Over the last eight years, the state of the American economy has gone from good to worse to terrible. Life for millions of American families has grown less affordable and less secure. Working Americans have suffered from lower wages, fewer jobs, declining home values, increasing foreclosures, and skyrocketing costs for basic necessities like gas, health care, and college tuition. And years of misguided fiscal policies and irresponsible regulatory failures have contributed to a financial meltdown that has spread throughout the United States, threatening the American Dream and extending far beyond our borders to the global economy.
Despite the fact that President Obama and the 111th Congress have inherited the most severe economic problems in generations, Democrats know that the United States can both recover from the current economic crisis and make the investments we need to rebuild our economy for the long term. Already, the 111th Congress has worked to pass the American Recovery and Reinvestment Act of 2009, which will create American jobs, invest in America’s future, and provide middle-class and small business tax relief. Though a critical victory for the American people, this package is only the important first step of the multi-step solution that will be required to correct the mistakes of the past eight years, strengthen the economy, and ensure long-term prosperity.
American Families are Being Squeezed by Declining Incomes and Fewer Job Opportunities
JOB CREATION & UNEMPLOYMENT
· Job creation is among the worst in 75 years. In February, the economy lost 651,000 jobs, marking the fourteenth straight month of job losses for nonfarm payrolls. Jobs losses in the last four months have averaged 646,000. Total job losses since the start of the recession now total 4.4 million, with over half of the losses (2.6 million) occurring in the past four months.  And though the nation has experienced the sharpest declines over the last year, job creation has been consistently weak throughout the eight years of the Bush Administration. Overall employment growth has averaged around only 22,000 jobs per month – only a fraction of the 150,000 jobs needed each month to keep up with population growth. It was not uncommon to see monthly job gains of 300,000 and even 400,000 during economic expansions during the Clinton Administration.
· The unemployment rate has risen to the highest level in 16 years, leaving millions more unemployed. In part because of this failure to create an adequate number of jobs, the national unemployment rate hit 8.1 percent in February 2009, the highest rate in 25 years. This represents 12.5 million people who are officially counted as unemployed – 6.4 million more people than were unemployed in January 2001.
Unfortunately, once they lose their job, America’s workers also are staying unemployed longer. In February 2009, 23.1 percent of unemployed persons (or 2.9 million) had been unemployed for more than 26 weeks, 2.2 million more than in January 2001. Beyond the unemployed, 8.6 million Americans are considered underemployed because they want to work full-time but can only find part-time work, five million more than at the start of the Bush Administration. What is worse, none of the above statistics, capture the 2.1 million – 756,000 more than in January 2001 — Americans who want a job but have been discouraged from looking for work (to be counted as unemployed by the government, a person must be actively looking for work). And “[t]he problem is ensnaring a broader swath of workers than before. Once concentrated among manufacturing workers and those with little work history, education or skills, long-term unemployment is growing most rapidly among white-collar and college-educated workers with long work experience.”
· While families worked harder, their wages continued to decline. Middle-class families are working harder and earning less today than they were eight years ago. Median household income, adjusted for inflation, has declined $333 from $50,566 in 2000 to $50,233 in 2007 (the latest year for which we have data). Between 2000 and 2007, the government’s measure of take-home pay (median weekly earnings) increased by a mere 0.3 percent (adjusted for inflation), compared with 7.7 percent growth between 1989 and 2000 (the last comparable business cycle).
· Employment compensation has lagged behind productivity gains. While the productivity of the American worker (output per hour) rose by 19.08 percent between the fourth quarter of 2000 and the third quarter of 2008, average hourly compensation (wages plus benefits, adjusted for inflation) increased by only 6.3 percent during this period.In sum, Americans are working harder – and more productively – but are not receiving proportionally increased rewards for their hard work. 
· Income equality has expanded. The New York Times reported that: “an outsized share of productivity growth, which expands the nation’s total income, is going to Americans at the top of the income scale. In 2005…the top 1 percent of Americans – whose average annual income was $1.1 million – took in 21.8 percent of the nation’s income, their largest share since 1929.” According to the Wall Street Journal, “[s]ince the end of the recession of 2001, a lot of the growth in GDP per person – that is, productivity – has gone to profits, not wages.” Economists at the National Bureau of Economic Research concluded that: "[t]o the extent that the productivity growth ‘explosion’ of 2001-2004 was achieved by cost-cutting, layoffs, and abnormally slow employment growth…the historical link between productivity growth and higher living standards falls apart. Not only have the bottom 90 percent of American workers failed to keep up with productivity growth, many have been harmed by it."
Indeed, the average income for 80 percent of American households has fallen since 2000 after adjusting for inflation. According to the Joint Economic Committee, changes in income over the past year have been regressive, with the average income of the bottom fifth declining two-an-a-half times more than the top fifth. “As a result of this pattern of losses at the bottom and gains at the top, income inequality is now greater” than it was before 2001.
· Earnings for workers with college degrees are declining. The WallStreet Journal observed that”a four-year college degree, seen for generations as a ticket to a better life, is no longer enough to guarantee a steadily rising paycheck.” In addition, the Los Angeles Times reported that: “[w]age stagnation, long the bane of blue-collar workers, is now hitting people with bachelor’s degrees for the first time in 30 years. Earnings for workers with four-year degrees fell 5.2 percent from 2000 to 2004 when adjusted for inflation, according to White House economists…Not since the 1970s have workers with bachelor’s degrees seen a prolonged slump in earnings during a time of economic growth…trends for people with master’s and other advanced degrees…have found that their inflation-adjusted wages were essentially flat between 2000 and 2004.” And, U.S. Census data indicates that “the number of college graduates earning below the poverty line has more than doubled in the past 15 years to almost 6 million people.”
· More American families and children face severe financial problems. In 2007, 37.3 million Americans were living in poverty, an increase of 5.7 million over the 2000 level. The average annual increase in the poverty rate during President Bush’s first term was second only to that during George H.W. Bush’s Administration and contrasts sharply with the declines in the Clinton and Kennedy-Johnson Administrations. Poverty has hit America’s children particularly hard. According to the latest Census report, almost one out of every six American children lives in poverty. The number of children living in poverty increased 15.38 percent during the Bush Administration.
American Families are Being Squeezed by Rising Costs and the Sharp Decline in the Housing Market
· The cost of family health insurance has skyrocketed nearly 80 percent since 2001.This is compared to a 24 percent increase in overall inflation. When premium growth outpaces increases in wages and inflation, workers typically have to spend a greater portion of their income each year in order to maintain coverage. The average premium for a family of four rose to $12,680 in 2008, with the average family contribution of over $3,350. From 2001 to 2008, the amount families pay out of pocket for their share of premiums has increased by approximately $1,550.
· Rising health care costs jeopardize employer-sponsored coverage. When the cost of premiums increases, employers have more difficulty providing health coverage, and their workers have more difficulty affording their share of the cost. With the increased cost of premiums during the Bush Administration, there has been an erosion of employment-based health benefits. The percentage of non-elderly individuals with employment-based health benefits decreased from 68.4 percent in 2000 to 62.2 percent in 2007.
· The number of uninsured Americans has increased by 7 million people since 2000, from 38.7 million to 45.7 million in 2007. A significant cause of the increase in the number of uninsured Americans is this decline in the number of people receiving health coverage through their employer. In 2007, nearly two-thirds of U.S. adults, an estimated 116 million people, struggled to pay medical bills; went without needed care because of cost; were uninsured for a time; or were underinsured. And given the weak economy, the number and percentage of uninsured likely rose in 2008 (the final numbers are not yet available), and will probably rise further in 2009 – the problems for Americans struggling with health care costs are only getting worse. Studies show that each one percent increase in unemployment will result in an additional 1.1 million uninsured.
· Foreclosures have increased by more than 80 percent in the last year. The American dream of owning a home is becoming less and less of a reality for millions of Americans and their families. Years of abuse by the mortgage lending industry, lax regulation under the Bush Administration, lack of affordable housing, and poor choices by some homeowners have all resulted in a nationwide housing crisis that is crippling the entire U.S. economy. During the third quarter of 2008, one in ten American homeowners found themselves either behind in mortgage payments or facing foreclosure. According to the Mortgage Bankers Association, nearly 7 percent of mortgages were 30 days or more past due (an increase of 58 basis points from the previous quarter), a record high. Disturbingly, this increase was due to the rise in mortgages past due by 90 days or more. According to RealtyTrac, more than 2.3 million U.S. properties faced foreclosure, an 81 percent increase from 2007, and it is likely that these numbers will rise by 2.4 million in 2009 as subprime loans continue to adjust to higher rates and Americans grapple with job loss and rising unemployment.
· Even homeowners with strong credit, who are in safe, fixed-rate loans are suffering from the reduction in property values and home equity wealth that result from foreclosures in their neighborhoods. In February 2009, the National Association of Realtors reported that the national median existing single-family home price in the fourth quarter of 2008 dropped 12.4 percent below the fourth quarter of 2007 price. It is estimated that more than 40 million homeowners will experience a decline in their home values due to surrounding foreclosures.  Thus, entire communities, especially those that are already vulnerable to economic disruptions, are at significant risk.
· The home loan crisis has only exacerbated the nation’s ongoing affordable housing crunch. Dropping interest rates and housing prices aside, the heightened underwriting standards for obtaining a home loan have made it more difficult for many Americans to purchase; increased job losses have made it more difficult for existing homeowners to make their mortgage payments; and increased demand, cost, and standards for rental housing has made it more difficult for non-owners to rent adequately. According to the Center for Housing Policy, between 1996 and 2006, housing costs for renters rose by 51 percent, while incomes rose by only 31 percent. In the wake of the housing crisis and rise in unemployment, it is expected that this schism will widen. It is also expected that rental costs will increase as homeowners of multifamily units deal with their own increased costs and are forced to pass on those costs to their tenants. 
The nation’s affordable housing woes are not limited to low-income Americans or renters. In 2006, the Washington Post reported that “the scarcity of affordable housing is a deepening national crisis, and not just for inner-city families on welfare. The problem has climbed the income ladder and moved to the suburbs, where service workers cram their families into overcrowded apartments, college graduates have to crash with their parents, and firefighters, police officers and teachers can’t afford to live in the communities they serve.” According to the Joint Center for Housing Studies, between 2001 and 2006, the number of Americans in the two middle-income quartiles spending more than 50 percent of their income on rent rose by 1.4 million (as compared to a 1.2 million rise in the bottom income quartile). Moreover, “by 2006, middle-income homeowners were twice as likely as middle-income renters to pay more than half their incomes for housing.” Housing is considered affordable if it makes up less than 30 percent of income.
· Gas prices jumped as much as 180 percentfrom$1.46 per gallon of regular gas in January 2001 to an all-time high of $4.11 in July 2008. The price for a barrel of oil increased 370 percent during the Bush Administration from $31 in January 2001 to highs of $145 in July 2008. Before the financial crisis and the subsequent reduction in oil and gasoline prices, the average household with children was spending about $4,143on transportation fuel costs in 2008, an increase of 118 percent or $2,240over 2001 costs.
· Electricity prices increased by 24 percent. The residential price for electricity increased from 8.58 cents per kilowatt hour in 2001 to 10.65 cents per kilowatt hour in 2007. This increase in residential electricity prices resulted in the average residential electricity bill increasing from $81 per month to $100 per month.
· Home natural gas prices jumped 36 percent. The residential price for natural gas increased from $9.63 per thousand cubic feet in 2001 to $13.06 per thousand cubic feet in 2007. These increases resulted in winter natural gas expenditures increasing from $445 during the winter of 2001 and 2002 to the anticipated cost of $870 during the winter of 2008 and 2009.
· Heating oil prices have skyrocketed by 156 percent. The price for heating oil increased from $1.31 per gallon in 2001 to $3.36 per gallon feet in 2008. The increases resulted in winter heating oil expenditures increasing from $627 during the winter of 2001 and 2002 to the anticipated cost of $1606 during the winter of 2008 and 2009.
· Since the 2000-2001 academic year, college costs have risen by 50 to 70 percent. Average tuition, fees, room and board costs at four-year private universities have increased by $11,892, or 53 percent, from $22,240 to $34,132 in the 2008-2009 academic year. Tuition, fees, room and board charges at four-year public colleges jumped from $8,439 to $14,333 for the 2008-2009 academic year – an increase of $5,894, or 70 percent.
· Average student loan debt soared to more than $19,000.Interest rates for Stafford student loans have risen substantially over the past three years, from 3.4 percent to 7.14 percent for outstanding loans and 6.8 percent on new loans. As a result, loan payments will be considerably higher for students taking out new loans and for those who did not consolidate loans in recent years. Without adequate federal grants funding, students and their parents must rely more on student loans to finance their college educations. According to the Institute for College Access and Success, more than 60 percent of college seniors graduate with debt, with an average $19,200 in debt per graduate. And, according to the Institute for Public Policy and Higher Education, 31 percent of the median family income is needed to pay for one year at a four-year public college after financial aid.
· The continuing credit crisis is affecting the ability of students and families to afford rising tuition costs. Lenders are increasing their lending standards and 39 lenders are no longer offering private student loans.
 U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation Survey (March 6, 2009), available here; Joint Economic Committee analysis of U.S. Department of Labor, Bureau of Labor Statistics, Employment Situation Survey (March 6, 2009).
 Conor Dougherty, “How Job Report May Be Masking Labor Pains,” Wall Street Journal at C1 (September 7, 2007).
 Michael A. Fletcher, “Highly Skilled and Out of Work: Long-Term Joblessness Spreads in Middle Class,” Washington Post at A01 (January 21, 2008).
 Joint Economic Committee analysis of U.S. Department of Labor, Bureau of Labor Statistics (January 9, 2009), available here. Median usual weekly earnings of full-time wage and salary workers by selected characteristics, quarterly averages, not seasonally adjusted, available here.
 Editorial, “Economic Life After College,” New York Times at A18 (June 11, 2007).
 Greg Ip, “Wages Fail to Keep Pace With Productivity Increases, Aggravating Income Inequality,” Wall Street Journal at A2 (March 27, 2006).
 Greg Ip, “The Declining Value of Your College Degree,” Wall Street Journal (July 17, 2008).
 Molly Hennessy-Fiske, “That Raise Might Take 4 Years to Earn as Well: Those with bachelor’s degrees are finding their incomes stagnate despite a growing economy,” Los Angeles Times at A1 (July 24, 2006).
 AP, “College degree may not be enough to protect against poverty” (April 29, 2007).
 Joint Economic Committee analysis of data maintained by the Bureau of the Census and U.S. Department of Commerce from 1959-1995.
 The average annual premium cost for family health coverage in 2008 was $12,680, compared with $7,063 in 2000. Kaiser Family Foundation, 2001 Employer Health Benefits Survey Report, available here; The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2008, available here .
 The Henry J. Kaiser Family Foundation, August 2007.
 The Henry J. Kaiser Family Foundation and Health Research and Educational Trust, September 2008; and The Henry J. Kaiser Family Foundation, Health Research & Educational Trust, News Release (September 6, 2001).
 Employee Benefit Research Institute, September 2008.
 U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2007 (August 2008), available here; U.S. Census Bureau, Health Insurance Coverage: 2000 (September 2001), available here.
 Employee Benefit Research Institute, October 2007.
 Commonwealth Fund, August 2008.
 Center on Budget and Policy Priorities, August 2008.
 Stan Dorn, et al, “Medicaid, SCHIP and Economic Downturn: Policy Challenges and Policy Responses” The Henry J. Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured (April 2008).
 RealtyTrac, “Foreclosure Acitvity Increases 81 percent in 2008 (January 2008), available here; Center for Responsible Lending, “United States Foreclosures: Impact & Opportunities” (January 2009), available here (state by state data on foreclosures is available here).
 “The fall in home prices has cut into Americans’ home equity and forced many to grapple with mortgages now worth more than the house itself.” Michael M. Grynbaum, Consumer Confidence Slips as Home Prices Drop, New York Times (April 29, 2008).
 National Association of Realtors, “4th Quarter Metro Area Home Prices Down as Buyers Purchase Distressed Property” (February 12, 2009), available here.
 Calculations based on data available from Energy Information Administration, Household Vehicle Energy Use: Latest Data and Trends; Short Term Energy Outlook (November 2007), available here, Household Vehicles Energy Use: Data Tables, Table A2 (released November 2005), available here.
 David P. Smole, “Stafford Loan Interest Rate Reduction: Background and Issues,” Congressional Research Service Pub. No. RS22568 (July 20, 2007).
 The Institute for College Access and Success (2006), based on an analysis of data from the Department of Education, National Postsecondary Student Aid Study (2004) cited in “A New Commitment to Students and Families: Opening the Door to College for All” prepared by the U.S. Senate Committee on Health, Education, Labor, & Pensions (July 2007) at 12.
 The Institute for Public Policy and Higher Education, Measuring Up 2006: The National Report Card on Higher Education cited in “A New Commitment to Students and Families: Opening the Door to College for All” prepared by the U.S. Senate Committee on Health, Education, Labor, & Pensions (July 2007) at 11.
 Robert Tomsho, “Tuition Ammunition: a Happy Lesson on Lending” Wall Street Journal (January 6, 2009).