Hollywood, Fla.
Two years into the administration of President George W. Bush, the economic nosedive that officially began in March 2001 continues unabated for America’s working families. In only these two years, we have moved from an economy with robust job growth, low unemployment, rising wages, declining poverty, expanding health coverage and record budget surpluses to one that is decidedly bleaker for most Americans. The Bush economy is marked by fewer jobs, more unemployment for longer periods, stagnant wages and falling incomes, declining health coverage, rising poverty and more personal bankruptcies, less retirement security, unprecedented and unsustainable trade deficits, a return to massive federal budget deficits and financial catastrophe for the states.
This breathtaking deterioration in the nation’s well-being and the well-being of the American people is a damning indictment of the president’s economic stewardship and his failed, flawed and unfair tax and budget policies. Though some have profited handsomely from the president’s economic program—primarily large corporations and families and individuals our society already has blessed richly—the vast majority of America’s workers and their families are faring far less well today than two years ago. And if the president gets what he wants—another round of unfair and unaffordable tax breaks for the very wealthy coupled with cuts in benefits, services and protections for everyone else—an already bad situation will get even worse for most Americans.
Fewer jobs. In 1999 and 2000, the economy added 5 million new jobs. But job loss has been steady since the president took office, and there is no apparent end in sight. The nation has lost 2.2 million private-sector jobs since the official start of the recession in March 2001. The hard-hit manufacturing sector lost 1.9 million jobs between December 2000 and December 2002. Sixty percent of CEOs surveyed at the end of last year said they expect more job cuts, not fewer, this year.
As if losing 2.2 million private-sector jobs were not shameful enough, the president now shamelessly invokes the sluggish economy to rationalize a trillion dollar package of new tax cuts that overwhelmingly benefit the very wealthy, provide little or nothing for most Americans and blow a huge hole in the federal budget for years to come. Equally distressing, the president’s new tax schemes could cost the economy as many as 750,000 jobs over the next 10 years
More joblessness. Rampant job loss on the president’s watch has translated into rising joblessness. The unemployment level was only 4 percent when the president took office, but it has grown ever since and for the past several months has hovered around 6 percent, an eight-year high. Ten million unemployed workers want jobs but cannot find them; 4 million work part-time because they cannot find full-time positions. There are three job seekers for every job opening.
And things are not looking up: Only last week, the Labor Department reported that jobless claims for the week ending on Valentine’s Day were at the highest level in seven weeks.
Longer spells of unemployment. Long-term unemployment has reached a 10-year high. In January, almost 1.7 million workers had been unemployed for at least half a year. Compared with the three months preceding the president’s inauguration, the average duration of unemployment has increased by five weeks.
Two million jobless workers have run out of their regular state unemployment benefits and their extended emergency federal benefits; 1 million of them still do not have jobs. Incredibly, the president remained a silent bystander last fall when Republican House leaders blocked an extension of emergency unemployment benefits, stranding hundreds of thousands of families a few days after Christmas. Although benefits were restored temporarily in January, the president did nothing to help the 1 million unemployed workers who have neither jobs nor state or federal benefits. Moreover, the president’s fiscal year 2004 budget, while chock full of new tax breaks for the wealthy, continues to leave out the long-term unemployed altogether.
No wage growth. Worker productivity has improved during the downturn, but family incomes have declined and wages have been essentially flat since the president took office. As a result of the rise in unemployment in 2001, incomes declined for the bottom 95 percent of households. For the year that ended in the third quarter of 2002, worker productivity grew by almost 6 percent, but real hourly wages rose only 2 percent. Weekly wages fell one-half of a percent in 2002; in 2000, they were up 3 percent.
Record bankruptcies. Personal bankruptcies have broken all-time records during this administration’s first two years. More than 1.5 million bankruptcies were filed in fiscal year 2002, the highest 12-month level in history. The previous record-breaker was 2001. In contrast, bankruptcies declined in 1999 and 2000.
Less health care, greater costs. The national priority of extending health care coverage to all Americans has been dealt a major setback, and the progress made in 1999 and 2000 in reducing the ranks of the uninsured has been erased. The Census Bureau reports that 41.2 million Americans were uninsured in 2001, 1.4 million more than in 2000. According to the National Center for Health Statistics of the Centers for Disease Control, 300,000 more people were uninsured in the first six months of 2002 than at the end of 2001.
Health care costs are exploding, with workers and retirees bearing much of this burden. Such cost hikes inevitably add to the ranks of the uninsured: premium cost-shifting accounted for 75 percent of the decline in employment-based coverage between 1989 and 1996.
Higher prescription drug price costs, rising between 16.4 and 19.5 percent this year, have spurred deep cuts in retiree health coverage. Last year, only 34 percent of large employers offered retiree coverage, down nearly half (from 66 percent) since 1988. Many employers that still provide such coverage have passed along substantial cost increases to retirees.
Yet in the face of the wrenching health care crisis, the president offers partial-loaf solutions—individual tax credits, association health plans and a stingy Medicare drug benefit, administered by HMOs and available only to seniors who agree to change their doctors—that will not significantly expand access to care or reduce costs and that will open the door wide to fraud and abuse. And under the president’s Medicaid block grant proposal, more vulnerable people—children, the elderly, the poor and people with disabilities—will lose health coverage altogether.
Massive retirement insecurity. Retirement security has evaporated for millions of Americans, especially those whose only retirement nest eggs are primarily in 401(k) plans. The catastrophic stock market declines of the past two years—worse in 2002 than in 2001 and worse then than in 2000—have ravaged retirement savings. Even assuming the markets produce average historic returns going forward, many investors will have to wait until at least sometime in 2009—and many others, much longer—to recover the full value their investments enjoyed at the end of 1999. Alarmingly, two-thirds of all 401(k) holdings are in the stock market.
For most Americans, retirement is a train wreck waiting to happen. But the president’s answers to this crisis make the wreck inevitable. Laying the groundwork to privatize Social Security, which the president still favors despite unrelenting stock market turbulence, will destabilize retirement security even more—and for even more Americans. The new retirement savings accounts and lifetime savings accounts the president seeks in his fiscal year 2004 budget serve only to provide more tax shelters for the wealthy and deprive the nation of needed resources. These accounts are not realistic savings options for the vast majority of Americans, most of whom cannot afford even the existing maximum allowable contributions to IRAs and 401(k) plans; and they will encourage many businesses to drop retirement coverage for their workers altogether.
Nor has the president responded to the wave of corporate scandals that robbed workers and retirees of millions with a solid plan to protect retirement savings. Instead, even in the face of Enron, WorldCom and similar examples of corporate treachery, the president continues to support investment advice legislation that permits retirement plan sponsors to provide conflicted advice and that will make it easier for employers to reduce retirement protections for lower paid workers while increasing them for those who are paid more.
Catastrophic trade deficits. The surging growth in the nation’s trade deficit is further evidence of the president’s failed economic program and his stubborn insistence on trade policies that enrich multinational corporations but hurt working families here and elsewhere. Last year, the United States ran an all-time record trade deficit in goods and services of $435 billion, a jump of almost $57 billion since 2000 and a completely unsustainable 4 percent of Gross Domestic Product. In goods alone, our 2002 trade deficit hit $485 billion. The monthly goods deficit in December was a staggering $48 billion, more than a third higher than the January figure, indicating a steady deterioration throughout the year. If the December rate continues, next year’s trade deficit will be well over half a trillion dollars.
Even those sectors where the U.S. has traditionally been thought to hold a competitive advantage saw dramatic deterioration last year. Our trade surplus in services plunges by $20 billion (falling from $69 billion in 2001 to only $49 billion in 2002). And the U.S. trade balance in advanced technology products swung from a surplus of $4.5 billion to a deficit of $17.5 billion, again with noticeable deterioration in the last months of the year. Total U.S. exports of goods actually fell by $36 billion in 2002, while imports rose by $23 billion.
American manufacturing workers are paying for these flawed trade policies and mushrooming trade deficits with their jobs: Between December 2000 and December 2002, we lost 1.9 million manufacturing jobs, a 10.4 percent decline. Manufacturing employment is now at its lowest level in 40 years.
The administration’s response to the catastrophic trade deficit is nothing short of malfeasance. The president insists on pursuing new trade agreements with half a dozen different countries and regions, as well as expanding existing agreements like the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO). Yet the track record of these trade agreements, which were sold to the American people on the promise of opening export markets and creating U.S. jobs, has been nothing short of scandalous. The combined U.S. trade deficit with Canada and Mexico soared from $9 billion in 1993, prior to NAFTA, to $87 billion in 2002, almost a tenfold increase. Since granting China Permanent Normal Trade Relations in 2000, which we were told would help us sell American goods in China, the U.S. trade deficit with China, the U.S. trade deficit with China has increased by almost 25 percent, hitting an astonishing $103 billion last year – our single largest bilateral deficit. At the same time, President Bush refuses to take steps to bring the dollar down to a realistic value and to insist that our trading partners (especially China) cease manipulating their currency to gain an artificial competitive advantage.
Disastrous budget deficits. President Bush also has run up enormous federal budget deficits. While modest deficits are neither inherently bad nor always to be avoided, the Bush deficits are entirely indefensible and completely irresponsible. In January, the Congressional Budget Office reported that the nation faces a 10-year budget deficit of $1.2 trillion outside of Social Security, a startling turnaround from the $3.1 trillion non-Social Security surplus the president inherited when he took office. The largest single component of this $4 trillion collapse is the president’s 2001 tax cut, which will cost more than $2 trillion over 10 years. Even these deficit projections are low: They do not include the cost of a preemptive attack on Iraq, a much-needed prescription drug benefit or the president’s latest round of break-the-bank tax cut proposals.
The Bush deficits are destroying our capacity to meet the needs and address the priorities of the American people, to improve health care and education and strengthen Social Security and Medicare. They are hampering economic growth. They are bankrupting the nation. And they will saddle our children with crippling debt. Yet the administration’s only answer to this catastrophe it has so deftly created is tax cuts for the very rich—this time, giving millionaires $30,000 on average while the 60 percent of Americans with household incomes below $46,000 would get only $131. This new round of tax breaks will add another $1.6 trillion to long-term deficits.
Wrenching financial shortfalls in the states. The president’s economic policies are huge headaches for the states, too. After several years of surpluses, states now face their worst financial crisis in 60 years, as they wrestle to close budget shortfalls that cumulatively reach as high as $200 billion between FY 2002 and FY 2004. States have taken draconian steps to close the gaps. Medicaid, Temporary Assistance for Needy Families (TANF) and child care benefits have been cut. Budget shortfalls are shortchanging children, as school districts and states lop days off the school year and cut preschool and after-school programs, and public universities everywhere are hiking tuitions and fees. Police, firefighters and other first responders have been laid off in numerous jurisdictions. And for the first time in years, states have begun to raise taxes.
The states’ budget crisis is largely the result of the national economic downturn, which has reduced states’ revenues while increasing their costs for health care and other basic services; the 2001 federal tax cut, which automatically cut state taxes as well; and extraordinary costs for homeland security. Yet although the administration’s economic policies are a big part of the states’ problem, the president and the majority in Congress refuse to be part of the solution. They have ignored the states’ plight, only recently approving a very modest package—$3.5 billion—to defray some but by no means all of the mounting homeland security costs.
The president’s fiscal year 2004 budget and his determination to accelerate the 2001 tax cuts and make them permanent plus eliminating taxes on dividends will wreak further havoc. The president’s budget includes 11 tax cuts that, if implemented, will cost the states up to $64 billion over 10 years. And the president’s dividends tax proposal would cost the states as much as $155 billion nationally over 10 years if, as expected, investors began to favor stocks over municipal bonds.
A billion here and a billion there, and soon the president will do indirectly to the states what he is attempting to do directly to the federal government: starve it of resources, privatize public programs and eliminate many of the benefits, services and protections we rely upon. As Bush stalwart and Karl Rove confidante Grover Norquist put it, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”
The president’s policies are not a recipe for economic recovery for America or America’s working families. They are a one-way ticket to economic disaster. In place of sound, comprehensive and fair tax and budget policies to end the economic crisis gripping the nation and restore Americans’ confidence and hope, the president proposes:
- Tax cuts that overwhelmingly favor the very rich, providing little or nothing for most Americans. And because these proposals will further shrink resources at the federal and state levels, they eviscerate the capacity of governments to maintain critical services and benefits for the American people. Under the president’s plan to speed up the 2001 tax cuts, make them permanent and end dividends taxation, millionaires get $30,000 windfalls on average, while the 60 percent of American households with incomes under $46,000 get, on average, only $131. Nearly one-third of families and individuals get nothing. Three-fifths of the benefit from the president’s tax plans flow to the top 10 percent of the population, whose annual incomes exceed $104,000, while the bottom 60 percent (with incomes less than $46,000) get less than 10 percent.
- A fiscal year FY 2004 budget that fails to invest in what matters most to Americans: good jobs, living wages, high quality and affordable health care, secure retirements, a first rate public school system, safe communities, sound opportunities for career and personal advancement and the promise of an even better future for our children. Even where the president’s budget purports to respond to critical priorities, such as runaway health care costs and the need for prescription drug coverage for the elderly, it fails America’s working families in crucial respects. The resources the president calls for fall well short of need, the approaches he prefers—block grants and privatization—are deeply flawed and the conditions he imposes on program funds are unfair and counterproductive. Of particular concern to America’s workers, the Department of Labor is one of only two federal agencies actually slated for a cut under the president’s budget. Funds to enforce laws that protect workers from workplace exploitation and abuse are cut, while the president seeks an increase in funds and as many as 95 more inspectors to target and investigate unions.
- Level funding or cuts to existing block grants, a shocking display of budgetary stinginess in light of the states’ financial crisis and a step that will impose unwarranted suffering on children, seniors, people with disabilities, the poor and others who rely on these life-supporting programs. The president wants to freeze funding under the TANF block grant, even though TANF rolls are rising and states are struggling to meet existing need. The president wants to freeze the Child Care and Development Block Grant and the Social Services Block Grant, though these programs already cannot meet the child care assistance needs of working poor families, and the administration acknowledges that the families of 200,000 fewer poor children will receive child care assistance by 2007 if the budget passes. The president wants to freeze funding for the Low-Income Home Energy Assistance Program block grant, a $300 million decline in resources since fiscal year 2002. Struggling states and poor individuals and families will inevitably suffer, as energy prices rise sharply and much of the country is experiencing the harshest winter in years. The president wants to cut $400 million from the 21st Century Community Learning Center block grant, kicking 570,000 low-income children out of after-school programs.
- Block grants for Medicaid and Head Start, budgetary sleight of hand that neither provides sufficient or necessary resources nor ensures adequate protections for participants in and beneficiaries of these programs. The proposal to provide additional monies to states willing to go along with a Medicaid block grant is a bait-and-switch operation: Under the president’s plan, states will have to restructure their programs to get new money at the front end, but these resources must be paid back in the out-years. Low-income families risk losing their entitlement to health care in states that accept the block grant, and where the traditional Medicaid program continues, health care benefits and protections are likely to decline for program participants. Head Start has scored remarkable achievements over the past 35 years, but it is still so shockingly under-funded that it fails to serve 95 percent of eligible children younger than three years old and 40 percent of three- and four-year olds. The president’s plan to block grant the program, with no new resources and inadequate guarantees of appropriate standards, threatens to stretch Head Start even thinner, further undermining its capacity to meet the needs of eligible children and families.
The American people do not want and cannot afford the president’s misguided, profoundly unfair and deeply divisive tax and budget policies. Instead, we need and support a thoughtful and comprehensive plan that will create jobs, improve wages and benefits, boost families’ income security and grow the economy.
To restore the nation to sound economic footing, meet the needs of America’s people and arrest the erosion of living standards and basic protections and benefits for all, Congress and the president should adopt an economic recovery plan that provides for the following:
- Tax cuts that broadly benefit most families, such as tax credits for all workers along with a fully refundable $1000 child tax credit and elimination of the marriage penalty;
- Substantial financial help for the states, so they can restore critical services such as education, health care and public safety and avert further damage;
- Investments in schools, transportation and transit systems, clean water and our industrial base to create jobs and spur growth;
- Meaningful health care reform that will make high quality, affordable care available to all Americans and prescription drug coverage under Medicare for the elderly and people with disabilities;
- Real retirement security that will strengthen and protect Social Security for all Americans, safeguard workers’ guaranteed pension benefits and protect savings in 401(k) plans; and
- Reform of our nation’s flawed trade policies, to ensure that trade agreements protect and promote the rights and interests of workers here and abroad, that they encourage job growth rather than job destruction, that they shore up rather than undermine our trade laws, and that they lead to balanced trade instead of ever-larger and completely unsustainable trade deficits; and
- An increase in the minimum wage to correct the gross underpayment of low-wage workers, many of whom remain poor despite working full-time.
The president’s economic policies are deeply flawed and profoundly unfair. They have failed America and America’s children. The American union movement will continue to resist tax and budget proposals that sacrifice the rights and protections of so many in order to promote the interests of so few. We will fight for policies that restore economic sanity, soundness and fairness, that lift the nation as a whole and that build a future of promise, hope and opportunity for us all.