Economy & Budget

D.C. spending is hammering the dollar (Rep. Ed Royce)

A new report from an organization called the U.N. Conference on Trade and Development (UNCTAD) calls for the dollar to be ditched and replaced with a new global reserve currency.  Why is it that the U.N. always concludes that central is better?  This discussion, of course, has been prodded by our country's financial crisis and drunken sailor-like spending.
It's not just the U.N.  The dollar's standing as the world's reserve currency has been under broad attack.  Partly out of nationalist resentment, the dollar has been slapped by the likes of China, Russia, India and Brazil, with calls for its replacement.  Now the U.N. has joined those looking to seat the greenback in the cheap seats, for good.  An author of the report - released earlier this week - noted that, "Replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability."  Readers should give thought to the un-workability of coordinating so many different political and economic systems.  Never mind further empowering an international financial institution.  No thanks.


What Yesterday’s Poverty and Income Numbers Don’t Tell Us About Economic Hardship

Yesterday’s Census Bureau report on trends in income and poverty is bleak reading. In addition to historic income declines for middle income families (the largest in the 60 years on record), the number of Americans whose incomes dropped below the official poverty line increased by 2.5 million, from 37.3 million to 39.8 million.

The poverty numbers tells us that things got worse last year—something, of course, we already knew—but they don’t give us an accurate picture of how many people are really struggling to make ends meet, or experiencing concrete forms of material deprivation, like having too little to eat, or not being able to pay their mortgage or utility bill.

There’s little disagreement here in Washington on this point. Liberals and some conservatives like Ron Haskins of the Brookings Institution argue that the official poverty measure fails to include both important benefits like food stamps and major expenses like child care, and doesn’t adjust for differences in geographic housing costs. Legislation introduced by Rep. Jim McDermott and Sen. Chris Dodd—H.R. 2909—would revise the poverty measure to address these issues.

Conservatives like Robert Rector of the Heritage Foundation argue that the current poverty measure and measures that would set slightly higher standard? like McDermott/Dodd fail to measure “real poverty,” which they equate with extreme material deprivation. They point to data showing that many people living below poverty line have air conditioning and VCRs to make their case that even the current poverty measure is set too high.

The best way to produce an accurate assessment of economic hardship is to move beyond the outdated idea that we can accurately measure by using a simple income line, even one that, like McDermott/Dodd, takes expenses and in-kind benefits into account. Instead we should measure “real poverty” instead of income poverty using a metric that counts someone as poor if they had both low income during the year and experienced a certain level of material hardship.

There is a ready model for this approach. A few years ago the U.K. government adopted a new approach to poverty measurement that takes both low-income and specific material hardships into account. They now use it to measure progress toward their goal of eliminating child poverty by 2020.

This kind of measure would still include an income line, but it should be set at roughly twice the current federal poverty line, or about $44,000 in 2008. Why the higher amount? Public opinion surveys have consistently found that most Americans think this is the amount needed to “get along” or “make ends meet” at a basic level. And, most Americans who suffer from specific forms of material hardship have incomes that fall above the official poverty line, but below 200 percent of it. Finally, the higher income line would ensure that groups who have to spend more to meet basic needs are counted. In particular, people with disabilities, who, even when their incomes are between 100-200 percent of the poverty line, are as likely to experience material deprivation as people without disabilities living below the poverty line.


Let's protect small businesses (Rep. Joe Sesak)

The 7th Congressional District, which I represent, lost more than 760 small businesses between 2001 and 2006, including more than 22% of the manufacturing industry. At the same time, health care premiums have increased faster for small businesses than their more established competitors while much needed credit has been shut off in frozen financial markets.

As Vice Chairman of the House Small Business Committee, I have made supporting small businesses one of my top priorities. Just yesterday I introduced the Small Business Lending Promotion Act, which expands a small business-lending program for women, minority and veteran entrepreneurs that currently faces caps on the volume and value of its loans. I have also made addressing the rising cost of health care for small businesses a priority.

Currently, small businesses face a hidden tax on health care, paying 18% more for health insurance than large employers, because they cannot effectively negotiate with large insurance companies. They are seeing their premiums skyrocket by nearly 10% a year on average and face a more volatile market due to their small size. As a result, fewer and fewer small businesses are offering health insurance. That is why, before marking up the Health Care bill in the Education and Labor Committee, I joined a bipartisan group of Representatives in calling for a health care reform bill that would lower costs for small businesses and millions of Americans they employ.


A path to repairing the U.S. mortgage market

Today, an industry-wide task force commissioned by the National Housing Conference (NHC) released a new policy statement on the "Ten Key Principles" for repairing the U.S. mortgage market and addressing soaring home foreclosures.

The taskforce, which was created to assess the dire condition of housing finance, as well as its potential, developed the principles to urge the federal government to look to the policies that will help to maintain its critical role in the housing finance system. In short, the principles provide recommendations that will affect consumers, banks, and the secondary financing markets, and they address the neglected importance of affordable rental housing to tens of millions of families, including those who are losing their homes to foreclosure.


Social Security is Broke

While we debate the pros and cons of a trillion-dollar-plus health care overhaul here in the House, it's important to come to terms with the rising financial commitment already facing our nation and future generations.

For instance, according to a report just released by the non-partisan Congressional Budget Office (CBO), Social Security is broke.

The CBO now projects that Social Security’s costs will exceed tax income in 2010 (next year!) and 2011, with cash surpluses returning over the 2012-2015 period and becoming negative again beginning in 2016 and later.  In their March 2009 estimates, the CBO projected that the cash surplus would be positive through 2016.  Keep in mind that these projections are based on what many economists of all stripes believe are far-too-rosy White House budget numbers.  It's a very real possibility that a positive cash surplus may not occur at all.

What's worse is what the CBO report reveals about our nation's long-term budget outlook:

"Over the long term (beyond the 10-year baseline projection period), the budget remains on an unsustainable path. Unless changes are made to current policies, the nation will face a growing demand for budgetary resources caused by rising health care costs and the aging of the population. Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth by lowering national saving and investment relative to what would otherwise occur, causing productivity and wage growth to gradually slow.

"Last year, outlays for Social Security, Medicare, and Medicaid combined accounted for about 9 percent of GDP. Outstripping the growth of GDP, spending for those programs is expected to rise rapidly over the next 10 years, totaling nearly 12 percent of GDP by 2019. Under long term projections recently published by CBO, such spending would continue to rise under current laws and policies and could total 17 percent of GDP by 2035.
"If outlays for those programs reached that level, federal spending would be well above its historical percentage of GDP. Unless revenues were increased correspondingly, annual deficits would climb and federal debt would grow significantly, posing a threat to the economy. Alternatively, if taxes were raised to finance the rising spending, tax rates would have to reach levels never seen in the United States. Some combination of significant changes in benefit programs and other spending and tax policies will be necessary in order to attain long-term fiscal balance."

These are very real numbers we're talking about, and it's about time Washington account for its finances rather than pushing them off to our children and grandchildren through continued borrowing and higher taxes.


Sobriety needed on economy and policy direction

Some in political, media and economic circles seem to verge on euphoric regarding the July 2009 jobs numbers released by the Bureau of Labor Statistics on Friday (August 7). Perhaps we need a little dose of sobriety.

The best that can be said about the July jobs report is that it was less bad than in recent months.

Taxing the middle-class to pay for health care (Rep. Michele Bachmann)

One of the more notable promises from the campaign trail by President Obama back in 2008 was his promise not to raise taxes by one single dime on anyone making less than $250,000 a year. Cap-and-trade and expiring tax cuts aside, it's taken only six months for the President to publicly consider reneging on his campaign pledge.

As the Wall Street Journal points out:

"Asked about raising taxes on the middle class on Sunday on CBS’s 'Face the Nation,' White House economist Larry Summers wouldn’t repeat Mr. Obama’s pre-election promise. 'It is never a good idea to absolutely rule things out no matter what,' Mr. Summers said—except, apparently, when his boss is running for office. Meanwhile, on ABC’s 'This Week,' Treasury Secretary Timothy Geithner also slid around Mr. Obama’s vow and said, 'We have to bring these deficits down very dramatically. And that’s going to require some very hard choices.'

"These aren’t even nondenial denials. The Obama advisers are laying the groundwork for taxing the middle class while claiming the deficit made them do it."


Consumer bankruptcy filings reach highest monthly total since 2005 bankruptcy law overhaul

After a period of relatively low bankruptcy filings during 2006-07, U.S. consumer bankruptcies rose sharply in 2008 and continue to climb in 2009. Consumer filings reached 126,434 in July, the highest monthly total since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was implemented in October 2005, and pushed the consumer total for the first seven months of 2009 past 800,000 filings.

ABI Executive Director Sam Gerdano expects the consumer filing total to top 1.4 million in 2009, reflecting the sustained and growing financial stress on U.S. households. "Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year," he said.

Cash for clunkers a tremendous victory for the American economy (Rep. Dale Kildee)

When we passed the cash for clunkers legislation back in June, I said that it would provide a much needed boost to our auto industry, clean up our environment, help us achieve energy independence and stimulate our economy as a whole. After just one week, this program is already proving to be a tremendous victory for the American economy, and there is no better proof of success than success.

Thousands of Americas have utilized this program to buy roughly 250,000 new, more fuel efficient vehicles and our auto manufacturers are seeing a surge in sales as a result. This unprecedented response from consumers is proof that the government can successfully stimulate the economy.


Clunkers: Still not enough answers

I’m floored at the pace with which the House of Representatives acted to dump more money into the Car Allowance Rebate System, or “cash-for-clunkers.” Before it was even clear to me what was happening with the money, the House had taken $2 billion from a program for loan guarantees to support renewable energy.

Even stranger is how quiet the National Highway Traffic Safety Administration (NHTSA) has been on the performance of the program. Dealers and auto manufacturers are waving estimates of transactions completed and fuel economy gains made through the program, but NHTSA has been on the sidelines, failing to use its data on the completed transactions to confirm or deny dealer claims. If the program were the roaring success that everyone has been claiming, wouldn’t NHTSA be the first in line to take the credit?