Rep. Maloney Outlines Dems’ New Direction on Economy
QUEENS, NY – On Wednesday, Rep. Carolyn B. Maloney (D-Manhattan, Queens), the Senior House Democrat on the Joint Economic Committee, delivered a major address on the economy at LaGuardia Community College. Maloney’s address was part of the House Democrats’ national effort to highlight their New Direction agenda to restore economic security for hard-working Americans. Before a crowd of LaGuardia students, professors and staff, Maloney outlined the Democrats’ plan to ensure economic security, opportunity and prosperity for all.
“Bob Woodward’s new book, State of Denial, is about the President’s unwillingness to face the facts about Iraq, but there could easily be a second volume about the economy,” Maloney said. “When the President says his policies are working, he must not know that real median household income is almost $1,300 lower than it was when he took office, compared with a gain of more than $5,800 under President Clinton. He must not know that 5.4 million more people are living in poverty, 6.8 million fewer people have health insurance, and 3.7 million fewer Americans have retirement plans under his watch.”
The full text of Maloney’s remarks follows:
Thank you. Today I want to discuss our economic future, but to do that I need to start with where we are now and what has happened to the economy and to economic policy on President Bush's watch.
I'm sure most of you are aware of Bob Woodward's new book, State of Denial. That book is about the President's unwillingness to face the facts about Iraq, but there could easily be a second volume about the economy. President Bush said recently that he hopes the upcoming election will be decided on economic performance. Well, so do Democrats, because we have the facts on our side, and the reality of the economy most American families face is very different from the rosy situation that the President tries to portray.
The President says his policies are working to make the economy strong and that all Americans are benefiting, but the facts say otherwise. The last five and a half years have not been good ones for the middle class and working families. While the costs of energy, health care, and a college education have skyrocketed, the typical U.S. household has seen its income fall $1,300 after adjusting for increases in living costs.
Working-age families have seen an even larger decline. For five straight years from 2001 through 2005 the real income of the typical household headed by someone under the age of 65 fell, by a total of $3,000. When economists use the term "real income" they mean income adjusted for inflation, and that is the measure I am describing. If you aregetting paid a little bit more but you can't buy as much as you could before because prices are higher, your "real income" has gone down.
What is remarkable about those five straight years of declining real income for the typical household is that four of those years were years of economic expansion, when the economy was growing and we were producing more. It is unprecedented to have four straight years of declining real income for the typical working family during an economic expansion, but that is what happened. Yes the economy has been growing since the 2001 recession, but the benefits of that growth have not been showing up in most workers' paychecks or in most households' incomes.
President Bush is in a state of denial about these facts. He once joked at a fundraiser that the crowd consisted of the "haves" and the "have mores." If his contributors are the barometer of how the economy is doing, then it is no surprise that he thinks everything is fine. Incomes have been growing at the very top of the distribution, where bonuses and stock options are common and income from dividends and capital gains is more important than income from wages. But that growth at the top of the income distribution has not trickled down in any way to the typical American family.
The statistics I have been citing for the typical household are what statisticians call the median, or the half-way point. Half of all households have an income higher than the median and half have an income lower than the median. The benefits of economic growth have been going to people with very high incomes, but families in the middle are struggling, and it is even worse for working families struggling to get into the middle class.
For most families, what they earn from their jobs is far and away the most important source of income, and people are not seeing increases in their real earnings. Actually, it is even worse than that. When you look at official Labor Department data on the usual weekly earnings of full time wage and salary workers, you find that between the end of 2000 and the end of 2005, real median earnings fell almost 1 percent, and real earnings lower in the distribution fell even more. The only gains were in the upper parts of the earnings distribution. This widening inequality contrasts with the pattern during the last five years of the Clinton Administration, when earnings grew strongly for workers in all parts of the distribution, including a 7.3 percent increase after inflation for the typical full-time worker.
President Bush is in a state of denial about these facts. When he says his policies are working and all Americans are benefiting he must not know that real median household income is almost $1,300 lower than it was when he took office (compared with a gain of over $5,800 under President Clinton). He must not know that there are 5.4 million more people living in poverty and 6.8 million more people without health insurance than there were when he took office. He must not know that 3.7 million fewer Americans have retirement plans than when he took office. President Bush must not know that wages are lagging behind productivity growth— that American workers are working harder and producing more but their paychecks are not reflecting the fruits of their labor. He must not know that there is a growing gap between the "haves" and the "have-nots." He must not know that while bonuses and the exercise of stock options by highly compensated individuals are pulling up earnings at the top, ordinary working families are struggling to keep up with rising costs for energy, health care, and a college education for their kids.
A few weeks ago, House Democrats held a Forum on Economic Security and Wages. We heard from experts documenting the trends in wages and inequality and the squeeze on the middle class. But one of the most compelling witnesses was Rosemary Miller, a Northwest Airlines flight attendant and single mother of two. Rosemary put a human face on the statistics we were hearing from economists about the difficulties workers have been facing in the Bush economy.
She talked about how her salary was now lower than it was in mid-1990s, how her pension and health insurance coverage were threatened, and how she had to use money she had set aside for her kids college costs to meet daily expenses.
The policies of President Bush and the Congressional majority do not address the problems of Rosemary Miller and other families trying to maintain a middle class way of life and they certainly do not address the problems of working families trying to make it into the middle class.
I believe that the American Dream must be attainable for all families. Democrats have a plan for a new direction on the economy for America that will spur economic growth and create greater opportunity for all families, not just the privileged few.
Our New Direction for America will strive to alleviate the middle-class squeeze by creating an economic environment that produces better jobs with better pay, makes health care and college more affordable, guarantees a dignified retirement for our seniors, moves the nation toward energy independence, and restores fiscal responsibility.
Let's examine these goals, starting with better jobs and better pay. If you work hard and play by the rules, you should share in the growing economy. That's the American dream, right? Raising the minimum wage is vital because workers have been left out of the economic growth we have seen so far in this recovery. Strong productivity growth has translated into higher profits for businesses, not more take home pay for workers.
The minimum wage hasn't been raised in nine years, because the Republican-controlled Congress has blocked legislation offered by the Democrats that would help nearly 15 million working families struggling to make ends meet. Inflation has not only wiped out the 1997 wage hike, but it has also brought the real value of the minimum wage to its lowest level in half a century.
Meanwhile, Congress has awarded themselves $31,600 in pay raises over the last nine years, as the minimum wage has lost one-fifth of its purchasing power. The priorities of the majority in Congress are truly misplaced.
Democrats have an Innovation Agenda to create good-paying jobs and keep America competitive. We need to renew our national commitment to research aimed at developing the next generation of scientific breakthroughs, and promote the public-private partnerships necessary to translate these new ideas into marketable technologies.
We will bridge the digital divide in our nation by making sure that every American has access to broadband internet service and communication technology. This will provide greater access to information in education and increase the productivity and efficiency of our economy in the future.
Maintaining our competitiveness also requires an investment in creating the next generation of scientists, engineers, and mathematicians by making sure that today's students get the education and job skills they need at all levels of learning.
That leads us to another goal of ours – college affordability. College is the best investment that students can make in themselves and that parents can make toward the success of their children. It is also the best investment our nation can make in America's future. Greater college affordability is a top priority for Democrats and we have three common sense ways to achieve it.
First, dramatically increase the tax deductibility of college tuition by simplifying the maze of tuition laws to allow a 100% tax credit for tuition up to $3,000. This would be equivalent to a $12,000 tax deduction for most middle-class families. Second, slash student loan interest rates in half to 3.4 percent for students and to 4.25 percent for parents. This would save the average borrower $5,600. Lastly, increase the maximum Pell Grant to $5,100, helping to make college more affordable for the more than five million studentsreceiving those grants.
Democrats have also offered a New GI Bill of Rights for the 21st Century, which includes modernized and expanded education and job training programs for our veterans when they return home.
Along with education, another goal is to give Americans affordable health care. The first order of business for Democrats on health care is to fix the Medicare prescription drug benefit. The program is needlessly complicated and also has a built-in coverage gap. Democrats will reduce
the cost of prescription drugs by allowing Medicare to negotiate directly with the pharmaceutical companies to lower drug prices for over 40 million beneficiaries. Our plan would use these savings to close the donut hole that seniors are falling through.
The ranks of those without health insurance have grown by nearly seven million on President Bush's watch. Soaring health care costs have contributed to the decline of employer-sponsored health insurance. If you're lucky enough to have health insurance, you're paying a lot more for it. Democrats will lower health care costs for small businesses through a 50 percent tax credit to help small businesses and the self-employed buy health care.
We also have the goal of helping our seniors by improving retirement security. We are committed to providing middle-class families with the tools they need to achieve retirement security, including preserving Social Security, expanding personal savings incentives, and enacting real pension reform that protects workers.
Our first priority in fulfilling that promise is to stop any plan to privatize Social Security in whole or in part. President Bush's plan to create private accounts within Social Security would lead to a massive increase in federal debt, weaken the solvency of Social Security, require large benefit cuts, and fail to increase national saving in preparation for the retirement of the baby boom generation.
We need to strengthen Social Security for the long-term and enhance the retirement security of all Americans. To further this goal, Democrats have introduced the AmeriSave Plan, which would expand and improve existing retirement accounts, such as 401(k)s and IRAs, so that American families can benefit from the power of compound interest. Under AmeriSave, nearly 100 million Americans will be eligible for the "AmeriSave Match," which will match dollar-for-dollar the first $1,000 contributed to an IRA, 401(k), or similar retirement plan. This plan will increase national savings and grow our economy while helping middle-class families
prepare for their retirement years.
We must also enact real pension reform to protect employees' financial security from CEO corruption and mismanagement, including abuse of the bankruptcy laws. Our plan removes incentives for corporations to use the bankruptcy process to dump their pension plans when there are sufficient assets to sustain these plans. We also need to treat CEOs and employees fairly under pension and tax laws, so that if employee benefits are cut, executives should face similar reductions.
Another challenge our nation faces – one that is slamming working Americans at the pump these days – is high energy prices. It is our goal to gain energy independence in 10 years. Freeing our nation from dependence on foreign oil is both an economic and national security necessity. With new leadership in Congress, America can achieve energy independence from Middle East oil in the next 10 years by developing emerging technologies that work with the existing energy infrastructure
Instead of tax giveaways to Big Oil companies, our comprehensive plan provides tax incentives to encourage increased production of biofuels, increases the number of flex fuel vehicles on the road and expands the number of ethanol pumps at gas stations. It would increase research and development to create jobs through cutting-edge technologies for biofuels, including new refining processes and new vehicle technologies. We can create new businesses and jobs, as well as a cleaner environment.
We must also reverse the damage done to our nation's economic outlook by restoring fiscal responsibility. Not only have President Bush and the Congressional majority failed to address the most important problems facing most American families now, they have also created a legacy of deficits and debt that will hurt standards of living in the future.
Budget discipline has been abandoned by the Administration and the Bush Republicans in Congress. The Republican majority has turned record surpluses into record deficits. A projected $5.6 trillion 10-year surplus at the end of the Clinton Administration has turned into a nearly $3 trillion deficit – including four of the worst deficits in the history of America. The national debt has exploded to the point where every newborn child inherits $28,000 of federal debt. We have a statutory limit on how high the federal debt can go, and the nation's debt ceiling has been raised four times on President Bush's watch to more than $8.9 trillion.
We are relying on the rest of the world to finance our budget deficits and our trade deficit with the rest of the world is nearly $800 billion and growing. Deficit spending is not just a fiscal problem – it's a national security issue as well. Nearly half of our nation' record debt is owned by foreign countries including China and Japan. Without a return to fiscal discipline, the foreign countries that make our computers, our clothing and out children's toys will soon have greater influence over our foreign policy.
That is not the way to prepare for the challenges we face as the baby boom begins to retire and when we face increasing competition from the rest of the world that requires strong American competitiveness. Democrats are committed to ending years of irresponsible budget policiesthat have produced historic budget deficits. Instead of piling trillions of dollars of debt onto our children and grandchildren, we will restore "Pay As You Go" budget discipline.
Finally, I want to mention the very important goal of eliminating the middle class squeeze.
Too many Americans are being squeezed by stagnant incomes and rising living expenses. Somehow, the President's tax cuts are supposed to ease the pain. The non-partisan Tax Policy Center estimates that this year the dividends and capital gains tax cut will only save middle-income families about $55 – about the price of one tank of gas for most minivan drivers. But millionaires will receive a cut of nearly $38,000 – enough to buy a new luxury sedan.
The Democratic budget plan for 2006 could have provided $150 billion of new tax relief for middle-income families. In Washington, we are actually fighting with the majority in Congress to extend a variety of tax provisions helping middle-class families, including tax deductions for college tuition and expenses, for teachers who spend their own money on school supplies, for businesses performing research and development.
Families not only want relief from the middle-class squeeze, but they also want the middle-class dream restored. To achieve that restoration of the American dream and to provide economic security and opportunity for all, we need a new direction in policy. I have talked about President Bush's state of denial about the economy, which allows him to think we can just stand back and hope for the best. But I hope that I have also shown you that there are ideas out there for addressing the real problems of real people and creating an economy that works for all Americans. Thank you.