save?, " transcript, in answer to Representative Brad Miller's comments regarding
arguments heard against Mrs. Maloney's credit card bill and other consumer
protections is that now is not the time to do anything that will restrict credit.
9
See Alicia M. Robb, et al., "Patterns of Financing: A Comparison between Whiteand African-American Young Firms," February 2009, The Kauffman Firm Survey,
Ewing Marion Kauffman Foundation, Table 4. This table shows that white small
business owners average $59,998 in total financial capital of which $3,486 comes from
personal credit cards or other owner loans and $6,163 business credit card balances.
Black small business owners had $26,318 in total financial capital of which $2,505
comes from personal credit cards and other consumer loans and $4,898 in business
credit card balances.
10Kent Hoover, "SBA misses deadlines on stimulus programs," Atlanta Business
Chronicle, April 26, 2009.
"Federal Reserve Board, March 2009, Consumer Credit, Federal Reserve Statistical
Release, Washington D.C.,
http://www.federalreserve. gov/releases/g 19/current/g I9.htm, released May 7, 2009.
12
Ibid.
13The Federal Reserve Board's Survey of Consumer Finances is a triennial survey of
the balance sheet, pension, income and other demographic characteristics of U.S.
families. The survey also includes information on consumer use of financial
institutions. The most recent survey is 2007: Changes in US. Family Financesfrom
Evidence from the Survey of Consumer Finances,
2004 to 2007:
http://www.federalreserve.gov/pubs/bulletin/2009/pdf/scfO9.pdf.
4
Ibid
39
'5 Federal Rcscrvc Board, March 2009, HouseholdDebt Service and Financial
Obligations Rations, Federal Reserve Statistical Release, Washington D.C.,
hittp:/Iwxvw. fderaireserv .gov/reieases/housedebt/default.htm.
'6 For a discussion of the effect of implicit recourse in the credit card market, see
Charles Calomiris and Joseph Mason, 2004, "Credit Card Securitization and
Regulatory Arbitrage," Journalof FinancialServices Research. 26:1, 5-27.
17Asset-backed Securities Outstanding from Securities Industry and Financial Markets
Association
(SIFMA)
http:/Iwww.sifma orp_/uploadedFi lesiRescarch/Statistics/Si FMA USABSOutstandino.p
df; Total credit outstanding is from Securitization rates calculated by dividing the
dollar value of outstanding securities by the total credit outstanding.
'"Ibid SIFMA ABS Credit card receivablcs outstanding as of 2009 Ql.
"9SIFMA, Securitized credit card receivables
http://www.sifina.org/upi.oadedFiles/Research/Statistics!'SIFMA USABSlssuance.pdf.
20Fderal Reserve Board of Governors, Press Release. November 25. 2008.
'SIFMA, Securitized credit card receivables
http:.'/www.sifima.oru/uploadedl-iles/Researchl!Statistics/SI FMA USABSIssuance.pdf .
"Federal Reserve Board of Governors, Press Relcasc, Novcmbcr 25, 2008. TALF
loans have a term of three years. Both consumer and corporate credit card receivables
are eligible.
73lbid
24S2.8 billion in March, $.9 billion in April. and $5.5 billion in May. See Recent
Opetations
for
the
Term
Asset-Backed
Secunties
Loan
Facility,
httpi//www newyorkfed.org/tmarkets/talf operations.html.
25See also Chantal Tode, "Credit card direct mail otfer volume declines sees exception
only with
airlines.
Wal-Mart,"
DM-News.
February
29,
2009
available
at
http:.xvvww.dmnews.com./'Credit-card-direct-mail-offcr-voluriue-dechine-secs-exceptiori-
oniv- with-airlines-Wal-Mart/article/127677/ . Offers of co-branded airlines card may
not be declining because those cards have a much higher proportion of superprime
(FICO score above 765) than standard credit cards. These cards are also attractive to
airlines because they generate customer loyalty. See Edgar, Dunn & Company,
"Defining the key performance indicators for your cobranded credit.card programs,"
Presentation to Ancillary Revenue Airline Conference, November 15-16, 2007,
available at
http://www.airlinheinforniationi.ore/coifererices/2007
A RAC/docurinentsU l fGcisinar E
dmar Duinn.pdf
2
cSeeLetter to Jennifer J. Johnson, Secretary, Board of Governors of' the Federal
Reserve System, ct al., Docket No. R-13 14, from Oliver Ireland, Morrison & Foerster
LLP. August 7, 2008, p. 5. The study was done by Argus Information and Advisory
Services, LltC, a data processor, and covers about 70 percent of the credit card
industry.
hitp:/itiles.ots.treas.eov/comments/bdc5cc- Ie0b-8562-eb23 -1171 59e49505.pdf
2
2
7Morrison and Foerster Letter. p. 6.
8Darryl E. Getter, April 24, 2009 CRS report, p. 2 (reporting SourceMedia data).
40
29
This view was shared by Ben Bernanke, Chairman of the Board of Governors of the
Federal Reserve System. In the statement accompanying the release of the Final Rules,
he stated "Although these rules take some new approaches, at their foundation are
familiar principles and goals. Above all, the rules seek to promote responsible use of
credit cards through greater transparency in credit card pricing, including the abolition
of pricing practices that are deceptive or unfair. Greater transparency will enhance
competition in the marketplace and improve consumers' ability to find products that
meet their needs. From the lenders' perspective, reduced reliance on penalty rate
increases should spur efforts to improve upfront underwriting." See Statement by
18, 2008,
available online at
Chairman
Ben Bermanke,
December
http://xvww.federalreserve.gov/newsevents/presslbcreg/betnanke2008 121 8a.htm.
30
See, e.g., The Pew Charitable Trusts, "Safe Credit Card Standards," Pew Safe Credit
Cards Project, at p.2 & n.5 available on-line at www.pewtrusts.org/creditcards (citing a
number of news reports regarding card companies raising rates and changing terms on
accounts in good standing).
31
Ausubel and Dawsey, p.1.
32
Federal Reserve Board, March 2009, Household Debt Service and Financial
Obligations Ratios, Federal Reserve Statistical Release, Washington D.C.,
http://www.federalreserve.aov/releases/housedebt/default.htm.
The financial
obligations ratio (FOR) adds automobile lease payments, rental payments on tenantoccupied property, homeowners' insurance, and property tax payments to the debt
service ratio. The homeowner FOR includes payments on mortgage debt, homeowners'
insurance, and property taxes, as well as payments on consumer debt and automobile
leases.
33
"bid.
34
Federal Reserve Board, Flow of Funds Balance Sheets. B. 100 Balance Sheet of the
Household and NonProfit Organizations, data through fourth quarter of 2008.
35
Bureau of Labor Statistics, Current Population Survey, Table A.l. Employment
status of the civilian population by sex and age, and Current Employment Statistics,
Table B.1. Employees on nonfarm payrolls by industry sector and selected industry
detail, April 2009.
36
Bureau of Labor Statistics, Current Population Survey, Table A.35. Unemployed
total and full-time workers by duration of unemployment, and Table A. 12. Alternative
Measures of Labor Underutilization, April 2009. Marginally attached workers are
those that are not counted as part of the labor force, even though they want a job, are
available for work, and recently searched for a job.
372007 Survey of Consumer Finances: Table 14.
38
Annual Bankruptcy Filings, Nonbusiness bankruptcy filings, Administrative Office
of the United States Courts, FY 2008 (ending June 30).
392007 Survey of Consumer Finances: Table 14.
40
Additionally, research has found that workers who do not have adequate health
insurance are incurring higher levels of credit card debt to pay for medical expenses.
See Demos, January 2007, "Borrowing to Stay Healthy: How Credit Card Debt is
Related to Medical Expenses," www.demos.org/pubs/healthy web.pdf.
41
'EASING THE SQUEEZE' Series
Joint Economic Committee
May 21, 2009
Easing the Squeeze on Women and Their Families
Democrats inherited one of the worst economic crises in our nation's history.
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay the bills and invest in their children's futures. The
strain on women and their families is compounded by a continuing gender pay
gap. 'IThe road to recovery will be long, but Congress has worked quickly with
the Obama administration to ease the pressure on working families by
advancing an economic policy agenda aimed at restoring broad-based growth,
reducing the high costs of health care, improving retirement security, and
increasing prosperity for all Americans.
The Bush Legacy: The Squeeze on Women and Their Families
Falling Incomes, Rising Expenses
* Median annual income for fcmale-headed families fell $1.492 to
$25,897 between 2000 and 2007. the most recent year for which data
is available. For all families, median annual income in 2007 was
$52,153.
• The average family health insurance premium increased by nearly 58
percent between 2000 and 2008, to $12.527.
* The average cost of college tuition at a four-year public university
increased by 47 percent between 2000 and 2007.
* '[he average cost of' full-time child care for one child in 2008 was
$6,094.
DisappearingJobs
* 1.5 million jobs held by women have vanished since the recession
began in December 2007.
* Nearly 5 million women are unemployed, an increase of 70 percent
since December 2007.
* The unemployment rate for women 20 years and older has increased
to 7.1 percent, and to 10.0 percent for women maintaining families,
which is 1.I percentage points higher than the national average of 8.9
percent in April 2009.
42
One-Third of Single Mothers Living in Poverty
* Nationwide, 3.6 million families headed by single mothers (33 percent
of all female-headed households with children) lived below the
poverty line in 2007.
* 43 percent of children living in female-headed households lived below
the poverty line, compared to the national child poverty rate of 18
percent. 7.6 million children in female-headed households were poor
in 2007, an increase of 20 percent since 2000.
Nearly 3 Million More Uninsured Women Since 2000
* 21 million women (14 percent) had no health insurance in 2007, the
most recent year of available data. 22 percent of single mothers had
no health insurance.
* 14 percent of children under the age of 18 living in female-headed
households had no health insurance in 2007.
Skyrocketing Debt
* Women were forced to rely heavily on debt financing in order to pay
their bills in the face of grim earnings and employment prospects
since 2000. Average total debt amongst female headed-households
shot up by 59 percent (from $28,000 to $44,300) between 2001 and
2007, the most recent year of available data.
* During the sub-prime 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 that the number of subprime
foreclosures for 2009 will be 830,000, with female homeowners
bearing a disproportionate burden.
* Average credit card debt for female-headed households grew by 35
percent, from $1,523 to $2,058 between 2001 and 2007. Variable
interest rates and other credit card practices mean that female-headed
households are diverting an increasing share of their incomes toward
servicing their credit card debt, which puts a further strain on family
finances.
* Average education-related debt for female-headed households
doubled between 2001 and 2007, from $1,631 to $2,532, as families
struggled to keep up with rising college tuition costs.
Easing the Squeeze on Women and Their Families
While the problems are enormous, the 11 1 th Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in women's pockets today and help them invest in their futures. In
addition, the FY2010 budget provides a blueprint for a policy agenda that
invests in the economic well-being of women and their families.
43
Closing the wage gap.
With the passage of the Lilly Ledbetter Fair Pay Act, Democrats restored the
rights of women and other workers to challenge unfair pay -to help close the
wage gap where women earn 78 cents for every $1 a man earns in America.
Putting money in the pockets of those who need it most.
The Making Work Pay Tax Credit, an extended Child Tax Credit and an
expanded Earned Income Tax Credit are already putting money in the wallets
of working mothers and their families. A refundable Child Tax Credit and
expanded saver's credit will provide a boost to millions saving for their
families' futures.
Protecting the most vulnerable.
'Ihe Recovery Act will help protect the health of low income families by
helping states avoid cuts in Medicaid enrollment and services, and boosting
funding for food stamps. WIC, and food bank programs that serve as critical
sources of healthy food for struggling families across the country.
Investing in America 'sfiturethroughjob training and education.
Congress and the Administration have committed substantial funding towards
job training in high-growth sectors, including "green jobs." expanded Trade
Adjustment Assistance expansion to cover training programs for workers
displaced from the service sector, and created a State Fiscal Stabilization Fund
to help prevent teacher layoffs and cuts in other key service.
Making college ajjordable.
The American Opportunity Tax Credit and increased Pell Grants are making
college more affordable for millions more women, and the FY2010 Budget
proposes an expansion of the Federal Perkins loan program and a new College
Access and Completion Fund.
Helping families stay in their homes.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will ease the
burden on working families, The Helping Families Save Their Homes Act of
2009 will provide lenders and homeowners with key tools and incentives to
modify unfair loans and to avoid foreclosures. Coupled with the
Administration's actions to help families refinance into lower interest rate
loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie
Mac and owe more on their houses than their current value, this critical piece
of legislation will halt the steep decline in homne prices and keep the dream of
homeownership alive for millions of American families,
Mlaking child care affordable.
The Recovery Act funded Child Care and Development Block Grants that
support quality child care services for low-income families, additional funding
for Head Start and Early Head Start over the next two years.
44
Making quality health care coverage affordable.
With the reauthorization of the Children's Health Insurance Program, the
Democrats expanded children's access to health insurance, and the FY2010
Budget includes a budget-neutral reserve fund that will facilitate the passage
of health insurance reform that achieves America's shared goals of
constraining costs, expanding access, and improving quality.
Sources: U.S. Census Bureau; Kaiser Family Foundation; National Association of
Child Care Resource & Referral Agencies; College Board; Bureau of Labor Statistics;
Consumer Federation of America; JEC calculations from the Survey of Consumer
Finances, the Mortgage Bankers Association's National Delinquency Survey, the
Bureau of Labor Statistics, and Global Insight.
45
Easing the Squeeze on Older Families
Democrats inherited one of the worst economic crises in our nation's history.
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay their bills and invest in their children's futures. The
road to recovery will be long, but Congress has worked quickly with the
Obama administration to ease the pressure on working families by advancing
an economic policy agenda aimed at restoring broad-based growth, reducing
the high costs of health care, improving retirement security, and increasing
prosperity for all Americans.
The Bush Legacy: The Squeeze on Older Families
Rising Expenses Eating Up a LargerPortion of Fixed Incomes
* Median annual income for families nearing retirement, those headed
by 55-64 year olds, was $75,034 in 2007, up 7.8 percent since 2000.
Median annual income for families headed by someone 45-54 fell 5.5
percent, to $80,384 over the same period.
* Rising costs for basic living expenses are outpacing incomes,
straining family budgets and pushing a secure retirement out of reach.
Tlhe average family health insurance premium increased by 48 percent
between 2000 and 2008, to $12,680. The cost of medical care has
increased an average of 4.3 percent per year between 2000 and 2008.
* Parents and grandparents helping family invest in a college education
have been squeezed by rising tuition costs, which shot up by 47
percent between 2000 and 2007.
DisappearingJobs
* There are 1.0 million more workers 55 years and older without a job
than at the start of the recession in December 2007. Over 1.8 million
workers 55 years and older are now unemployed.
* The unemployment rate for older workers has increased from 3.1
percent to 6.4 percent over the course of the recession, and the
number of unemployed workers between the ages of 45 and 54 has
increased by 1.I million.
* The unemployment rate for near-retirement workers aged 45 to 54
years has increased from 3.5 percent to 6.4 percent over the course of
the recession.
Over 6 Million Americans 55 and Older Lived in Poverty in 2007
* Nationwide, 2.9 million Americans aged 55 to 64 (8.6 percent of the
near-retirement population) lived below the poverty line in 2007. An
additional 3.6 million Americans 65 and over (9.7 percent of the
elderly population) lived below the poverty line in 2007.
46
Nearly I Million More Uninsured Americans Nearing Retirement Since
2000
* Over 4 million Americans between the ages of 55 and 64 (12.0percent) had no health insurance in 2007, the most recent year of
available data, an increase of nearly 1 million since 2000.
Skyrocketing Debt
* Older families were forced to rely heavily on debt financing in order
to pay their bills in the face of grim earnings and employment
prospects. Average total debt amongst older households (headed by
someone 55 years and older) shot up by 66 percent (from $84,193 to
$139,890) between 2001 and 2007, the most recent year of available
data.
During the sub-prime boom, predatory lenders targeted older
.
homeowners with high cost subprime refinancing products that
stripped long-time owners of home equity. Property values
plummeted when the housing bubble burst, and millions are now
upside-down on their mortgages, owing more than their homes are
worth. The Joint Economic Committee estimates that the number of
foreclosures for 2009 will be 1.7 million, and many will impact
elderly homeowners.
Average credit card debt for older households grew by 83 percent,
from $2,709 to $4,959 between 2001 and 2007. Variable interest rates
and other credit card practices mean that older families are diverting
an increasing share of their incomes toward servicing their credit card
debt, which puts a further strain on family finances.
Easing the Squeeze on Older Families
While the problems are enormous, the 111 th Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in older Americans' pockets today and help them invest in their
futures. In addition, the FY201O budget provides a blueprint for a policy
agenda that invests in the economic well-being of older Americans and their
families.
Putting money in the pockets of those who need it most.
The Making Work Pay Tax Credit, an expanded Earned Income Tax Credit,
and a one-time boost to Social Security payments are already putting money
in the wallets of older families. An expanded saver's credit will provide a
boost to millions saving for their retirements.
Protecting the most vulnerable.
The Recovery Act will help protect the health of low income families by
helping states avoid cuts in Medicaid enrollment and services, and boosting
47
funding for food stamps, WIC, and food bank programs that serve as critical
sources of healthy food for struggling Americans across the country.
Helping]Amilies stay in their homnes.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will ease the
burden on working families. The Helping Families Save Their Homes Act of
2009 will provide lenders and homeowners with key tools and incentives to
modify unfair loans and to avoid foreclosures. Coupled with the
Administration's actions to help families refinance into lower interest rate
loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie
Mac and owe more on their houses than their current value, this critical piece
of legislation will halt the steep decline in home prices and keep the dream of
homeownership alive for millions of American families.
Investing in America 'sfiutrethroughjob trainingand education.
Congress and the Administration have committed substantial funding towards
job training in high-growth sectors, including "green jobs," expanded Trade
Adjustment Assistance expansion to cover training programs for workers
displaced from the service sector, and created a State Fiscal Stabilization Fund
to help prevent teacher layoffs and cuts in other key service.
Mfaking college affordable.
The American Opportunity Tax Credit and increased Pell Grants are making
college more affordable for the millions of parents and grandparents
struggling to pay for a family member's education, and the FY2010 Budget
proposes an expansion of the Federal Perkins loan program and a new College
Access and Completion Fund, Democrats are also committed to expanding
community service work opportunities for older Americans, which will help
lower-income older workers remain in or rejoin the workforcc.
Mffaking qualit; health care coverage affordable.
The FY2010 Budget includes a budget-neutral reserve fund that will facilitate
the passage of health insurance reform that achieves America's shared goals
of constraining costs. expanding access, and improving quality.
Sources: U.S. Census Bureau; Kaiser Family Foundation, National Association of
Child Care Resource & Referral Agencies: College Board; Bureau of Labor Statistics;
JEC calculations from the Survey of Consumer Finances, the Mortgage Bankers
Association's National Delinquency Survey, the Bureau of Labor Statistics, and Global
Insight.
48
Easing the Squeeze on Young Families
Democrats inherited one of the worst economic crises in our nation's history,
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay their bills and invest in their children's futures. The
road to recovery will be long, but Congress has worked quickly with the
Obama administration to ease the pressure on working families by advancing
an economic policy agenda aimed at restoring broad-based growth, reducing
the high costs of health care, improving retirement security, and increasing
prosperity for all Americans.
The Bush Legacy: The Squeeze on Young Families
Falling Incomes, Rising Expenses
* Median annual income for young families, those headed by 25-34
year olds, fell $3,073 to $54,279 between 2000 and 2007, the most
recent year for which data is available.
* The average family health insurance premium increased by 48
percent between 2000 and 2008, to $12,680.
* The average cost of college tuition at a four-year public university
increased by 47 percent between 2000 and 2007.
* The average cost of full-time child care for one child in 2008 was
$6,094.
DisappearingJobs
* The number of workers between the ages of 25 and 34 years old with
a job has dropped by 1.5 million since the recession began in
December 2007.
* Over 3.2 million young workers are unemployed, twice as many as
in December 2007.
* The unemployment rate for young workers has increased from 4.8
percent to 9.7 percent over the course of the recession, well above
the national unemployment rate of 8.9 percent in April 2009.
One-Fifth OfAll Young Families Lived in Poverty in 2007
* Nationwide, nearly 2 million young families with children under 18
years old and headed by someone aged 25 to 34 (19.8 percent of all
young families) lived below the poverty line in 2007, up from 16.2
percent in 2000.
Over 10 Million More UninsuredYoung Americans in 2007
* The number of working-age young Americans (aged 25 to 34) with
no health insurance increased by 2.0 million to 10.3 million in 2007,
the most recent year of available data. Over a quarter (25.7 percent)
of all young Americans had no health insurance coverage in 2007.
49
Skyrocketing Debt
* Young families were forced to rely heavily on debt financing in
order to pay their bills in the face of grim earnings and employment
prospects. Average total debt amongst young households shot up by
58 percent (from $68,864 to $108,773) between 2001 and 2007, the
most recent year of available data.
* During the sub-prime boom, predatory lenders targeted first-time
homebuyers with high cost subprime mortgage loans. Over 354,000
new homeowners used these high-risk loan products to finance their
first homes in 2006. The Joint Economic Committee estimates that
the number of subprime foreclosures for 2009 will be 830,000, and a
disproportionate share will impact on first-time homeowners.
* Average credit card debt for young households grew by 5 percent.
from $2,977 to $3,116 between 2001 and 2007. Variable interest
rates and other credit card practices mean that young households are
diverting an increasing share of their incomes toward servicing their
credit card debt, which puts a further strain on family finances.
* Average education-related debt for young headed households
increased III percent to $9,981 between 2001 and 2007 as families
struggled to keep up with rising college tuition costs.
Easing the Squeeze on Young Families
While the problems are enormous, the 11 1th Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in younger workers' pockets today and help them invest in their
futures. In addition, the FY2010 budget provides a blueprint for a policy
agenda that invests in the economic well-being of young families.
Putting money in the pockets of those who need it most.
The Making Work Pay Tax Credit, an extended Child Tax Credit and an
expanded Earned Income Tax Credit are already putting money in the wallets
of young working families. A refundable Child Tax Credit and expanded
saver's credit will provide a boost to millions saving for their families'
futures.
Protectingthe most vulinerable.
The Recovery Act will help protect the health of low income families by
helping states avoid cuts in Medicaid enrollment and services, and boosting
funding for food stamps, WIC. and food bank programs that serve as critical
sources of healthy food for struggling young families across the country.
50
Investing in America 'sfuture throughjob trainingand education.
Congress and the Administration have committed substantial funding towards
job training in high-growth sectors, including "green jobs," expanded Trade
Adjustment Assistance expansion to cover training programs for workers
displaced from the service sector, and created a State Fiscal Stabilization Fund
to help prevent teacher layoffs and cuts in other key service.
Making college affordable.
The American Opportunity Tax Credit and increased Pell Grants are making
college more affordable for millions more young people, and the FY2010
Budget proposes an expansion of the Federal Perkins loan program and a new
College Access and Completion Fund.
Helpingfamilies stay in their homes.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will ease the
burden on working families. The Helping Families Save Their Homes Act of
2009 will provide lenders and homeowners with key tools and incentives to
modify unfair loans and to avoid foreclosures. Coupled with the
Administration's actions to help families refinance into lower interest rate
loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie
Mac and owe more on their houses than their current value, this critical piece
of legislation will halt the steep decline in home prices and keep the dream of
homeownership alive for millions of American families.
Making child care affordable.
The Recovery Act funded Child Care and Development Block Grants that
support quality child care services for low-income families, additional funding
for Head Start and Early Head Start over the next two years.
Making quality health care coverage affordable.
With the reauthorization of the Children's Health Insurance Program, the
Democrats expanded children's access to health insurance, and the FY2010
Budget includes a budget-neutral reserve fund that will facilitate the passage
of health insurance reform that achieves America's shared goals of
constraining costs, expanding access, and improving quality.
Sources: U.S. Census Bureau; Kaiser Family Foundation; National Association of
Child Care Resource & Referral Agencies; College Board; Bureau of Labor Statistics;
Center for Responsible Lending; JEC calculations from the Survey of Consumer
Finances, the Mortgage Bankers Association's National Delinquency Survey, the
Bureau of Labor Statistics, and Global Insight.
51
Easing the Squeeze on African-American Families
Democrats inherited one of the worst economic crises in our nation's history,
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay their bills and invest in their children's futures. The
road to recovery will be long, but Congress has worked quickly with the
Obama administration to ease the pressure on working families by advancing
an economic policy agenda aimed at restoring broad-based growth, reducing
the high costs of health care, improving retirement security, and increasing
prosperity for all Americans.
The Bush Legacy: The Squeeze on African-American Families
Stalled Wage Growth. Rising Erpenses
* Wage growth has stalled for African-American workers. During the
2000s economic recovery, African-Americans' inflation-adjusted
wages grew at an annual rate of just 0.2 percent, after having grown
four times as much (0.8 percent) during the 1990s recovery.
* The average family health insurance premium increased by nearly 58
percent between 2000 and 2008, to $12,680.
* The average cost of college tuition at a four-year public university
increased by 47 percent between 2000 and 2007.
* The average cost of full-time child care for one child in.2008 was
$6,094.
DisappearingJobs
* 871,000 jobs held by African-Americans have vanished since the
recession began in December 2007.
* 2.7 million African-Americans are unemployed, an increase of 71
percent since December 2007.
* The unemployment rate for African-Americans has increased to 15
percent, well above the national unemployment rate of 8.9 percent in
April 2009.
iVearly a QuarterofAll African-Americans Lived in Poverty in 2007
* Nationwide, 24.4 percent of the Africarn-American population (9.7
million African Americans) lived below the poverty line in 2007.
* Over one-third (33.7 percent) of African-American children lived
below the poverty line, compared to the national child poverty rate of
18.0 percent. 4.2 million African-American children were poor in
2007, an increase of 17 percent since 2000.
NVearly I Million More UninsuredAfrican-Americans Since 2000
* 7.6 million African-Americans (19.2 percent) had no health
insurance in 2007, the most recent year of available data. 1.5 million
African-American children (11.8 percent) had no health insurance in
2007.
52
Skyrocketing Debt
* Like millions of households, many African-American families were
forced to rely heavily on debt financing in order to pay their bills in
the face of grim earnings and employment prospects. Average total
debt amongst African-American households shot up by 77 percent
(from $53,459 to $94,737) between 2001 and 2007, the most recent
year of available data.
* During the sub-prime boom, African-American home-buyers were
three times more likely than whites to receive a high cost subprime
mortgage loan. The Joint Economic Committee estimates that the
number of subprime foreclosures for 2009 will be 830,000, and a
disproportionate share will impact African-American homeowners.
* Average credit card debt for African-American households grew by
29 percent, from $2,670 to $3,448 between 2001 and 2007. Variable
interest rates and other credit card practices mean that AfricanAmerican households are diverting an increasing share of their
incomes toward servicing their credit card debt, which puts further
strain on family finances.
• Average education-related debt for African-American households.
nearly doubled between 2001 and 2007, growing from $3,052 to
$5,632 as families struggled to keep up with rising college tuition
costs.
Easing the Squeeze on African-American Families
While the problems are enormous, the I I lb Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in African Americans' pockets today and help them invest in their
futures. In addition, the FY2010 budget provides a blueprint for a policy
agenda that invests in the economic well-being of African-American families.
Putting money in the pockets of those who need it most.
The Making Work Pay Tax Credit, an extended Child Tax Credit and an
expanded Earned Income Tax Credit are already putting money in the wallets
of working families. A refundable Child Tax Credit and expanded saver's
credit will provide a boost to millions saving for their families' futures.
Protectingthe most vulnerable.
The Recovery Act will help protect the health of low income African
American families by helping states avoid cuts in Medicaid enrollment and
services, and boosting funding for food stamps, WIC, and food bank programs
that serve as critical sources of healthy food for struggling families across the
country.
53
Investing in America 'sfiiturethroughjob trainingand education.
Congress and the Administration have committed substantial funding towards
job training in high-growth sectors, including "green jobs," expanded Trade
Adjustment Assistance expansion to cover training programs for workers
displaced from the service sector, and created a State Fiscal Stabilization Fund
to help prevent teacher layoffs and cuts in other key service.
Making college affordable.
The American Opportunity Tax Credit and increased Pell Grants are making
college more affordable for millions more African Americans, and the
FY2010 Budget proposes an expansion of the Federal Perkins loan program
and a new College Access and Completion Fund.
Helping families stay in their homes.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will ease the
burden on working families. The Helping Families Save Their Homes Act of
2009 will provide lenders and homeowners with key tools and incentives to
modify unfair loans and to avoid foreclosures. Coupled with the
Administration's actions to help families refinance into lower interest rate
loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie
Mac and owe more on their houses than their current value, this critical piece
of legislation will halt the steep decline in home prices and keep the dream of
homeownership alive for millions of American families.
Making child care affordable.
The Recovery Act funded Child Care and Development Block Grants that
support quality child care services for low-income families, additional funding
for Head Start and Early I-lead Start over the next two years.
Making quality health care coverageaffordable.
With the reauthorization of the Children's Health Insurance Program, the
Democrats expanded children's access to health insurance, and the FY2010
Budget includes a budget-neutral reserve fund that will facilitate the passage
of health insurance reform that achieves America's shared goals of
constraining costs, expanding access, and improving quality.
Sources: U.S. Census Bureau; Kaiser Family Foundation; National Association of
Child Care Resourcc & Referral Agencies; College Board, Bureau of Labor Statistics;
ACORN Fair Housing: JEC calculations from the Survey of Consumer Finances, the
Mortgage Bankers Association's National Delinquency Survey, the Bureau of Labor
Statistics, and Global Insight.
54
Easing the Squeeze on Hispanic Families
Democrats inherited one of the worst economic crises in our nation's history,
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay their bills and invest in their children's futures. The
road to recovery will be long, but Congress has worked quickly with the
Obama administration to ease the pressure on working families by advancing
an economic policy agenda aimed at restoring broad-based growth, reducing
the high costs of health care, improving retirement security, and increasing
prosperity for all Americans.
The Bush Legacy: The Squeeze on Hispanic Families
Stalled Wage Growth, Rising Expenses
* Median annual income for Hispanic families fell $1,684 to $41,616
between 2000 and 2007, the most recent year for which data is
For all families, median annual income in 2007 was
available.
$52,153.
* The average family health insurance premium increased by nearly 58
percent between 2000 and 2008, to $12,680.
* The average cost of college tuition at a four-year public university
increased by 47 percent between 2000 and 2007.
* The average cost of full-time child care for one child in 2008 was
$6,094.
DisappearingJobs
* 864,000 jobs held by Hispanic workers have vanished since the
recession began in December 2007.
* 2.5 million Hispanics are unemployed, an increase of 87 percent
since December 2007.
* The unemployment rate for Hispanics has increased to 11.4 percent,
well above the national unemployment rate of 8.9 percent in April
2009.
More Than One in Five HispanicsLived in Poverty in 2007
* Nationwide, 21.5 percent of the Hispanic population (9.9 million
Hispanics) lived below the poverty line in 2007.
* Over one-quarter (28.6 percent) of Hispanic children lived below the
poverty line, compared to the national child poverty rate of 18.0
percent. 4.5 million Hispanic children were poor in 2007, an increase
of 960,000 since 2000.
Nearly 4 Million More UninsuredHispanics Since 2000
* 14.8 million Hispanics (32.1 percent) had no health insurance in
2007, the most recent year of available data. 3.2 million Hispanic
children (20.1 percent) had no health insurance in 2007.
55
Skyrocketing Debt
* Hispanics were forced to rely heavily on debt financing in order to
pay their bills in the face of grim earnings and employment
prospects. Average total debt amongst Hispanic households shot up
by 125 percent (from $56,153 to $126,411) between 2001 and 2007,
the most recent year of available data.
* During the sub-prime boom. Hispanic home-buyers were two and a
half times more likely than whites to receive a high cost subprime
mortgage loan. The Joint Economic Committee estimates that the
number of subprime foreclosures for 2009 will be 830,000. and a
disproportionate share will impact Hispanic homeowners.
* Average credit card debt for Hispanic households grew by 48
percent, from $2,721 to $4,015 between 2001 and 2007. Variable
interest rates and other credit card practices mean that Hispanic
households are diverting an increasing share of their incomes toward
servicing their credit card debt, which puts a further strain on family
finances.
* Average education-related debt for Hispanic households shot up by
126 percent between 2001 and 2007, from $1,631 tO $3,865, as
families struggled to keep up with rising college tuition costs.
Easing the Squeeze on I lispanic Families
While the problems are enormous, the III"'1 Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in Hispanics' pockets today and help them invest in their futures. In
addition, the FY2010 budget provides a blueprint for a policy agenda that
invests in the economic well-being of Hispanic families.
Putting money in the pockets o0 those who need it most.
The Making Work Pay Tax Credit, an extended Child Tax Credit, and an
expanded Earned Income Tax Credit are already putting money in the wallets
of working families. A refundable Child Tax Credit and expanded saver's
credit will provide a boost to millions saving for their families' futures.
Protectingthe most vulnerable.
The Recovery Act will help protect the health of low income Hispanic
families by helping states avoid cuts in Medicaid enrollment and services, and
boosting funding for food stamps, WIC, and food bank programs that serve as
critical sources of healthy food for struggling families across the country.
Investing in America 's future throughjob trainingand education.
Congress and the Administration have committed substantial funding towards
job training in high-growth sectors, including "green jobs," expanded Trade
Adjustment Assistance expansion to cover training programs for workers
56
displaced from the service sector, and created a State Fiscal Stabilization Fund
to help prevent teacher layoffs and cuts in other key service.
Making college affordable.
The American Opportunity Tax Credit and increased Pell Grants are making
college more affordable for millions more Hispanics, and the FY20 10 Budget
proposes an expansion of the Federal Perkins loan program and a new College
Access and Completion Fund.
Helpingfamilies stay in their homes.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will ease the
burden on working families. The Helping Families Save Their Homes Act of
2009 will provide lenders and homeowners with key tools and incentives to
modify unfair loans and to avoid foreclosures. Coupled with the
Administration's actions to help families refinance into lower interest rate
loans if they have mortgages issued or guaranteed by Fannie Mae and Freddie
Mac and owe more on their houses than their current value, this critical piece
of legislation will halt the steep decline in home prices and keep the dream of
homeownership alive for millions of American families.
Making child care affordable.
The Recovery Act funded Child Care and Development Block Grants that
support quality child care services for low-income families, additional funding
for Head Start and Early Head Start over the next two years.
Making quality health care coverage affordable.
With the reauthorization of the Children's Health Insurance Program, the
Democrats expanded children's access to health insurance, and the FY2010
Budget includes a budget-neutral reserve fund that will facilitate the passage
of health insurance reform that achieves America's shared goals of
constraining costs, expanding access, and improving quality.
Sources: U.S. Census Bureau; Kaiser Family Foundation; National Association of
Child Care Resource & Referral Agencies; College Board, Bureau of Labor Statistics;
ACORN Fair Housing; JEC calculations from the Survey of Consumer Finances, the
Mortgage Bankers Association's National Delinquency Survey, the Bureau of Labor
Statistics, and Global Insight.
57
Easing the Squeeze on Veterans and Their Families
Democrats inherited one of the worst economic crises in our nation's history,
a crisis that is putting put extraordinary stress on millions of American
families struggling to pay the bills and invest in their children's futures. The
road to recovery will be long, but Congress has worked quickly with the
Obama administration to ease the pressure on working families by advancing
an economic policy agenda aimed at restoring broad-based growth, reducing
the high costs of health care, improving retirement security, and increasing
prosperity for all Americans.
The Bush Legacy: The Squeeze on Veterans and Their Families
Falling Incomes, Rising Expenses
* Median annual income for veterans was just $36,838 in 2007, the
most recent year of available data.
* The average cost of college tuition at a four-year public university
increased by 47 percent between 2000 and 2007.
* The average cost of full-time child care for one child in 2008 was
$6,094.
DisappearingJobs
100.000 more veterans were unemployed in 2008 than in 2007, and
this situation is likely to have worsened as the recession's impacts
on the labor markets intensified through the first half of 2009.
* 573,000 veterans were unemployed in 2008, an increase of 21
percent since 2007. Unemployment amongst veterans of the post9/1I military conflicts grew by nearly 34 percent between 2007 and
2008.
* The unemployment rate amongst young veterans of the post-9/11
conflicts is particularly high, at 14.1 percent in 2008.
*
Too Many Veterans Lived in Poverty in 2007
* Nationwide, nearly 23 million veterans (5.9 percent of the veteran
population) lived below the poverty line in 2007.
Housing Crisisfor Veterans
* In early 2008, foreclosure rates in military towns were increasing at
four times the national average, because military families were
prime targets for some predatory lenders, Nationwide, about I in 10
homes were under foreclosure in
*
2008. and the Joint Economic Committee estimates there will be
830.000 sub-prime foreclosures in 2009.
Today, about 8 percent of veterans who have served since 9/11 are
paying more than half of their income for housing, placing them at
serious risk of homelessness. 56 percent of low-income veterans
58
who rent their homes had housing affordability problems in 2005,
the most recent year of available data.
In 2007, almost 154,000 veterans were homeless on a given night,
and about 300,000 veterans experience homelessness at some point
over the course of a year. Veterans are over-represented in the
homeless population; while veterans represent just one-tenth of the
adult population, they comprise about one-third of the adult
homeless population. While homeless vets are more likely than nonvets to be employed and highly-educated, they are twice as likely to
be chronically homeless. In 2005, between 44,000 and 64,000 vets
suffered from long-term or repeated homelessness.
Easing the Squeeze on Veterans and Their Families
While the problems are enormous, the 11 1th Congress and the Obama
administration have worked swiftly to chart a course toward a stronger
economic future. The American Recovery and Reinvestment Act is designed
to turn our economy around, and it includes many provisions that will put
money in veterans' pockets today and help them invest in their futures. It
provides incentives for businesses to hire recently discharged unemployed
veterans, and expands housing assistance for disabled veterans. In addition,
the GI Bill for the 21't Century will ensure that the economic recovery
includes our men and women in uniform. Democrats' FY2010 budget
provides a blueprint for a policy agenda that invests in the economic wellbeing of Veterans and their families.
Putting money in the pockets of those who need it most.
The Making Work Pay Tax Credit, an extended Child Tax Credit and an
expanded Earned Income Tax Credit are already putting money in the wallets
of veterans and their families. A refundable Child Tax Credit and expanded
saver's credit will provide a boost to millions saving for their families'
futures.
Investing in our veterans and their families through job training and
education.
Democrats restored the promise of a full, four-year college education for Iraq
and Afghanistan veterans, making them part of the economic recovery.
Congress authorized tuition assistance and training opportunities for military
spouses seeking careers that can be maintained as they move from station to
station, and made unused educational benefits transferable to spouses and
children.
Expanding reliefand homeownership opportunitiesfor returningveterans.
Stabilizing the housing market is central to restoring the American economy,
and Democrats have worked quickly to put in place policies that will help
veterans hurt by the mortgage crisis, including prohibiting home foreclosures
for nine months after military service; providing a much-needed increase to
59
the VA home loan limit; enabling more veterans to refinance their existing
high-risk loans through VA home loans; and making thousands of veterans
eligible for low-interest loans. Together with the newly-passed Helping
-Families Save Their Homes Act of 2009, these critical actions will halt the
steep decline in home prices and keep the dream of homeownership alive for
America's military families.
Providing veterans with affordable quality health care.
Democrats moved quickly to increase veterans' health care funding, establish
a series of preventive health care projects, waive co-payments for preventive
services for all TRICARE beneficiaries, and protect military families from
increases in TRICARI co-pays and deductibles. The Democratic Congress
has restored over $1 billion in military health care funding to continue to
provide medical services to military families and their service members.
Sources: U.S. Census Bureau; Kaiser Family Foundation; National Association of
Child Care Resource & Referral Agencies: College Board, Bureau of Labor Statistics:
Iraq and Afghanistan Veterans of Arerica; Giovemrnent Accountability Office; JE('
calculations from the Survey of Consumer Finances, the Mortgage Bankers
Association's National Delinquency Survey, the Bureau of Labor Statistics, and Global
Insight.
60
WOMEN IN THE RECESSION
Working Mothers Face High Rates of Unemployment
A Report by the Joint Economic Committee
Representative Carolyn B. Maloney, Chair
Senator Charles E. Schumer, Vice Chair
May 28, 2009
Executive Summary
Working women have received pink slips in growing numbers over the course
of the current recession, which began in December 2007. For the first 3
months of the recession, when job losses were relatively light, women actually
gained rather than lost jobs. This uptick in women's employment is similar to
what has happened in previous recessions. However, in August 2008, this
recession began to look quite different from past downturns. Women's job
losses picked up pace to become a significant fraction of the total monthly job
losses.
As women's job losses have accelerated, so have the job losses for working
mothers. A Joint Economic Committee analysis of published and unpublished
data collected by the Bureau of Labor Statistics (BLS) finds that increases in
unemployment during this recession have been especially steep for female
heads of household - mothers who are solely responsible for maintaining their
families' economic security. Key findings of the analysis include the
following:
*
*
*
*
In 2008, seven out of ten mothers with children under 18 years old were
in the labor force. Over half of all mothers usually worked full time last
year.
As of April 2009, nearly one million working-age female heads of
household wanted a job but could not find one.
One out of every ten women maintaining a family is unemployed, which
exceeds the highest rate (9.0 percent) experienced during the 2001
recession and the "jobless recovery" that followed.
The ranks of female heads of household who are unemployed or
"marginally attached" to the labor force has grown across all
demographic groups, with women of color faring the worst. Black and
Hispanic women in this group are currently experiencing unemployment
at rates of 13.3 percent and 11.0 percent, respectively.
The American Recovery and Reinvestment Act (ARRA) will temper the
effects of the current recession for these families right now and over time.
Extended unemployment benefits, nutrition assistance programs, preserving
Medicaid benefits and tax cuts will bring immediate relief for these families.
In addition, ARRA invests in job creation in education, healthcare, and child
61
care that tend to disproportionately employ women. This will help to ensure
that female-headed households will not be left behind in the recovery.
Vast Majority of Mothers in the Labor Force, Most Work Full-Time
Women's increased vulnerability to the business cycle has significant
implications for family economic well-being.' Most children grow up in
families with working parents, regardless of whether they live in dual- or
single-parent families. Today, many families no longer have an additional
worker to enter the labor force when times are tough, making rising
unemployment among women a worrisome trend.
On average, in 2008, seven out of ten (71.4 percent) mothers with children
under 18 years old were in the labor force.2 The remaining 29 percent were
not in the labor force and were usually not counted in official unemployment
statistics. Over half of all mothers worked full time during 2008. An
additional 16 percent worked part time, while 4 percent of all mothers were
unemployed. (See Figure 1) Of those employed mothers, about one-third
were the sole breadwinners for the families - either because they were the
head of the household or. for married women, because their spouses were
unemployed or out of the labor force. (See Figure 2) Among those in the
labor force, the unemployment rate for mothers with children under 18 years
old averaged 5.6 percent in 2008, a full percentage point higher than in 2007.
Figure 1. Over Half of All Mothers Worked Full Time Last Year
EmploymentStatusof Women withChiidren Under 18Years Old. 2008 Annual Averages
Not in the
labor force
29%
.
.
Usual full time
51%
Unemployed
4%
Usual par time
16%
Source
F0 catutlons baoed01!data fn-
B.-roooof LaborSasLcs., Cugent Popu.tion Sorvy.
As Recession Continues, Working Mothers Face Rising Unemployment
Working women have received pink slips in growing numbers over the course
of the current recession. For the first 3 months of the recession, when job
62
losses were relatively light, unlike men, women actually gained jobs. 3 This
uptick in women's employment is similar to what has happened in previous
recessions. However, in August 2008, this recession began to look quite
different from past downturns as women's job losses picked up pace to
become a significant fraction of the total monthly job losses. On average,
one-third ofjobs lost were held by women during the past eight months.
Increases in unemployment during this recession have been especially steep
for female heads of household, who are solely responsible for maintaining
their families' economic security.4 Among female heads of household, the
unemployment rate rose 3.1 percentage points between December 2007 and
April 2009, compared to an increase of 2.7 percentage points for all women 16
years and older (not seasonally adjusted).
Figure 2. Nearly One-Third of Working Moms Are Their Families' Sole Earner
Employed Women in theLaborForce with Children Under 18 YearsOld, 2008 AnnualAverages
Head of household
26%
Married, spouse
out of the labor \
force laborMarried,
4%
rD
A
4 %
Married, spouse
unemployed
2%
spouse
employed
~~~~~~~~~~
So-rce:JECcalculations
based
on datafrom theBoreauof LaborStatistics,Cant Population
Srvey.
During the current recession, the number of working-age (ages 25-54) female
heads of household who are either unemployed or "marginally attached" to the
labor force has increased dramatically. Marginally attached workers are those
that are not counted as part of the labor force, even though they want a job, are
available for work, and have searched for a job in the past 12 months. Unlike
those counted as unemployed, marginally attached workers have not searched
for work in the preceding 4 weeks. (See Figure 3) The increase in the number
of marginally attached female heads of household has occurred across all
demographic groups. Given that a female head of household is the sole
breadwinner for her family, the growing rate of marginal labor force
attachment among this group is particularly troublesome.
63
Figure 3. Nearly I Million Women Maintaining Familie Want a Job
Female leadsofllousehold,25-54 Years0ld,Uneruployed or MarrinaLlyAttached.
By Start and End
and Current Recession
ofLast
1200
lo
6o00o
Attached
400
j
:
~~~~~~~~~O~fOfiiay~narrnfoycd
200
Marh 200i
L
hceb,
2007
No-eteh-e 200!
Ap.i 2009
SourceiL1 calculaatons
basedo. datafromaopob!LsbdabIcsFrm the trocauof LaborSta.1.tcs, Curret Population
Surey
Nearly one million working age female heads of household wanted a job but
could not find one as of April 2009, 16 months into the recession.5
These
included 761,000 unemployed working-age heads of household, 304,000 more
than at the start of the recession, and an additional 154,000 "marginally
attached", 92,000 more than at the start of the recession. 6
The unemployment rate today for all female heads of households is 10.0
percent. which exceeds the highest rate (9.0 percent) experienced during the
2001 recession and the "jobless recovery" that followed.
Because
employment for female heads of household never regained strength during the
jobless recovery of the 2000s, this group entered the current recession with a
relatively high unemployment rate as compared to the rest of the population. 7
(See Figure 4) In December 2007. the overall civilian unemployment rate was
4.9 percent' while the rate for female heads of household was 6.9 percent.'
Comparing the current recession to the 2001 recession shows how much more
severe this recession is for female heads of household. While the
unemployment rates were similar at the start of the recession. the duration of
the current recession is taking a heavy toll. Over the past 12 months, the
unemployment rate among all female heads of household has steadily climbed
by 3.2 percentage points, to its current level of 10.0 percent. One out of every
ten women maintaining a family is unemployed.' 0 (See Figure 4)
64
Figure 4. Unemployment Rate Among All Female Heads of Household
By Month forLastand Current Recession
12.0
Current Recession
10.0
8.0
/-
6.0
ffi
6.0
_
/
-
--
_
~~~~~~~~~~~~~~~~Jobless Recovery
2001Recession
4.0
2.0
0.0
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Months Since Start of Recession
Source: JEC calculations based on non-seasoally adjusted data fron uipublshed tables from the
Bureau of Labor Statistics, Curncnt Population Surrey.
Women of Color Are Faringthe Worst in this Recession
White women, including white female heads of household, have fared
somewhat better than women of color. In both recessions these households
experienced a fairly steady, although high, rate of unemployment. (See Figure
5) But the current recession now has this group facing an unemployment rate
of 8.7 percent, 3.1 percentages points higher than one year ago and
considerably higher than at any point during the 2001 recession.'1
Figure 5. Unemployment Rate Among White Female Heads of Household
By Month for Last and Current Recession
12.0
CurnentRecession
10.0
800
6.0
Pv 6.
~CJobless
C
Recovery
2001Recession
4.0
2.0
0.0
0
1
2
3
4
5
6
7
8
9
10
11
Months Since Start of Recession
Source: SECcalculations based on nun-seasonally adjusted data from unpublished tables from the
Bureau of Labor Statistics, Current Population Surey.
12
13
14
15
16
65
Black female heads of household started both recessions with an
unemployment rate just under 10 percent, well above the average for all
female heads of household.' 2 (See Figure 6) At first, their experience in the
labor market during this recession was comparable to their experience in the
2001 recession. However, as the current recession intensified, the gap
widened betwcen the unemployment rates in the current recession and in the
jobless recovery following the 2001 recession. The unemployment rate for
black female heads of household is currently 3.7 percentage points higher than
it was one year ago, suggesting that the employment situation for these
women is quite difficult.
Hispanic female heads of household started this recession with a lower
unemployment rate than in 2001. (See Figure 7) Over the past 12 months, the
unemployment rate for Hispanic female heads of household has increased 4.0
percentage points.'
Summary
The American Recovery and Reinvestment Act (ARRA) will temper the
effects of the current recession for these families right now and over time.
Extended unemployment benefits, nutrition assistance programs, preserving
Medicaid benefits and tax cuts will bring immediate relief for these families.
In addition, ARRA invests in job creation in education, healthcare, and child
care that tend to disproportionately employ women. This will help to ensure
that female-headed households will not be left behind in the recovery.
Figure 6. Unemployment Rate Among Black Female Heads of Household
By Month for Last and Current Recession
(-uret Rc-escs n
14.0
12.0
10.0
,
beoRovr
tS.O\/
2002
s
Re
n
6.0
4.0
2.0
0.0
-
0
2
3
4
6
1
8
9
10
1
1 2
Months Since Stan of Recension
Siore: JEC calculations based on non.-s
atniy adttsied data fronm
onpibished tbl.e from the
Biuneaof Labor Stutisfits. Cine-t Population Staey.
13
14
15
16
66
Figure 7. Unemployment Rate Among Hispanic Female Heads of Household
By Month for Lastand CurrentRecession
14.0 f
Current Recession
12.0
10.0 ,
_ 8.0
61
Jobless Recovery
2001Recession
6.0 .
4.0
2.0
0.0
0
3
4
5
6
7
8
9
10
I1
12
13
14
15
16
Months Since Stattof Recession
Source: JEC calculations based on non-seasonally adjusted data fromntpublished tables fromn
the
Bureau of Labor Statistics, Careent Population Surey.
Endnotes
'Joint Economic Committee, "Equality in Job Loss:
Vulnerable to Layoffs During Recessions" July 22, 2008.
Women Are Increasingly
2
Bureau of Labor Statistics (BLS), Current Population Survey (CPS), Table 4. Number
of families by presence and age of own children under 18 years old, type of family,
employment status of parents, race and Hispanic or Latino ethnicity, 2008 annual
averages. The Current Population Survey is a monthly survey of about 50,000
households conducted by the Bureau of the Census for the Bureau of Labor Statistics.
The sample is scientifically selected to represent the civilian noninstitutional
population. See www.census.gov/cps/ for more information on this survey.
3
BLS, Current Employment Statistics. The last seven months available data are for
August 2008 through February 2009.
4
BLS, Current Population Survey, unpublished tables. These data are not seasonally
adjusted. According to the CPS, a "family" is a group of two persons or more (one of
whom is the head of the household) residing together and related by birth, marriage, or
adoption. Thus, female heads of households may include households where the
dependents are the aging parents rather than children of the head of household. We
note that the CPS discontinued the use of the word "head of household" in March 1980
and replaced it with "householder."
5
This is the sum of the unemployed and the marginally attached. Ibid
67
6
Ibid.
'Ibid.
8
BLS, Current Population Survey, Table A-I. Employment status of the civilian
population by sex and age, various months. These data are seasonally adjusted.
9BLS, Current Population Survey, unpublished tables.
10 Ibid. We note that the April 2009 data show a reduction in the unemployment rate.
IHlowever, this is a highly volatile series and it is not possible to extrapolate a change in
trend from a single observation. This holds fbr figures 4-7.
''Ibid.
l2lbid
'3Although none of the data used for Figures 4 -7 are seasonally adjusted, a seasonal
trend is only visible for Hispanic female heads of households, shown in Figure 7. The
peak in the unemployment rate during the last recession and the spike in
unemployment during month 12 of the current recession are for December. This strong
seasonality may indicate that Hispanic women who maintain families are more likely
to be employed in occupations that have strong seasonal trends. Ibi.
68
COMPREHENSIVE HEALTH CARE REFORM
An Essential Prescription for Women
A Report by the Joint Economic Committee
Representative Carolyn B. Maloney, Chair
Senator Charles E. Schumer, Vice Chair
October 8, 2009
Executive Summary
The status-quo health insurance system is serving women poorly. An
estimated 64 million women lack adequate health insurance.' Over half of all
medical bankruptcies impact a woman. 2 For too many women and their
families today, quality, affordable health care is out of reach.
Women are more vulnerable to high health care costs than men. Several
factors explain why. First, women's health needs differ from men's, so
women are obliged to interact more regularly with the health care system regardless of whether they have adequate insurance coverage or not. Second,
women are more likely to be economically vulnerable and therefore face
devastating consequences when faced with a mounting pile of medical bills.
The inability of the current system to adequately serve women's health care
needs has come at great expense. One recent study estimates that women's
chronic disease conditions cost hundreds of billions of dollars every year.3
The following brief provides an overview of the basic facts regarding
women's insurance coverage, and the consequences of our broken health
insurance system on women's health - both physical and financial.
Specifically:
*
Over one million women have lost their health insurance due
to a spouse's job loss during the current economic downturn.
Women have lost 1.9 million jobs since the recession began in
December 2007, and many of those women saw their health
insurance benefits disappear along with their paychecks. 4 Second,
women whose spouses lose their jobs are also vulnerable to losing
their health benefits, because so many women receive coverage
through a spouse's job-based plan. The Joint Economic
Committee estimates that 1.7 million women have lost health
insurance benefits because of the contraction in the labor market
since December 2007. 68 percent (1,153,166) lost their insurance
due to a spouse's job loss. 32 percent (547,285) of those women
lost their insurance due to their own job loss.
69
*
*
*
*
*
*
As a consequence of single mothers' job loss, the Joint
Economic Committee estimates that at least 276,000 children
have lost health insurance coverage. 5 The weak job market has
been rough on single mothers; the number of unemployed female
heads of household has increased 40 percent over the past twelve
months. 6 For many of these women, the loss of a job means not
only a disappearing paycheck. but also the disappearance of
cmployer-sponsored health insurance coverage for their families.
Women between the ages of 55 and 64 are particularly
vulnerable to losing their health insurance benefits because of
their husbands' transition from employer-sponsored coverage
to Medicare. One recent study concludes that a husband's
transition from employer-sponsored coverage to Medicare at age
65 can be problematic for his younger wife. Many of these wives
depended on their spouse's employer-based coverage and are not
yet age-eligible for Medicare. As a result, 75 percent of these
women reported delaying filling prescriptions or taking fewer
medications than prescribed because of cost.'
Younger women are particularly vulnerable to lacking
adequate health insurance coverage. Over one-quarter (26
percent) of all young women (ages 19-24) do not have health
insurance coverage. The weak job market has hit young workers
particularly hard, with the unemployment rate amongst young
women at 15.5 percent in September 2009, substantially higher
than the national unemployment rate of 9.8 percent. 8 The dismal
job market means that young women are less likely than ever to
have access to job-based coverage, and many women who once
received coverage through a parent's health insurance plan have
seen this coverage evaporate with their parents' jobs.
39 percent of all low-income women lack health insurance
coverage. Because of wide variability in state Medicaid eligibility
rules, millions of American women fall through the safety net
every day. '[he devastating impact of the recession on state
budgets has forced some states to further tighten Medicaid
eligibility rules at precisely the time when need is growing fastest.
The health consequences of inadequate coverage are more
severe for women than for men. Women are more likely than
men to run into problems receiving adequate medical care. Over a
quarter (27 percent) of women had health problems requiring
medical attention but were not able to see a doctor, compared to
21 percent of men. Similarly, nearly a quarter (22 percent) of
women reported that they were unable to fill a needed
prescription, as compared to 15 percent of men.
While the financial burden of inadequate health insurance
coverage weighs heavily on all Americans, uninsured and
under-insured women suffer more severe economic
consequences than do men. Women are more likely than men to
70
deplete their savings accounts in order to pay medical bills. Onethird of under-insured women deplete their savings to pay medical
bills, as compared to a quarter of under-insured men. The
disparity is comparable amongst the uninsured (34 percent of
uninsured women as compared to 29 percent of uninsured men).
The comprehensive health care reform proposals offered by the Obama
administration and currently taking shape under the leadership of Democrats
in the House and Senate include numerous provisions that are critical to
providing quality, affordable health care for all Americans, both women and
men. Many of these solutions are a key part of the prescription for easing the
burden on America's women, for whom the status quo health care system is a
failure.
Comprehensive Health Care Reform: An Essential Prescription for
Women
The status-quo health insurance system poorly serves women. An estimated
64 million women lack adequate health insurance. 9 Over half of all medical
bankruptcies impact a woman.'0 For too many women and their families
today, quality, affordable health care is out of reach.
Women are more vulnerable to high health care costs than men. Several
factors explain why. First, women's health needs differ from men's, so
women are obliged to interact more regularly with the health care system regardless of whether they have adequate insurance coverage or not. Women's
reproductive health concerns, including pregnancy and childbirth,
contraception, and the consequences of sexually-transmitted diseases, require
more contact with medical providers." Women are more likely than men to
have one or more chronic diseases, including diabetes, asthma, and
hypertension, all of which require ongoing coordinated care.' 2 Second, women
are more likely to be economically vulnerable and therefore face devastating
consequences when faced with a mounting pile of medical bills. Women
comprise more than half of America's poor, and millions of working women
continue to earn less than their male counterparts.' 3 Regardless of marital
status, women are more likely to be responsible for their children's health and
well-being.' 4
The inability of the current system to adequately serve women's health care
needs has come at great expense. One recent study estimates that women's
chronic disease conditions cost hundreds of billions of dollars every year.'5
The direct costs of women's cardiovascular disease, which impacts 43 million
American women, are estimated at $162 billion annually. The direct medical
costs of diabetes on women total over $58 billion. The direct medical costs of
osteoporosis, which impacts 8 million women, are estimated at nearly $14
billion annually. The direct medical costs of breast cancer are estimated at $9
billion.
71
The following brief provides an overview of the basic facts regarding
women's insurance coverage, and the consequences of our broken health
insurance system on women's health - both physical and financial.
Women are no more likely than men to be uninsured, but the sources of
women's health insurance policies are quite different from men's. As a
result, women are especially vulnerable to losing their health insurance
coverage.
Because women are less likely than men to be employed full-time, they are
less likely to be eligible for employer-provided health benefits. 27 percent of
employed women work part-time, and are therefore excluded from their
employers' health insurance benefit plans. In contrast, just 13 percent of
working men are part-time employees.)6
Figure 1. Health Insurance Status of Non-Elderly Adults
40%
3 0%.
Sff~~~~~Wr,,,0
,
W-onc
Men
Nonidrcado
sIuor~agic.,1t4. Numb-,yo ts.n o, f.o
100 .d-ctomu,.d&g
1
SR.-.e It. ,,, rtu,,rnsot CoJnunticr
,.,ku! trot, fir.', t 2009ASOC
SJrphkltel to
{he
CI'S
Women are nearly twice as likely as men to depend on a family member
(typically a spouse) for health insurance benefits. 25 percent of non-elderly
women receive health insurance coverage as a dependent on a family
members' job-based health insurance plan, as compared to just 13 percent of
men. Women are particularly vulnerable to losing health insurance coverage
when they are dependent on someone else for their benefits.
First, the weak job market means that a woman is vulnerable to losing
employer-based coverage because of loss of her own job or her spouse's job
loss. Women have lost 1.9 million jobs since the recession began in Dccember
2007, and many of those women saw their health insurance benefits disappear
along with their paychecks.17 Many more women have lost their employerprovided health insurance benefits as businesses have cut back on employees'
72
hours. 3.3 million women who usually work full-time are currently working
part-time because full-time work is not available, more than twice as many
than when the recession began in December 2007. Many of these women are
no longer eligible for employer-sponsored coverage.' 8 As noted above,
women's health insurance coverage is impacted not only by their own
employment, but also by their spouse's employment. Women whose spouses
lose their jobs are also vulnerable to losing their health benefits, because so
many women receive coverage through their spouses' job-based plans. Men
have lost 5 million jobs since the recession began, resulting in over one
million wives losing their health insurance coverage and joining the ranks of
the uninsured. The combination of women's job loss and their spouse's job
loss means that women are doubly vulnerable to losing their health insurance
coverage in today's weak economy.
Using these job loss statistics and the share of men and women receiving
health insurance benefits through employer-sponsored plans, we estimate that
1.7 million women have lost health insurance benefits because of the
contraction in the labor market since December 2007. 32 percent (547,285) of
those women lost their insurance due to their own job loss. 68 percent
(1,153,166) lost their insurance due to a spouse's job loss. In contrast, 3.1
million men have lost health benefits due to job loss since the recession began.
Nearly all (96 percent) of those losses are due to men's own job loss.' 9
Figure 2. Women's Health Insurance Coverage Lost
Due to Recession-Driven Job Loss,
(Total=1,700,451 women have lostcoverage)
Coverage Loss
Due to Own Job
Loss
32%
574,285 lost policies
Coverage Loss
Due to Spouse's
Job Loss
68%
Soare: Joint Econoomic
Conunittee estimates using March 2008 Supplement to the CPS, June 2009 CPS, and BLS
Establishttent Sarvey data. Recession-dnive,
jo lossbrefers tojobs lost between December 2007 and August 2009. A
mnethodological
appendix is available fmomthe JEC apon request.
Health insurance losses due to the economic contraction are likely
substantially larger than the Joint Economic Committee's estimates of job-loss
related health insurance losses. The rising cost of providing employees with
health insurance coverage combined with the economic slowdown means that
some employers have dropped health insurance benefits for their employees.
73
Therefore, many Americans who remain employed may no longer have health
insurance coverage. 20
Second, women between the ages of 55 and 64 are particularly vulnerable to
losing their health insurance benefits because of their husbands' transition
from employer-sponsored coverage to Medicare. One recent study concludes
that a husband's transition from employer-sponsored coverage to Medicare at
age 65 can be problematic for his younger wife. Many of these wives
depended on their spouse's employer-based coverage and are not yet ageeligible for Medicare. As a result, many of these women experience
disruptions in medical care. For example, 75 percent of women who
experienced an insurance disruption due to husbands' transitions to Medicare
reported delaying filling prescriptions or taking fewer medications than
prescribed due to cost. These numbers were substantially smaller for similar
women who did not experience this insurance disruption."
Women without access to employer-based health insurance benefits - either
from their own job or a family members' job - are left to find insurance on
their own. 10 percent of all women are insured through Medicaid. 7 percent
purchase insurance on the individual market, which can come at an enormous
cost. For instance, in many states, a 25 year-old woman purchasing health
insurance on the individual market pays 45 percent more in monthly
premiums for the exact same plan purchased by a 25 year-old male. 22
Adult women comprise 38 percent of the uninsured. Certain groups of
women are far more likely to be uninsured or under-insured than others.
While just 18 percent of all women are uninsured, much larger shares of
certain groups of women are left without coverage today.
Roughly one quarter (24 percent) of all single mothers do not have health
insurance coverage. 37 percent of all children without health insurance live in
single-parent families, the vast majority of which are headed by a working
single mother.2 3 The weak job market has been rough on single mothers: the
number of unemployed female heads of household has increased 40 percent
over the past twelve months.24 For many of these women, the loss of a job
means not only a disappearing paycheck, but also the disappearance of
employer-sponsored health insurance coverage.
74
Figure 3. Distribution of the Uninsured, (Total=46.3 million)
Note: Children ate tader 18yetts old.
Sontee:Joiot Economic Committeecalculations ftom the 2009 ASEC Supplement to the CPS.
Figure 4. Characteristics of Uninsured Non-Elderly Women
All wome
Single Patnt
n
I
18%
- - -1 26%
Poor (I 100l%FPL)
139%
NearPoor(100-199%
FPL)
133%
< High School
137%
133%
Fo'eign-Bom
19-24Yeats Old
126%
Note: Non-elderly wonoenameages 18-64.The pen entage refeesto the shaeeof o givencategoiy of womenthat ore
-ninvoed, e.g.
33%of all foreign-hom women were unmsted. FPL refer to the fedealpovety lme.
Soutees: Data on single patents is fnmnthe Kaiser Family Foundation's estiates of Urhan Institute tabulations, 2008 ASEC
Sopplement to the CPS. The eemainmig
dataate Joint Economic Committee calcmlationsfni the 2009 ASEC Supplement to the CPS.
As a consequence of single mothers' job loss, the Joint Economic Committee
estimates that at least 276,000 children have lost health insurance coverage
that they received through their mother's employer-based plans.2 5 The
recovery package included subsidies to make COBRA coverage more
affordable, allowing some of these families to purchase an extension of their
existing health insurance coverage for a limited time. But COBRA coverage
remains prohibitively expensive for many Americans, particularly working
single parents, and many women work for businesses that are too small to be
bound by COBRA regulations. 2 6
75
Over one-quarter (26 percent) of all young women (ages 19-24) do not have
health insurance coverage. The weak job market has hit young workers
particularly hard, with the unemployment rate amongst young women at 15.5
percent in September 2009, substantially higher than the national
unemployment rate of 9.8 percent. 27 The dismal job market means that young
women are less likely than ever to have access to job-based coverage, and
many women who once received coverage through a parent's health insurance
plan have seen this coverage evaporate with their parents' jobs. Moreover,
over half (60 percent) of employer-sponsored health plans do not cover
dependents after age 19 if they are not enrolled in school. The vast majority of
students covered through their parents' employer-based policies lose their
health insurance benefits upon college graduation. 28
Millions of poor and near-poor women lack health insurance. 39 percent of
women living at or below the federal poverty line ($22,050 for a family of
four in 2009) do not have health insurance coverage. One-third (33 percent) of
ncar-poor women living between 100-199 percent of the federal poverty line
lack coverage. Medicaid eligibility rules vary substantially across states. The
safety net program covers just 45 percent of low-income Americans, leaving
millions of low-income women without access to affordable health insurance
coverage. 2 9 Facing serious budgetary pressures due to the recession, some
states have further pared back Medicaid eligibility and/or benefits at precisely
the time when increasing numbers of families desperately need access to
public benefits.30
Fiigu re 5. Lin- and Underinsured Women, by Income
7g%
Ct~~~~~~~~~~~
Uorsunrd al ally lila ill p
cu
ear!
78%
f inso
a'y
. ndeiwd
an.
45%
32
50.
19%
4i%
All
Lo.. I-come
Modorate
Iou e
Icoao
Nfiddt,,l-oe
Und.e rOsIdis deflned aso bedall *w hc
butexpiccd oneo1thefollorsing medarC
e al
iridcal ey.peos- c.1,eid io
morn of nconreifow
ifII-
oir-e (-2005
FP!l, o drd
, lcoihle
w .l
High
KMa.,
or mor of m.onr.
orr ni rc.of conlc
Subgroups
may no,sumtoin!beciuseof mondag. Law in-nrn is< S2Ok.-nndmininco=eisS20k1539 9k.mrddk in-e
559.9k.
high otone isS60k.r g-t-er
Soro-- TheCoruow-r-ollh F id [tElcrrhil
;.
ailH
, J nna,
- Survey2007
is540k-
While millions of women lack access to health insurance, millions more
women are "underinsured," or covered by health insurance benefits that leave
them vulnerable to significant financial hardship. Under an expanded
definition of lack of access to health insurance coverage that includes both the
76
uninsured and underinsured, the percentage of women lacking adequate
health coverage rises to 45 percent. Over three-quarters (78 percent) of lowincome women lack adequate coverage. 60 percent of moderate-income
women lack adequate coverage. Even amongst relatively well-off Americans,
access to adequate coverage remains tenuous. 3 '
Health insurance coverage also varies substantially by race. Minority women,
especially Hispanics and Native Americans, have the greatest rates of noninsurance - 36 percent of Hispanic women lack health coverage, as do 32
percent of Native American women.
Figure 6. Health Insurance Status of Non-Elderly Women, by Race/Ethnicity
100%
90%
80%
70%
60%
50%
40%/6
*Medicaid
U Prvate
30%
*Uninsured
20%
101%
0%
/
59
9. ,
at
9
Note:Non-elderlyadultsate ages 18-64.Numbes maynot sm to 100% due to unding.
Sour-e: Joint Economic Committee calculations fmm the 2009 ASEC Supplement to the CPS.
t49
`11
77
Figure 7. Difficulty Obtaining Necessary Medical Care, hy Gender
GMen
27%
21%
1Wo-ne,
22%
1.$ 7t
15%
14%
...
4
S ,
''fj-
lad heath problems and needed to see
daot-: but didt
Soure. The Kua o
urdulyFouodation. KIf
Unable to see specialist when needed
W-'oi cai Heah
Coudlndot affr
to fill pn-rlnpl on
-ar~c,.
20)4k
Figure 8. Share of Non-Elderly Adults Reporting Difficulty Obtaining Health
Care, by Income
O
67%
en
Ze
nWen
65%
52%
39%
I ....
l
u.zw-lc.sroc
M oudcru~ cli
Ntiddle Inc.,oe
IlibghI.C,.c
"Dfficly6obiatnog cre is defned asreponorg ary -one fo.r prublens. did not rdi a pnscepfino; did nor see a sperrali;
tnh-n-eeded:skippgd tecor-irerdord odial tor. tu-rr.coror fallow-up: hadari.ed.al problem bt did nor -wn adocrorot
5
char C5 L t o i-ote ;i .
0Lk, ituderare11 0 is S70kfl519)
iiddieio ow., $40L.Si9 1k. hibghici,
i 560k or gnear
Soare Tire Conurenweahb Fuod SteenialHeath Iroorance Sursey 2007.
Women are more likely than men to report problems with access to
medical care.
Women are more likely than men to run into problems receiving adequate
medical care. Over a quarter (27 percent) of women had health problems
requiring medical attention but were not able to see a doctor, compared to 21
78
percent of men. Similarly, nearly a quarter (22 percent) of women reported
that they were unable to fill a needed prescription, as compared to 15 percent
of men.
While the percent of men and women reporting difficulty obtaining needed
care is inversely related to income, the gender gap in obtaining care is
relatively constant regardless of income. 32 While 39 percent of all men
reported difficulty, over half (52 percent) of all women reported trouble
obtaining needed medical care. Amongst the lowest-income individuals, 57
percent of men report difficult as compared to 67 percent of women - a 10
percentage point gap. Amongst higher income individuals (those with incomes
of $60,000 or more), the percentage of both men and women reporting
difficulty obtaining needed care is lower, but the gender gap remains, at about
11 percentage points.
Even when compared to men with similar insurance coverage, women are
more likely to report difficulty obtaining needed medical care due to cost. The
gender disparity in cost-barriers to care is particularly stark for the
underinsured. While nearly half (49 percent) of all underinsured men report
forgoing needed medical care due to cost, 69 percent of underinsured women
report foregoing needed care because they could not afford it. The persistent
pay gap between men and women may explain part of this - women earn 77
cents for every dollar earned by their male colleagues, leaving them with a
smaller paycheck to cover needed medical expenses. 33 Women are also more
likely than men to be the custodial parent and therefore bear responsibility for
children and their accompanying expenses, which leaves less money at the
end of each month to cover necessities such as medical care for the mother. 3 4
Figure 9. Non-Elderly Adults Going Without Needed Medical Care Due to
Cost, by Insurance Status and Gender
OMen
76%
ElWomen
69%
67%
49%
52%
39%
34%
25%
AN
Insured all year not
Insured allyea, uanderinsued
Uninsured at any time
underinsured
"Going without needed ntedical care due to cost" is defined as a positive responseto one or more of the folloing: not filling a
needed presctiption because of cost, skipping reconnmended test, treatment, or follow-up due to cost; having a medical condition
and not visitingodoctordueto cost; not gettingneededspeciahst careduetocost. Underinsured is defmedasinsured all year but
expeneneed one of the following:
medical expenses equaled 10%/o, mere of income; medical expenses equaled 5% or moe of
200
income if low incone (0 %Vo
ofthe fedeaipoverty lihe); ordeductiblesequaled 5% oroe of incoe. Non-eldely adultsare
ages 19-64.
Source: The Comnonweadth Fund Btennal Health Insurance Survey, 2007.
79
Figure 10. Non-Elderly Adults Foregoing Needed Medical Screenings Due to
Cost, by Insurance Status and Gender
OMen
:i0:.mee
42%
36%
23%
21%
%
-_16%
9%
Inso-ed all year. not
All
Thesurveycot estie
Int-
d al yeo,, undek ,o- tid
Unoi-eod at onytone
toedtealserennogopen-ended
butgivesrnanonroaoon.
coloncotancselSreens,
a-d paptee'sas
evorplen Urndenosted is deltettda insured oalyet!but espeneo-ced
oneofthe folloreot; mdical enpetteen
eqauaed10 Oor
rmo, of utcome.medical
expenseseqialed 5% or mote of Loro if Io. occorn-(<200% of thc fedetalpotcrlty 1.Ic: or
0
.ord tone of o-o--r Nonetd.lyudulalte ge 194.
dedtclibiccqucd
SourCe The Co-=r--onweuth Fuod BimnoulHealth lttsunmoeSur-ey, 2OdT
deilottionlOr
Millions of women report difficulty obtaining needed preventative medical
care. Study after study shows the importance of preventative care, both in
terms of health benefits and the critical role preventative medicine can play in
containing medical costs.35 Yet women are more likely than men to go without
needed preventative medical screenings due to cost. Even when compared to
men with similar insurance coverage (or lack thereof), women are more likely
to see cost barriers to receiving preventative care. The gender disparity is
particularly sharp amongst the underinsured: nearly a quarter (23 percent) of
underinsured women report foregoing preventative medical screenings due to
cost. as compared to 16 percent of underinsured men.
Perhaps unsurprisingly, the same groups of women who are most likely to
lack health insurance coverage are likely to report problems receiving
necessary medical care. 67 percent of uninsured women report that they
delayed receiving needed medical care due to cost. 3Y Disparities in access to
preventative care are particularly troubling because of the important health
benefits of preventative medicine.
80
Figure I1. Non-Elderly Women's Lack of Access to Preventative Medicine, by
Insurance Status
*InsuredaS year,notutmdernnsred
55%
U
O Isured aS year,odceinsuted
E Uninsured atamytime
40%
33%
24%
utOA
-1 f
14%
15%
11% I
Has no regular source of care
No pap test in past year if 19-29; in pat 3
Noartarogan
r past 2 yeats if 50+
yeats if 30-4
Underinsured is defined asimured all year but expeienced one of the follosvting medical expenses equaled 10% or momeof
income; medical expenses equaled 5% or more off income if lo. income (<20000 of the fedetal povety line); or deductibles
equaled 5% or mom of income. Subgroups may not sam total because of ounding.
Source. The Commoawealth Frad Bicamal Health Iasuatce Survey, 2007.
Figure 12. Share of Non-Elderly Women Reporting No Doctor's Visit Last Year
Due to Cost, by Race/Ethnicity
Asl/PanerXf
Isander
White
12%
115%
African-Amencan
0
American
Iadia./Alaskan
Native
122%
26%
127%
Hlipanic
Soac K:KaiseFamily Foundation,PPtting Womet
and Prevention, 2004-2006.
S
Hea-ih CuDreDirparirierot the Map, rtig
data fmm theCenterforDisse Coatml
81
Figure 13. Share of Non-Elderly Women Reporting Difficulty Obtaining
Health Care, by Race
AiBWottnrn
* Alt Mioottty
29%~~~~~~~~Y
25%~~~~~~~~~~~~~~~~7
26.
.
26
2*%
|
it'yt~n.
|
Nolimith
Coveraga
NoPerionai
D Ictot
iRV.
|
23%
'
|
10~~~~~~~~6
NoCheck!ipio
NoDeot
No Dmo VioVsit
No1ootoaogtatnNo opTest in
Pas:2 Yeats Checnkpin Las DuateCos:
toLast2 Year; Lart 3Yeats
2 Years
All itIiO
lidedt- A
it'nnto't. Niap@.i.,,
HitpitA
A i
-iFcAin
e
So-ter Kaiser Fanily Fo-ndation, Putmn Womena Health Core-Doponti
16%.
LateorNo
Pna.al C=o
and Alaskan N.i6c-
ontthe Molp.c!otg data fnro theCenter forfDisease Conmnl
andPmesent-n.
2004-2007
Uninsured women are far less likely than other women to receive
recommended preventative care. Over half (55 percent) of women over age 50
have not received the recommended mammogram, a critical screen for breast
cancer that allows providers to catch cancer in its early and treatable stages
when conducted on a regular basis. Over a third (37 percent) of uninsured
women have not received the recommended pap smear, a critical screen
allowing for early detection of cervical cancer. And 40 percent of uninsured
women do not have access to a regular doctor.
Significant and troubling racial disparities in women's access to preventative
care exist. The high cost of medical care and lack of access to affordable
health insurance coverage are likely to explain much of the disparity. Nearly a
quarter (23 percent) of minority women report that they were unable to visit a
doctor due to cost, as compared to 15 percent of white women. Lack of access
to medical care due to cost is particularly problematic for Native American
and Hispanic women, with 26 percent and 27 percent respectively reporting
no doctor's visit in the last year due to prohibitive costs. Access to dental
coverage remains highly unequal, with 36 percent of all minority women
reporting no dental check-up in the last two years as compared to 25 percent
of white women. Some preventative medical care remains underutilized by all
women, regardless of race. Despite recommendations from the American
Cancer Society that all women over 40 receive annual mammogram exams, a
quarter of all women report no mammogram in the last two years.37
82
Women's reproductive health is severely compromised by un- and underinsurance, with consequences for both women and their children.
The average American woman will spend roughly five years being pregnant,
recovering from pregnancy or trying to get pregnant, and three decades trying
to avoid an unintended pregnancy.3 8 Women's specific health concerns
regarding pregnancy and childbirth, access to safe and affordable
contraception, and the severe consequences of sexually transmitted diseases
require continuous engagement with the health care system.
The consequences of poor access to reproductive health care are severe for
women. Women are more likely than men to contract serious sexuallytransmitted diseases, including genital herpes, gonorrhea, and chlamydia, and
limited access to regular medical care reduces the likelihood of early detection
and effective treatment of these diseases. 39 Women without health insurance
are 30 percent less likely to use contraceptive methods requiring a
prescription, which are more effective at preventing unintended pregnancies
than over-the-counter birth control methods alone.4 0 Reproductive health care
providers often provide the screenings for female-specific diseases (including
breast, cervical, ovarian, uterine, and endometrial cancers) that are less likely
to prove fatal with early screening and treatment. Yet limited access to regular
care diminishes the likelihood of preventative screenings, as noted above, and
further compromises women's reproductive health.
Women's limited access to quality, affordable health care also compromises
children's health. Quality pre-natal and post-partum care is strongly linked to
healthy outcomes for new infants as well as their mothers. 4 ' Large disparities
in maternal mortality and infant health persist by race and income, suggesting
a link between health care access and health outcomes. 42
While lack of health care coverage remains a critically important barrier
to women's receipt of adequate medical care, work-family balance
challenges stand in the way of millions of women's access to quality
health care.
18 percent of all women report that they delayed or did not receive needed
medical care because they were unable to take time off work. Over a quarter
(27 percent) of all low-income women report that an inability to take time off
work prohibited them from obtaining needed medical care. Similarly, 20
percent of all low-income women report that child-care problems kept them
from getting needed care. Taken together, these data suggest that health care
reform is only the beginning of the solution. Without national policies that
assist families in balancing work and life responsibilities, millions of
Americans - especially the working poor - will remain unable to access
needed medical care.
83
Figure 14. Women's Reasons for Delaying or Foregoing Needed Care, hy
Income
33%
EAUf Wet.n
0 Lo. I.ncoe (0200%.
FPL)
~~~~~~~~~~~~~~~~~~~~*i
Por(7f0%-r- FPPI)
l
27%
~~19%19V
I9V
21%
20%
28
17%
15%
1 30
.. 12%
Noini-n..e
_
Crdrtfilit
tone
Cfoddrrt joket Tr CflXolr
Chrild-SOTO Tleo
fiTotSJ,,TStIl
TO- proler6
( ouldrrllokc lreanollett bud
la.1
me loenrrloycd eoarcn. "Chld-oano pebleneaZ is lonricd torworron wcithchildren order thcaigc of
18 ling at home FPI
to Thefodernl pocedy Ire PcTCCTTTgOs
refer o,
010.8
gC.oo18d
olderr lpoiirg delaoyrgforegsorig
neededcm in the 12 moths peer to the-survey fora gwin Teases
Sou.ce fht Kaiser F-nih Fonda:fo. 2f004
KaosonWoren's HeltzhSunty.
fefers
Figure 15. Non-Elderly Adults with Medical Bill Problems in the Last Year, by
Insurance Status and Gender
OMel
*
T
rhOrer
60%
57%
51%
47%
37%
20%
A;!
Isored allyear.
nor
inrd ll year. dnoeroroored Unosnneed trmyrtee
ondcenosotod
%ed l
bill
problerre" orederoned
to
nrnircofnIhe
one or
foliotng
.
problems or
-
rarbilrly
to pay
m-dial
biit; con.tcted byt
coleetmli agen^cyr egarding enpardrrredrica brllo. had t ch.3ngeceayof life to p y ntedreal bril. Undeerrinrred is deliond asresreed cr1
yeaelba:enpoonrcdenonol thelollowing. medicalcpcnscs eoualed Iff.Cer aror oftrxone: medical expeniseseou31cd5-.or teem
of rcore iflaicrnrr-rne (-200
ofire
hu eodd
q
%r
of-o
e
-edey adul
ges 1 o64.
So.rne: The *=en-.n.=frce1h fIund trnnr31 Heal:h l--rinec Sors-e. 210X71
84
Figure 16. Non-Elderly Adults Depleting Savings to Pay Medical Bills,
by Insurance Status and Gender
ClMen
*Womern
33 /v
29%
25%
'no-/
16%
K
9%
All
I
9%
Insured aP year not
In
.
d all year, undermsmed
I -
C
Uninsured at nmy rmm
underinsrred
Underrrefdrmdrinedmasmneddall year but experienced one of the followig: medical expenses equaled 10% or mom of
income; medical expenses equaled 5% ormorr of income if low incom (<200% ofthe federalpovety mine);ordeductibles
equaled 5%or mote of income. Non-elderly adultsano ages 19-64.
Source: The Commonwealth Fund Biennial Health Insurance Survey, 2007.
Inadequate insurance coverage not only puts women's physical health in
danger; it also imperils women's financial health. Women bear a heavier
financial burden due to un- and under-insurance than do un- and underinsured men.
37 percent of women had medical bill problems in the last year, as compared
to 29 percent of men. Amongst the under-insured, 57 percent of women had
medical bill problems as compared to 47 percent of men. Amongst those with
no insurance at all, the share of both men and women with medical bill
problems are even more dramatic - 60 percent of uninsured women and 51
percent of uninsured men.
Many Americans are taking desperate measures to cope with the medical bills
that pile up following an illness. Women are more likely than men to deplete
their savings accounts in order to pay medical bills. One-third (33 percent) of
under-insured women deplete their savings to pay medical bills, as compared
to a quarter (25 percent) of under-insured men. The disparity is comparable
amongst the uninsured (34 percent of uninsured women as compared to 29
percent of uninsured men).
Comprehensive health-care reform is critical to women's physical and
financial health. By simultaneously addressing coverage issues and health
care costs, Congress will be tackling two problems that weigh heavily on
women and their families - lack of access to affordable coverage and
skyrocketing medical costs for those who do have insurance. Specifically:
85
*
*
*
*
*
*
*
A ban on gender rating will put an end toward discriminatory
practices that charge women substantially more than similarlysituated men for the same health benefits policies. America's
health insurers support this reform, recognizing that gender rating
is unfair to our nation's mothers and daughters.4 3
A ban on denial of coverage based on pre-existing conditions
("guaranteed issue") will ensure that individuals are not denied
insurance coverage because of a medical condition. For millions
of breast cancer survivors and others with diseases specific to
women, guaranteed issue will make insurance coverage accessible
and affordable,
Inclusive health insurance "exchanges" will expand access to
health insurance coverage for the millions of women who arc not
offered employer-based coverage or for those whom employerbased offerings are not adequate or affordable, especially those
who work part-time and arc thus ineligible for benefits and for
women who lose their coverage when an older spouse becomes
eligible for Medicare.
By requiring well-visits and preventative medicine with no costsharing as part of any policy offered by an insurer participating in
the health insurance exchange. health care reform will expand
access to necessary and cost-effective preventative screenings and
treatments for all women.
Caps on out-vo-pocket spending for any policy offered through the
health insurance exchange will insure that a medical crisis no
longer comes with the risk of a family financial crisis, Prohibiting
insurers from nullifying previously-offered coverage after costs
have been incurred (no "rescissions') will give families peace of
mind in knowing that their health insurance policies must cover
what they promise to cover; the rules of the game can no longer be
changed mid-way through the process. For the millions of women
diagnosed requiring medical attention each year, this security is
key.
The goal of health care reform is to provide affordable health
insurance to all Americans, whether or not they have access to
employer-provided health insurance benefits. A public option may
be one of the cheapest ways to ensure that all Americans have
access to an affordable, quality insurance plan that meets certain
standards.
Public subsidies to help middle-income families pay for health
insurance coverage will be a boon for women, whose earnings are
typically lower than men's.44 Medicaid expansions will
disproportionately benefit women, who are more likely than men
to be poor. 4 5
The proposals under discussion would allow the millions of American women
who are satisfied with their health care coverage and their medical care to
86
maintain the status quo. But it would provide an important and urgent set of
solutions for the 64 million women without adequate health insurance. The
time has come for comprehensive health care reform.
Endnotes
'Rustgi, Sheila et al. 2009. Women at Risk: Why Many Women Are Foregoing Needed
Health Care. Washington, D.C.: The Commonwealth Fund.
(httip://www.commonwealthfunid.org/-/media/Files/Publications/l ssuepercent20Brief/2
009/Mav/Womenpercent20atpercent20Risk/PDF 1262 Rustgi women at risk issue
brief Final.pdf)
2
Himmelstein, David et al. 2009. "Medical Bankruptcy in the United States, 2007:
Results of a National Study." The American Journal of Medicine. 122(8)(August
2009). (http://pnhp.org/new bankruptcy study/Bankruptcy-2009. df)
3
Wood, Susan et al. 2009. Women's Health and Health Care Reform: The Economic
Burden of Disease in Women. Washington, D.C.: The Jacobs Institute of Women's
Health at the George Washington University School of Public Health and Health
Services.
4
The most recent data available are for August 2009.
5
Had the 11 1 th Congress not expanded the State Children's Health Insurance Program
(S-CHIP) eligibility this winter, the number of children losing health coverage likely
would be even greater.
6
The most recent data available are for September 2009. See also the Joint Economic
Committee's May 2009 report on working mothers in the recession, Women in the
Recession: Working Mothers FaceHigh Rates of Unemployment.
(http://jec.senate.gov)
7
Schumacher, Jessica R., et al. 2009. "Insurance Disruption Due to Spousal Medicare
Transitions: Implications for Access to Care and Health Utilization for Women
Approaching Age 65." HealthServices Research 44(3)(June).
(http://www.hsr.org/hsr/abstract.isp?aid=44347877138)
8Bureau of Labor Statistics Household Survey. Data are for women ages 16-24, with
the most recent data available are for September 2009.
9
Rustgi, Sheila et al. 2009.
'0 Himmelstein, David et al. 2009.
'Chavkin, Wendy and Sara Rosenbaum. 2008. "Women's Health and Health Care
Reform: The Key Role of Comprehensive Reproductive Health Care." New York, New
York: Columbia University Mailman School of Public Health.
(http://www.iiwh.orn/attachments/Women percent20and percent20Health
percent20Care percent20Reform.pdf)
87
2
Patchias, E. and Waxman J. 2007. Women and Health Coverage. The Affordability
Gap. Washington, D.C.: The Commonwealth Fund and the National Women's Law
Center.
(http://www.nwlc.org/pdfiNWLCComnimonwealthHealthlnsurancelssueBrief2007.pdf)
' 3Institutc for Women's Policy Research. 2009. The Gender Wage Gap: 2008.
Washington,
D.C.:
Institute
for
Women's
Policy
Research.
(http://w vw.iwpr orglodf/C350.tdf). Cawthome, Alexandra. 2008. "The Straight Facts
on Womcn in Poverty." Washington, D.C.: Center for American Progress.
(http:I/wwvw.amencariproeress.ore/issues/2008/ 10/wonien poverty. htmifl)
14 U.S. Census Current Population Survey. 2009. Americais Families and Living
Arrangements: 2008. See Table F(i5.
(h-ttp:!/www.censusg.v/popuilation/www/soedemo/hh-fam /cps2008.html). Sec also thc
Kaiser Family Foundation's 2004 Women's Health Survey.
(http://www. kff.org womensheaith/upioad/2004-Kaiser-Women-s-Hcaith-SuirvevPresentation.pd_)
'5 Wood, Susan ct al. 2009.
16 joint Economic Committee calculations from Bureau of Labor Statistics Household
Survcy. The most recent data available are for September 2009.
The most recent data available are for August 2009.
' Joint Economic Committee calculations from Bureau of Labor Statistics Household
Survey. Thc most rcccnt data available arc for Scptcmbcr 2009.
'9The Joint Economic Committee's calculations incorporate the number of jobs lost by
men and women, the probability that a given individual had an employer-sponsored
plan (either as a policy-holder or as a dependent), as well as industry-specific weights
to account for the distribution of job losses and health insurance across industries. We
compute job-loss related health insurance losses separately for each gender. Data for
industry-specific health insurance coverage status by gender comes from the March
2008 Supplcmcnt to the Currcnt Population Survey (CPS), which is thc most rcccntly
available detailed data on health insurance coverage. Data on job loss comes from the
Bureau of Labor Statistics' Establishment Survey, from December 2007 through
August 2009 representing the most current available detailed data. Data for industryspecific marriage rates by gender are from the June 2009 CPS, the most recent data
available. A complete methodological appendix is available from the Joint Economic
Committee upon request.
one recent nationally-representative survey, amongst employers who reported
taking steps to reduce costs in the last 12 months, 29 percent reported reducing health
care benefits or increasing employee costs as a in the last 12 months. See Galinsky,
Ellen and James. T. Bond. 2009. The Impact of the Recession on Employers."
Washington, D).C.: Families and Work Institute.
20In
21
Schumacher. Jessica R., et al. 2009.
22
National Women's Law Center. 2008. Nowhere to Turn: How the Individual Health
Insurance AMarket hails Women. Washington, D.(C.: National Women's Law Center.
(http:f/action. nwk orglsite/PageNavioator/nowheretoturn Ren). See the final
section on recommended policy prescriptions for a widely-agreed upon fix to the
88
problem of discriminatory gender rating practices.
23
Joint Economic Committee calculations using data from the U.S. Census Bureau
2009 ASEC Supplement, Table H108. Health Insurance Coverage Status and Type of
Coverage by Selected Characteristics for Children Under 18: 2008.
(http://www.census.gov/hhes/www/cpstables/032009/health/hO8 000.htm)
24
Joint Economic Committee calculations from Bureau of Labor Statistics Household
Survey, current as of September 2009.See the Joint Economic Committee's May 2009
report on working mothers in the recession, Women in the Recession: Working Mothers
Face High Rates of Unemployment. (http://iec.senate.gov)
25
The Joint Economic Committee's calculations incorporate the change in the number
of employed female heads-of-household, the number of children impacted by that
change, and the probability that those children received health insurance through a
mother's employer. Because data on the number of employed female heads-ofhousehold from Bureau of Labor Statistics Household Survey are not seasonallyadjusted, the Joint Economic Committee uses the annual change in the number of
employed female heads-of-household from September 2008 to September 2009, rather
than the change over the course of the recession. Had the I lI Congress not expanded
the State Children's Health Insurance Program (S-CHIP) eligibility this winter, the
number of children losing health coverage likely would be even greater.
26
FamiliesUSA. 2009. UnderstandingCOBRA and Mini-COBRA Premium Assistance.
Washington,
D.C.
FamiliesUSA.
(http://wwxv.familiesusa.org/issues/privateinsurance/understanding-cobra-premium.html)
27
Bureau of Labor Statistics Household Survey. Data are for women ages 16-24, with
the most recent data available are for September 2009.
2
8Collins, Sara R. April 23, 2009. Young and Vulnerable: The Growing Problem of
Uninsured Young Adults and How Policies Can Help. Washington, D.C.:
Commonwealth Fund.
(http://www.commonwealthfund.org/-/inedia/Files/Publications/Testimony/2009/Apr/
Testimony
percent2OYoungpercent20andpercent20Vulnerable/ 1264 Collins New York Ciy cou
ncil hearing voung adults 04232009 testimony.pdf); National Conference on State
Legislatures, 2008. Covering Young Adults Through Their Parents' or Guardians'
Health Policy.
(http://www.ncsl .org/issuesresearch/health/healthinsurancedependentstatus/tabid/ 1449
7/default.aspx).
29
Under federal rules, state Medicaid programs must cover pregnant women and
children under age 6 whose family incomes are below 133 percent of the federal
poverty line and children age 6 to 18 whose family incomes are below 100 percent of
the federal poverty line. Beyond that, the federal government allows states to set their
own eligibility guidelines. In some states, such as Louisiana, out-of-work families
qualify for Medicaid only if their incomes are at least 11 percent below the federal
poverty line ($2,426 for a family of four). Unemployment benefits are counted as
income, which means that many unemployed families find themselves without health
insurance, but with too much income to qualify for Medicaid. See Galewitz, Phil.
"Medicaid: True or False?" KaiserHealth News, July 1, 2009.
30
Numerous states have already enacted limits to Medicaid eligibility, and several more
89
are considering proposed cuts. See, for example: Kelley, Debbie. "Advocates say
Medicaid cuts will hurt developmentally disabled." Denver Post, July 1, 2009.
(htrpn/vww.denverpost.eomlbreakingnen
s/ei 12733118); California Budget Project.
June 1, 2009. More Than 1.9 Million Californians Could Lose Access to Health
Coverage Under the Governor's May Revision. Sacramento, CA: California Budget
Project.
(http://www.cbp.ora/documents/090521 Health Cuts Statewide Fact Sheet.di)
3'Note that the definition of "low-income" varies somewhat here because the data is
from a separate survey. Income groups are defined according to absolute dollar values
rather than in terms of the federal poverty line. For instance, low-incomc is defined as
under $20,000 rather than 100 percent of the federal poverty line.
32Difficulty obtaining needed care is defined as reporting any one of the following four
problems: I) did not fill a needed prescription 2) did not see a needed specialist 3)
skipped a recommended medical test, treatment, or follow-up 4) had a medical problem
but did not visit a doctor or clinic.
"'U.S. Census Bureau . Income, Poverty, and Health Insurance Coverage in the United
States: 2008. (http:/Avww.census.gov/prodi2009pubs/p60-236.2df)
34U.S. Census Current Population Survey. 2009. America s Families and Living
Arrangements: 2008. See Table FG5.
(http:/iwso'scenstis.gov/population/www/soedemo, hh-fam/cps2008.htmi)
35
For a literature review on the health benefits- of prevention, see Partnership for
Prevention. 2007. Preventative Care: A National Profile on Use, Disparities, and
Health Benefits. Washington, D.C.: Partnership for Prevention.
(tittp://wwwv.prevent.ort/iniages/stories/2007/ncpp/ncpp percent20preventive
percentr0carc percent20report.pdf). For a review of the economic arguments for
prevention, see Woolf, Steven H. 2009. "A Closer Look at the Economic Arguments
fbr Prevention." Journalof the American Medical Association 301(2009):536-538.
(http:!/iama.ama-assn.org/cgi/conten/fuil/301/5/536) (subscription required).
See (http:f//Xsww.rwif.oze /pr/product.ispid=384 10) for a free abstract.
36
The Kaiser Family Foundation. 2004 Kaiser Women 's Health Survey.
37
Note that some studies have found significant racial differences in the timing of
mammograms. For instance, a recent study found that 18 percent of white women with
breast cancer were inadequately screened with mammography prior to breast cancer, as
compared to 34 percent of African-American women with breast cancer. See SmithBindman, Rebecca. 2006. "Does utilization of screening mammography explain the
racial and ethnic differences in breast cancer?' Annals of Internal Medicine 144(8):
614-6.
(http:///www.ncbi.nlm.nih.gov/pubmed/ 16618951 ?ordinals= i&itool=EntrezSystem2.
PEntrez. Pubmed. Pubmed ResultsPanel. Pubmed DiscoveryPanel. Pubmed RVAbstrac
tPlus)- Chan, Nancy. April 17, 200(6. "Mammography screenings for breast cancer
show racial and ethnic disparities." UCSF News Office.
(http://news.ucsf.edu/releases/mammographv-screenines-for-breast-cancer-show-
racial-and-ethnic-disparitiesf).
38Chavkin and Rosenbaum. 2008.
90
39
Alan Guttmacher Institute. 2002. Sexual and Reproductive Health: Women andMen.
(http://www.tuttmacher.org/pubs/fb I0-02.pdf)
40
Culwell, Kelly R. and Joe Feinglass. 2007. "The Association of Health Insurance
with Use of Prescription Contraceptives." Perspectives on Sexual and Reproductive
Health 39(4): 224-230. For data on the efficacy of prescription versus over-the-counter
birth control methodologies, see the Mayo Clinic's Birth Control Guide
(httD://wzww.nlm.nih.gov/medlinepluslbirthcontrol.html).
41
McCormick, Marie C. and Joanna E. Seigel. 1999. Prenatal Care: Effectiveness and
Implementation. New York, NY: Cambridge University Press; Butz, Arlene M. et al.
1993. "Infant Health Care Utilization Predicted by Pattern of Prenatal Care."
Pediatrics. 92(1): 50-54; Conway, Karen Smith and Andrea Kutinova. 2006. "Maternal
Health: Does Prenatal Care Make a Difference?" Health Economics 15(5): 461-488;
Centers for Disease Control and Prevention Health Resources and Services
Administration. Healthy People 2010, esp. Chapter 16, "Maternal, Infant, and Child
Health."
(http:f/www.healthypeople.gov/document/HTMLlVolume2/1 6MICH.htm# Toc49469
9663).
42
Chavkin and Rosenbaum. 2008.
43
The health insurance industry's trade group, AHIP, has repeatedly stated its support
for a ban on discriminatory rating practices, including gender rating. See, for example,
Edney, Anna. 2009. "AHIP Pleads Its Case: Regulate Us." National Journal. May 6,
2009.
(http://undertheinfluence.nationalioumal.com/2009/05/ahip-pleads-its-caseregulate.php). The insurance industry recognizes that discriminatory rating practices
drive down coverage rates, as shown in multiple empirical studies. See, for example,
Wachenstein, Leigh and Hans Leida. 2007. "The Impact of Guaranteed Issue ad
Community Rating Reforms on Individual Insurance Markets." Seattle, WA: Milliman,
Inc. (http://vwxv.ahip.org/content/default.aspx?docid=20736). Note that the ban on
gender rating practices is often referred to as part of the "guaranteed issue" policy,
which would prohibit insurers from denying coverage based on pre-existing conditions,
race, gender, or other basic characteristics.
"Institute for Women's Policy Research. 2009.
45
Cawthorne, Alexandra. 2008.
91
INCOME, POVERTY, AND HEALTH INSURANCE
COVERAGE IN AMERICAN: 2008
Joint Economic Committee Fact Sheets
September 11, 2009
HOUSEHOLD INCOME IALLS IN 2008, DROPPING
BELOW 1998 LEVEL
American families are experiencing very difficult economic times - the
toughest since World War II. During the Bush administration, a weak
recovery, compounded by a devastating economic downturn, pushed the
typical household's income down to the lowest level in a decade. Real median
household income fell by $2,197 (in 2008 dollars) from 2000 to 2008, a 4.2
percent decline. Median income in 2008 ($50,303 in 2008 dollars) declined to
a level not experienced by households since 1997. Between 2000 and 2008,
the poorest households' income declined by 8.1 percent while the richest
households' incomes declined by only 1.2 percent. The data confirm that the
vast majority of Americans were made substantially worse off over the 20002008 period. The new direction of policies being pursued by Congress and the
Obama administration will work to counter these trends and improve the wellbeing of families across the country.
National:
Household income drops below 1998 level. Modest gains in household
income were wiped out by a drop in 2008. Real (inflation-adjusted) median
household income fell $1,860 between 2007 and 2008 to $50,303 (in 2008
dollars). While median household income rose during the three-year period
between 2005 and 2007, those increases were more than offset by the 3.6
percent decline in 2008. Real median household income fell by $2,197 (in
2008 dollars) from 2000 to 2008, a 4.2 percent decline. By contrast, during the
Clinton Administration (1992-2000), median household income rose by
$6,437 (in 2008 dollars) or 14.0 percent (Chart 1).
92
Chart 1. Household Income Has Slipped Since 2000, Following Strong Growth During
the 1990's
Changein RealMedican Household Income
19.0% I
14.0%
i
14.0%
S
.
9.0%
5
.0 4.0%
I
U
-1.0%
-4.2%
-6.0%
2000-2008
1992-2000
Souve: Joint Economic Committee calculations based on date firomthe Boeau of the Census, U.S. Department
of Commere.
Households across the board faced declines in income. While income for
the richest house-holds' (90th percentile) declined by only 1.2 percent during
the 2000-2008 period, other households experienced even larger declines
(Chart 2). Over the 2000-2008 period, income for the typical house-hold (50th
percentile) fell by 4.2 percent, and income for the poorest households (10th
percentile) declined by 8.1 percent. The data confirm that the vast majority of
Americans were made substantially worse off during the past eight years.
Chart 2. Household Income Down for Across the Board Since 2000
Change in real average household income by income group, 2000-20008
10thpenrentile
20th petentile
50th pen entile
50th pementile
9oth perentile
95th pen entile
0.0%
LI
-1.0%
-1.2%
-2.0% r
-0.9%
-1.9%
-3.0% I
-4.0% t
-4.2%
-5.0%
r
-6.0% F
I
IY
:.,
-7.0% P
-7.6%
-8.0% F
-8.1%
-9.01%L
Sore- Joint Econonic Coonittee-cklatiomn based on date from the Buorau of the Cens, U.S. DeptmentofCoo
ce
93
Minorities experienced the largest drops in household income
during the Bush presidency. Real median household income declined
by 7.4 percent for African Americans, and 8.6 percent for Hispanics
between 2000 and 2008 (Chart 3). African Americans and Hispanics
faced income declines more than three times as large as the declines for
non-Hispanic whites, which fell by 2.7 percent.
Chart 3. Household Income Has Declined the Most for African Americans and
Hispanics since 2000
Change in real median household incomeby race and Hispanicorgin 2000-2008'
Oseenl
-20%;
-30%.
Vtenione
hano, hipanic
'¢I
-
BlackA 0 C
,,
,
'
Hispanic
'
-2.7%
-4.2%
-6.0%
-8.0%
.9o.
-7.4%
-8.6%
Snmre: Joint Econonic Conrittee caicnlatx- based on date from the Bume=n
of the CoS.A. U.S. Dep=a.e.t of Cooozeree
Whal~e
dett.otes9What. nonHispm.c. Afacan Amienran
denoteshboe;denuffPing
themoolses as Atmna.
American
Alone,
or in
con-hota; with another act (A I O.C )
Women continuc to earn less than men. Real median earnings of both men
and women working full-time, year round, fell between 2007 and 2008. While
the gender wage gap did not widen in 2008, women's earnings fell by a larger
percentage. Men's earnings fell by 1.0 percent, while earnings of women fell
1.9 percent. In 2008, real median earnings of women were $35,745, just 77
percent of their male counterparts.
States:
Following Census guidance on how to utilize and compare state-level data,
this re-port compares the two-year average for 1999-2000 (the last years of the
Clinton Ad-ministration), with the two-year average for 2007-2008 (the last
years of the Bush administration), in order to gauge trends in household
income during President Bush's two terms. Over that period:
Household income dropped in 15 states between 2000 and 2008. Real
median household in-come fell significantly in the 2007-2008 period relative
to the 1999-2000 period (Table 1). In nine of these states (Delaware, Illinois,
Michigan, Mississippi, Minnesota, Missouri, North Carolina, Tennessee, and
94
Wisconsin), the drop in income exceeded 8 percent. Households living in
Missouri experienced the greatest declines (14.6 percent). In only eight states
(Arkansas, Montana, New Hampshire, North Dakota, Oklahoma, South
Dakota, West Virginia, and Wyoming) and the District of Columbia did the
typical household see a statistically significant rise in real income in the 20072008 period relative to the 1999-2000 period.
Nearly two-thirds of the Midwest states 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: eight of the 17 states in the region
experienced a significant percentage decline in income.
95
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RECORD NUMBER LIVING IN PO VER TY IN 2008,
8.2 MILLIONADDED TO POVERTY ROLLS UNDER THE BUSH
ADMINISTRATION, INCLUDING 2.5 MILLION CHILDREN
American families are experiencing very difficult economic times - the
toughest in terms of stagnant incomes since World War II. Over the 20002008 period, the economic policies pursued during the previous administration
left most families behind and ill-prepared to weather the severity of the
current recession. During the Bush administration, the number of Americans
living in poverty in-creased by 8.2 million; and instead of growing, incomes
for families in the bottom 40 percent of the income distribution ladder actually
fell. One out of every eight Americans was living below the federal poverty
line in 2008. Household incomes were lower in 2008 than at the end of the
1990s and income inequality rose sharply over the period. The new direction
of policies being pursued by Congress and the Obama administration will
work to counter these trends and improve the well-being of families across the
country.
National:
The number of Americans living in poverty increased by 8.2 million from
2000 to 2008. The number of Americans living in poverty was 39.8 million in
2008. The official poverty line for a couple with two children is $21,834.
The national poverty rate was almost two percentage points higher in
2008 than in 2000. The poverty rate in 2008 was 13.2 percent, increasing
significantly from its level of 12.5 percent in 2007. The poverty rate increased
for four straight years from 2001 to 2004, and again in 2007 and 2008. In
2008, the poverty rate was 1.9 percentage points higher than it was in 2000
(See Chart).
97
Poverty Has Reen Increasing Since 2000
Numberin Poverty and Povert Rate
6
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(oitht ce)
14
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Sour: BUau ofthe Cer,.ss, U.S. Depqn-ntn of C.m.y.e
2008
Almost one in five children lived in poverty last year. The poverty
rate for all children under 18 years of age was 19.0 percent in 2008,
increasing from its level of 18.0 percent in 2007. In 2008,
approximately 750,000 more children under 18 lived in poverty than in
2007. Since 2000, the number of children living in poverty has
increased by 2.5 million, with the child poverty rate rising from 16.2 to
19.0 percent.
The poverty rate for African Americans and Hispanics increased
significantly between 2000 - 2008. In 2008, the poverty rate was 24.6
percent for African Americans and 23.2 percent for Hispanics. The
recent increase in the poverty rate among Hispanics is significant.
Since 2000, the poverty rate among African Americans also increased
significantly, rising by over 2 percentage points (See Chart). The
poverty rates among African American and Hispanic children were
even higher, at 33.9 percent and 30.6 percent, respectively.
98
Poverty Rates Are Highest Among Minorities
Poverty Rates by Race and Hispanic Origin, 2000 and 2008
30
24.6
25
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22.5
21.5
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15
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2000
2008
1
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Whte, Non-Hispanic
Source: Bueau ofthe Census,U.S. Departnoentof Corunoen
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BI
Hispanic
t.
Federal spending cuts from 2000-2008 hurt families: Poverty has increased
not only because of the relatively weak labor market, but also because income
support programs like Temporary Assistance for Needy Families (TANF) are
helping fewer individuals. While the number of children living in poverty has
increased by nearly 3 percentage points since 2000, the number of children
receiving TANF has moved in the opposite direction. TANF served 240,000
fewer children in 2008 compared to just two years earlier. By way of
comparison, reports of mass layoffs among adult employees rose by 779,412
between 2006 and 2008.
States:
The number of people in poverty rose by 23 percent or more in the
Midwest and the South between 1999-2000 and 2007-2008. The number of
poor people in the Midwest region of the country increased by 26 percent
while its total population increased by only 3 percent since 2000. In the South,
poverty levels increased by 23 percent, or 3 million people. No region
escaped, with the number in poverty rising by 10 percent in the Northeast and
almost 16 percent in the West.
Twelve states saw significant increases in the poverty rate in the last 8
years. In four of these states, the poverty rate increased by at least 4
percentage points between 1999-2000 and 2007-2008. No state experienced a
significant decline in its poverty rate. The rate in the remaining 38 states plus
the District of Columbia was essentially unchanged.
99
The number of poor people increased significantly in 23 states and the
District of Columbia. Twenty-three states and the District of Columbia
experienced significant increases in the number of poor people between 19992000 and 2007-2008 (See Table). In sixteen of these states, the increase was at
least 25 percent.
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100
UNINSURANCE NEARS RECORD HIGH, NUMBER OF
UNINSURED AMERICANS INCREASED B Y NEARL Y
8 MILLION DURING THE BUSH ADMINISTRATION
American families are experiencing a health insurance coverage crisis. 46.3
million Americans were without health insurance coverage in 2008. The
recession that began in December 2007 has exacerbated the trend to-ward
erosion of coverage. During the eight years of the Bush administration, the
ranks of the uninsured grew by 20.6 percent. The cost of health insurance has
risen steadily, putting pressure on employers and straining cash-strapped
American families. Millions of employers no longer offer health insurance
coverage to employees because of the prohibitive cost of coverage. Congress
and the Obama administration are currently pursuing comprehensive health
insurance reform legislation that will counter these trends, providing the
opportunity for affordable, high-quality, and comprehensive health insurance
coverage for all Americans.
National:
Between 2000 and 2008, the ranks of the uninsured grew by 7.9 million.
This represents a 20.6 percent increase in the number of uninsured between
2000 and 2008 (Chart 1). The number of uninsured increased by 683,000
between 2007 and 2008.
101
50 f
Chart 1. Number Uninsured In 2000 versus Number of Uninsured in 2008
46.3
40
2
30
25
2000)
So=: 8rc.u oft hc Ccks. U S. Dcpanmcot of Co=rc.
2008
Nearly one-in-ten children are growing up without health insurance.
Nearly ten percent of all children 7.4 million children - did not have health
insurance in 2008. This represents a decline of over one million since 2000.
This decline is due entirely to expansions in the public State Children's Health
Insurance Program (S-CHIP). Enrollment in S-CHIP has increased by 7.5
million since 2000, while private health insurance coverage of children
dropped by 3.5 million over the same period. S-CHIP played an important role
in cushioning children from the impact of the first year of the Bush recession,
with an additional 1.7 million children obtaining coverage through the
program between 2007 and 2008.
Minorities are more likely than whites to he without health insurance.
The percentage of Hispanic and African Americans without health insurance
was particularly high relative to whites and other ethnic groups. Nearly onethird of Hispanics and one-fifth of African Americans were uninsured in 2008.
The Ilispanic uninsured rate fell to 30.7 in 2008 from 32.1 percent in 2007,
and the African American uninsured rate fell to 18.9 in 2008 from 19.2
percent in 2007. Expansions in public coverage, including Medicaid. S-CHIP,
Medicare, and military health care explain the decline in uninsured minorities
over the last year.
Declines in private coverage continue. The percentage of Americans
now covered by private and employer-sponsored insurance dropped
again in 2008 (Chart 2). Private coverage declined for eight
consecutive years under the Bush administration. Only 66.7 percent of
Americans drew on private sources for their health insurance in 2008.
This is down from 72.6 percent in 2000. The majority of this shift is
102
due to declines in employer-provided insurance, which now covers less
than 59 percent of the population.
Without expansion in government health insurance coverage, the
uninsured population would have grown even faster. The number of
Americans covered by public health insurance grew to 29 percent of the
population in 2008, providing some counter-pressure against the declines in
private health insurance coverage. The number of Americans receiving
coverage from public sources increased by 18.4 million between 2000 and
2008, even as private coverage has dropped. The majority of coverage growth
is due to expansions in the S-CHIP and Medicaid programs.
Steep increases in private insurance premiums have played a critical role
in declining employer-sponsored coverage. Insurance premiums charged to
employers have increased between 90 and 97 percent since 2000, nearly four
times the rate of overall inflation. Many employers have dropped insurance
coverage due to the rising cost of providing coverage to their employees, a
trend that accelerated as the recession gathered steam in 2008. In 2008, the
average worker contribution for employer-provided family coverage grew to
$280 per month, more than double the average contribution of $135 per month
in 2000.
Chart 2. Percent of Population with Private Health Insurance, 2000 through 2008
80 I
75
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70
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693
69.0
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-
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2007
-
2008
Soous: Bureou of the Census, U.S. Deparnt of Comeoc.
More than one-sixth (17.2 percent) of all of the uninsured work full-time.
The ranks of the uninsured in 2008 included 27.8 million Americans who had
worked at some time during the year; among those were 20.9 million people
who worked full-time (35 hours or more per week in the majority of weeks
they worked in 2008). Another 6.9 million Americans who were without
health insurance worked part-time.
103
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 2007-2008 (the last
years of the Bush administration), in order to gauge health insurance coverage
trends during President Bush's two terms. Over that period:
Almost two-thirds of all states saw the number of uninsured increase.
Between 1999-2000 and 2007-2008, 32 states experienced a statistically
significant increase in the number of uninsured individuals, and 24 states
showed a statistically significant increase in the percentage uninsured. Texas
was the state with the largest increase in the number of uninsured (1.5
million). Missouri and Tennessee experienced the largest increases in the
percentage of pcople uninsured (4.8 percent, each). The other states with an
in-crease of 3 percentage points or more were Arkansas, Georgia, Mississippi,
Nebraska, New Jersey, Oregon, and Rhode Island.
Few states saw increases in health insurance coverage. Only 3 states
(Hawaii, Massachusetts, and New York) and the District of Columbia
experienced a statistically significant reduction in both the number and
percentage of uninsured.
104
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105
MINORITY VIEWS OF SENATOR SAM BROWNBACK
REVIEW AND OUTLOOK
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. Since the beginning of the
recession, total non-farm payroll employment has declined by 7.2
million over a record 23 consecutive months. Private sector payroll
employment has declined by 7.3 million during the same period. The
number of individuals classified as unemployed has more than doubled
from 7.5 million to 15.4 million. The unemployment rate breached the
10% level in October 2009 reaching 10.2% - the highest level since
April 1983 - before declining slightly to 10.0% in November.
Payroll Employment Since 2000
(Change inemployment, in thousands)
*__-
-
. -l--Ll-----h--------------
-------2000
2001
2002
2003
Source: srweau of tabor Statistics
2004
-
_7 ------0
- 2005
-
2006
- - 2007
(Numgberof idiuallsuneunpk~ed in th6uan2s
-
_i*_
------
_
miii illiiiijimnldi
1
ar lMO
Sam-Breau
o
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uist
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-200
2008
UnuempoWient Since 2000
(Numbs
nd~~~une-mp--e---~-----of
-uais
------*
4
g W _
600
----
2009
106
While economic growth, as measured by inflation-adjusted Gross
Domestic Product (real GDP) turned positive in the 3rd-quarter of 2009
following four consecutive quarters of decline, significant risks to the
economy remain.
Economic Growth Since 2000
(Inflation-adjusted annualized GDP growth)
---------------
-------------------
8%
6%
---------------------------- - ---------- - ------ --------------------------------------------
--.:;-i
h-hfl
--,,-t
-I----l ----------, ----------------f
4%
2%
0%
1
- -- _---- - - - - - - - - - - - - -_
-- ---
|
-It--i
- - - - - - - - - - - - - - - - -
- - -- - - - - -- - - - - - - - -- - - - - - - - - -_--
- - -:
---- - - - - - - - - - - - - - - -- -.------
- - - -
- - - - - - - - - -- -
Blue Chip
Forecast
-2%
- - - - - - -
-4%
- - - - - - - -
-6%
- - - - - - - -
-8%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Bureau of Economic Analysis; Blue Chip Economic Indicators 12/10/2009
Labor markets, while showing some signs of thawing, remain soft. As
measured by the Bureau of Labor Statistics' (BLS) Job Openings and
Labor Turnover Survey (JOLTS), both job openings and hires remain
near record low levels. Layoffs and discharges have declined after
peaking in January, but remain at historically high levels. This is
despite the fact that overall job separations are at historically low
levels. The bottom line is that job creation is largely stalled.
Unfortunately, the Administration and Congress share a significant
portion of the blame for the fact that job creation has not recovered.
Record debt levels, runaway federal spending, the prospect of new and
higher taxes, uncertainty surrounding future health care obligations, as
well as environmental legislation that will impose significant costs on
individuals and businesses create an economic environment clouded
with greater uncertainty and potential risks.
It is understandable why businesses are reluctant to engage in new
investments or to recall older workers or hire new workers. It is
107
understandable why individuals - entrepreneurs - are hesitant to step
forward to start or invest in new businesses.
THE NATIONAL DEBT AND FEDERAL SPENDING
The gross national debt surpassed the $12,000,000,000,000. mark in
November of this year. Even Administration forecasts project that the
national debt will approach or surpass 100% of Gross Domestic
Product by the end of the next decade. This past fiscal year, the federal
government ran a $1.4 trillion deficit, but this is only part of the story.
Over the same period, the gross national debt increase by $1.9 trillion $500 billion more than the unified budget deficit.
The nation faces unfunded liabilities in Social Security and Medicare
that exceed $50 trillion in present value terms.
No credible source would suggest that the nation is on firm financial
footing. Yet, the Congress and new Administration are insistent on
increasing the size and scope of the national government. Higher
taxes, new entitlement programs, and larger domestic spending are
taking the nation in exactly the wrong direction.
At a time when American households have been cleaning up their
personal balance sheets, the majority insists on pushing a social agenda
that will take the nation closer to the fiscal abyss.
In February, this Congress enacted a $787 billion "stimulus package"
accompanied by the claim that the action was necessary to prevent the
unemployment rate from rising above 8 percent. Much of the stimulus
was delivered in the torm of temporary tax reductions for most
Americans. In fact, much of those "tax reductions" were actually
transfer payments to individuals with no income tax liabilities. The
theory was that individuals, particularly low income individuals would
increase consumption and provide a boost to the economy.
Early evidence suggests that a majority of the tax code based stimulus
either saved or used to reduce debt. Recent research by the Federal
Reserve Board staff suggests that three quarters of the 2008 tax rebates
was saved or went to reduce debt. Current data suggests the same is
true for stimulus payments made this year.
Despite indicators that the $787 billion stimulus has done little to
stimulate jobs and the economy, the majority remains intent on trying
to rush through another stimulus package during the next session of
108
Congress. This push comes even though even though two-thirds of the
already appropriated stimulus is unspent.
HEALTH CARE REFORM
As this report is being filed, the majority in the United States Senate is
intent on rushing legislation through the Senate that would
significantly alter one-sixth of the nation's economy.
There is no question that the health care system faces significant
challenges, but a government driven program that spends $2.5 trillion
over the first ten years of full implementation is not the solution.
Legislation proposed by the majority will impose significant new
The legislation utilizes
burdens on individuals and businesses.
inflation to disguise the breadth of tax increases which will quickly
harm middle class families; the legislation will increase health care
spending and health care costs; and the legislation also relies on
reductions in Medicare spending which are unlikely to be fully realized
to off-set new spending.
Additionally, the legislation creates a number of disincentives that are
contrary to sound economic policy.
High Marginal Tax Rates Discourage Work
Both the House and Senate bills would further increase the penalty on
work faced by many low-income families who receive tax and in-kind
benefits from government welfare programs. The bills' health
insurance subsidies for individuals and families between 133% and
400% of the poverty line fall in value as income rises, which means
that an increase in earnings (through more hours of work or a payraise) results in a higher cost for health insurance. The subsidies would
tack on an additional 12% to 20% to marginal tax rates, which already
approach 40% to 50% for families receiving cash welfare (TANF),
supplemental food assistance (SNAP), and earned income tax credit
payments (EITC). Tacking on the additional marginal tax rates caused
by subsidies would result in marginal tax rates of 50- 60% for most
affected families.
Tax rates this high, particularly on families with very low incomes, not
only create considerable work disincentives, but they also impede the
ability of low-income families to improve their economic well-being. If
working more hours or obtaining a better paying job results in more
than half of those additional earnings being taken away as a result of
109
taxes and government welfare programs, the incentive to work harder
or to invest in an education is greatly reduced. When faced with
excessively high marginal tax rates, it is more likely that rational
individuals will choose not to take the measures necessary to increase
their income and economic well-being.
Maginal TaxRate with Subsidies
SO%
MargInat axARteWlffiLDw n
CombinedFederal, Ste and PICA Tax Rate
-.
2ft
-0%
S2l=
WeA=
$27,0OO
530.O
S23.0
SM."
$3900
Young Workers Discouraged from Working; Their Earnings
Reduce Family Health Subsidies
One provision of Senate Democrats' proposed health care bill would
target families with children-teenagers or college students-who
work and earn income. It is very common for teenagers and college
students to obtain jobs so that they can have some spending money of
their own or help with their educational expenses. Whereas the
measure of income used to determine the eligibility of a family for
various low-income benefits does not include the wages of teens and
college students, the Senate bill penalizes the families of these younger
workers by including their wages in benefit eligibility calculations. For
many low- to moderate-income families, the inclusion of a teen or
college student's wages could mean a significant increase in their cost
of health insurance, or could even result in them losing their health
insurance subsidy altogether.
110
For example, if a family of four earning 250% of the poverty level
($55,125) had a teen or college student who worked at a minimumwage job for 12 hours per week to help save for college, the family's
health insurance subsidy would be reduced by nearly $800. And for
any family earning at or close to 400% of the federal poverty level,
even minimal earnings from a teen or college student could push their
income over the edge for a health insurance subsidy and cause them to
lose thousands of dollars ($5,000 for a family of four) in insurance
subsidies. Rather than punish the families of young workers who take
on jobs, we should encourage these young workers to help contribute
to their expenses and to receive an education that will improve their
economic well-being.
__s
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Teen works
12 hours
par week, rSO
earning the
minimum
wage
Teen does
not work
57,500
Insurance Subsidy
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Disincentives for Marriage
Marriage has been shown to have tremendous individual and societal
benefits. Yet the Democrats' proposed health care legislation would
create new marriage penalties for both low- to moderate-income and
upper-income individuals and families. These penalties can be so large
in some cases that couples might forgo marriage in order to avoid
thousands of dollars in new taxes.
Ill
On the lower end of the income scale, the subsidies provided in the
bills to individuals and families to purchase health insurance contain
severe marriage penalties, and these penalties come on top of those
already present under today's tax code. A marriage penalty occurs
when married taxpayers filing jointly owe more in taxes than they
would if they were unmarried and filing singly. The subsidies in the
bills are calculated based on individuals' and families' incomes as a
percentage of poverty, but poverty levels increase only marginally for
each additional person in a household. Therefore, if two single
individuals who both earn. 150% of the poverty level were to get
married, they would have to pay an additional $830 toward their health
insurance. And for two single individuals both earning 250% of the
poverty level-one with two children and one without children-the
marriage penalty contained in the health insurance subsidies would
cause them to pay an additional $2,050 towards their health insurance.
* Health insurance Costs if Single
* Health Insurance Costs if Married
$
_
0
$6,000
I
[
$4,00oD
F$2,001D
L$0
Two individuals at 150% of Poverty
Saw~.
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Two indivkiuals at 2500% of Poverty
(one wifth kids, one with no kids)
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I
These marriage penalties are very significant for low- and moderateincome families who often live paycheck to paycheck. Given the
already significant marriage penalties in low-income benefit programs,
it seems ironic that the government would create yet another program
112
that penalizes low-income individuals for "doing the right thing," that
is, getting married.
Medicare Surtax Hits Marriage
The Medicare payroll tax is currently 2.9% on all earnings, counting
both the employer and employee share. Senate Democrats propose an
additional 0.5% surtax on earnings over $200,000 for singles and
$250,000 for married couples. In addition to creating a new marriage
penalty on low-income households (that is, individuals and families
earning up to 400% of the poverty level), the Democrats' Medicare
surtax would create a marriage penalty of as much as $750 for dual
income married couples.
U
U
Total Medicare Taxes if Single
Total Medicare Taxes if Married
v $14,000
F.$12,00i
_
p
0
~~~~~~$10,00
' $8,000
t $6,000
L $4,000
$2,000
_ $0
Two Individuals Earning $200,000 Each
Two Individuals Earning $150,00 and
$200,000
So-r.: JECR.prbli-o SwoffCokW.1ioeoBo..d o- th. Pof., Prot.,fonsod Afordobf. Core Ac (1.RP3S90,
Rid sbfim.)
Although this may be a small percentage of these affected couples'
incomes, it does not negate the principle that individuals should not be
required to pay more in taxes simply as a result of marriage. The
additional marriage penalty contained in the new Medicare payroll tax
adds insult to injury, since upper income married couples and
individuals who are contemplating marriage and who will be hit by this
new marriage penalty already face a whole host of marriage penalties
113
that flow from existing income tax brackets and a multitude of
provisions in the tax code that phase out and eliminate certain
deductions and credits for married couples with higher incomes.
Of course, the structure of the legislation also insures that an ever
increasing share of families and individuals will be subject to the tax.
By not indexing the thresholds for inflation, bracket creep will make
the new Medicare tax hit increasing numbers of taxpayers at lower
levels of income.
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Cadillac Plans Tax Will Hit Average Plans Too
The plan to tax high value insurance products uses a threshold that is
indexed for CPI-U plus one percent rather than the projected increase
in health insurance premiums of 6.1% projected by the Kaiser Family
Foundation. As the following chart shows, failure to adequately index
the high cost plans tax will mean that even plans like the "silver plan"
will become subject to the tax.
.
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24
115
Structure of Small Business Subsidies Discourage Job Creation
and Wage Growth
Both the House and Senate bills include temporary subsidies to small
businesses to encourage them to offer employer-sponsored health
insurance.
The credits are available to businesses with 10-25
employees and average employee salaries of $20,000-$40,000. The
maximum credit-- equal to 50% of the business's costs of providing
health insurance-is available to businesses with 10 employees and an
average salary of $20,000. As the number of employees increases, or
as salaries increase, the amount of the credit provided to the business
decreases.
Consider the example of a business with 10 employees and an average
salary of $20,000. If half the employees take single coverage and half
take family coverage, the average premium for the employees would
cost $9,100. Of this amount, the business would pay an average of
$6,884 and the employee would pay an average of $2,216.
The
business's total health care costs would be $68,838, for which the
business would receive a 50% tax credit worth $34,419. The credit
would bring the average cost per employee of providing health
insurance to $3,442,
If the business were to hire two additional workers, its tax credit would
be reduced to 43%, and its average after-tax cost of health insurance
per employee would rise by $482, from $3,442 to $3,924, for a total
increase in health insurance costs of $12,666. This means that hiring.
two new workers does not cost only $40,000 in wages. but rather
$52,666 in total compensation costs.
The small business subsidy not only discourages employers from
hiring new employees, but it also discourages them from increasing
employees' salaries. If a business with 10 employees and an average
salary of $20,000 were to increase the average salary by $1,500, its tax
credit would be reduced to 46%, resulting in a $275 increase in the
business' per employee health insurance cost and a total health
insurance cost increase of $2,754. In this case, increasing employees'
salaries by a total of $15.000 actually costs the employer $17,754.
116
Although the tax credit applies to a small number of businesses and is
only temporary, it discourages employers from creating new jobs and
from increasing employees' salaries. The temporary status of the
subsidies makes providing health insurance for the long-term uncertain
if not altogether unlikely. Because small businesses receiving the
credits would have an incentive to drop health insurance coverage once
the credit expires, there would likely be political pressure to retain the
tax credit at a substantial cost to taxpayers. Retaining the tax credit
would reduce costs for some small businesses, but would also maintain
the perverse incentive for small businesses to employ as few workers
as possible and to hold down their wages.
rIgs'.!hip1
[.IAm.I:IIu:1I
-
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EmnblvWAS
Increase Averagie
Wage to $21,500
_--
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10 Employees,
$20,000 Average Wage
3
4,0
$3,800
_
$3,600
$3,400
3,200
pro-id'ne heoitlt
bad
9.8% Cap on Employee Contributions Encourages Employers to
Eliminate Insurance Coverage
The Senate bill would cap employee contributions to insurance
premiums at 9.8% of their income. If an employer offered a policy that
required employees to pay more than this, the employee would be
eligible to purchase insurance through the exchange, and the employer
would have to pay a fine equal to the lesser of $3,000 per employee
117
who enters the exchange or $750 times their total number of
employees. If an employer currently contributes $5,000 (the cost of an
average single policy in 2009) towards each of his or her employees'
insurance premiums, an employee with median earnings of $45,000 per
year will pay $8,375 for a family health insurance policy with a total
cost of $13,375. This contribution, however, represents 19% of the
employee's income. To bring the employee contribution down to 9.8%
of their income, the employer will have to increase its contribution by
$3,965 to a total of $8,965. Clearly, the incentive here is for the
employer to drop its offer of employer sponsored health insurance
coverage and pay a $3,000 fine rather than $3,965 in additional health
insurance costs (by dropping coverage, the employer will also save the
$5,000 insurance contribution they previously made).
* Penalty for Not Providing Coverage
-a
-
i Health Insurance Senefits
U Wages
$-5,00
..-
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to
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Pniorto
Complywith
9.8% Mandate
Cease to Provide
Insurance Coverage
Health Reform
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For employers paying low- to moderate wages, there is a strong
incentive to eliminate insurance coverage altogether. If the employer
has 60 employees each with salaries of $45,000, and half of these
employees have family health insurance coverage, the 9.8% cap on
employee contributions would result in an additional cost of $1 18,950
to the employer. Rather than pay the additional insurance costs, the
employer could instead drop employee coverage and pay a $45.000
118
penalty (60 employees x $750 = $45,000). By ceasing to offer its
employees health insurance coverage, the employer saves a total of
$73,950 plus the $5,000 per employee ($300,000 total) that it
previously contributed towards health insurance. In return for the
savings from not offering coverage, the employer will presumably
increase the compensation of the employee by roughly $5,000
($300,000 total) and the employee will use the money to either pay the
$750 per adult penalty for not having insurance or to purchase
insurance in the exchange, but will lose the benefit of being able to pay
for insurance with tax-free dollars.
High Cost Plans Tax Discourages Employers from Offering FSAs
Under the Senate Democrats' bill, Flexible Spending Account (FSA)
contributions (as well as dental and vision plans) will be included in
the total cost of employees' health insurance benefits for the purpose of
calculating the high cost plans tax. This 40% tax on providers of high
cost health insurance plans will apply to plans above $8,500 for
While a
individuals and $23,000 for families, beginning in 2013.
particular health insurance plan, in and of itself, may not exceed the
threshold, adding on an FSA contribution and dental or vision benefits
could push the total cost of health benefits above the high cost
threshold.
For example, consider an individual plan that costs $8,000, and the
individual makes an FSA contribution of $2,500. The total cost of the
employee's health benefits is $10,500, which exceeds the $8,500
threshold by $2,000. Therefore, an $800 tax (40% of $2,000) is due.
But who pays the tax-the insurance company or the FSA sponsor
(i.e., the employer)? Because there are multiple health benefits, the tax
is distributed proportionally to the sponsors of the benefits. In this
case, the employer would be responsible for paying $192 (24%) of the
tax. If the employee were only allowed to contribute $500 to an FSA,
But if employers limit FSA
the employer could avoid this tax.
contributions, employees' taxable wages will rise and they will pay
higher payroll and income taxes. As more and more plans become
subject to the high cost plans tax (due to a lack of appropriate indexing
as well as costly new benefit mandates) it will be in employers' best
interest to eliminate FSA offerings altogether.
119
Current Health Care Reform Legislation Increases Risks and
Uncertainty for Employers
The health care legislation pending, and as yet unrevealed, in the
Senate will serve to add uncertainty to a fragile economic environment.
As potential costs to employers mount as a result of the legislation,
employers will become decidedly less likely to add workers or increase
cash wages. This is not the type of action that is needed in light of
what most economists project will be a very slow and prolonged
recovery, particularly in the labor market.
We have discussed only a few of the potentially negative economic
aspects of the pending health care legislation. Suffice it to say, there
are many more aspects of this legislation that will serve to damage the
economic and social fabric of our nation.
CONCLUSION
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. 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 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 baby-boomer
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.
120
We are concerned, however, with rhetoric from the other side of the
aisle suggesting that the continuing economic and financial difficulties
facing American families, the overall economy, and financial markets
are a welcome call for the majority to continue reckless, undisciplined,
and massive expenditures on special-interest projects.
We are concerned that some of our Democrat colleagues continue to
view the current situation as an invitation to abandon further all fiscal
discipline, open the spigots of big-government spending, and create
vast new government programs, such as the health care legislation
currently under consideration.
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 our Democratic colleagues will continue
their 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 prosper and hold on to the hard-earned incomes, wages,
dividends, and gains that ultimately flow from their hard work and
industry.
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.
Government should not stand in the middle of the roadway as an
obstacle to renewed growth in labor markets and the general economy.
Government is incapable of directing economies in an efficient and
effective manner. That is the role of the private sector. It is a role that
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only the private sector is capable of fulfilling for the benefit of all
Americans.
Our future prosperity depends upon us to rein in runaway spending and
to harness an out-of-control national debt. Smaller and less intrusive
government offers hopc for a new day of prosperity for the American
people. We must remove the cloud of a bloated and growing national
government policy that hangs over us and may pose the greatest
economic threat we have faced as a nation.
Senator Sam Brownback
Ranking Minority Member
@FedFRASER