May 7, 2007

Middle-Class Life Under Bush: Less Affordable and Less Secure

For millions of hard-working, middle-class families, life under the Bush presidency has grown less affordable and less secure. President Bush's record of fiscal incompetence and mismanagement, and Republicans' close ties with special interests, have helped lead to both lower wages on the one hand and skyrocketing costs for basic necessities like gas, health care, and college tuition on the other. Unfortunately, instead of producing solutions to the problems facing the middle class, Bush Republicans have ignored them and pushed for policies that would make matters even worse.

The Democratic Policy Committee (DPC) has released an updated fact sheet: Middle-Class Life Under Bush: Less Affordable and Less Secure. The fact sheet includes information on how America's middle-class families are being squeezed by declining income and fewer job opportunities:

While families work harder, their wages continue to decline. Middle-class families are working harder and earning less today than they were at the start of the Bush Administration. According to the Wall Street Journal, "Since 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."[13] Median household income, adjusted for inflation, has declined $1,273 from $47,599 in 2000 to $46,326 in 2005.[14]

The real median earnings of both male and female full-time, full-year workers declined between 2004 and 2005 by 1.8 percent and 1.3 percent, respectively.[15] Median weekly earnings have risen only 0.9 percent between 2000 and 2006 compared with 7.1 percent growth between 1996 and 2000 under the Clinton Administration.[16]

Meanwhile, employment compensation has lagged behind productivity gains. While the productivity of the American worker rose by 17.5 percent between the first quarter of 2001 and the fourth quarter of 2006, real compensation per hour increased by only 8.7 percent.[17] In the first quarter of 2007, productivity in the non-farm business sector further improved by 1.7 percent, while real weekly earnings increased by only 1.2 percent.[18] Therefore, Americans have worked harder - and more productively - for their families, but are not receiving the proportionally increased rewards for their hard work.

Earnings for workers with college degrees declining. The LA Times has reported that: "Wage 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."[19]

Worst job creation record since Hoover Administration. A growing economy should be good news for those seeking jobs. But over the course of President Bush's term in office, his Administration has the worst overall job creation record since Herbert Hoover more than 70 years ago.[20]

Overall non-farm payroll employment has increased by just 5.2 million since President Bush took office in January 2001 compared with 22.7 million during the Clinton presidency. Overall employment growth has averaged just 70,000 per month under President Bush - much lower than the approximately 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 under previous Administrations. [21]

Private sector job creation has been especially poor during the Bush presidency, with an average annual job growth rate of only 0.5 percent per year since 2001.[22] Just 3.8 million private sector jobs have been created during the Bush presidency, compared with over 20 million private sector jobs during the Clinton presidency.[23]

The manufacturing sector, often the source of jobs with good pay and benefits, has lost three million jobs since the start of the Bush Administration.[24] Nearly half of the jobs created since 2001 were part-time and freelance positions without benefits.[25] This slow pace of private sector job creation is particularly troubling given that we are so far into the economic recovery.

Unemployment has increased 7.1 percent and long-term joblessness has nearly doubled. In part because of this failure to create a sufficient number of jobs, the national unemployment rate stands at 4.5 percent,[26] which is 7.1 percent higher than the 4.2 percent rate when President Bush took office. Unfortunately, once unemployed, America's workers also are staying unemployed longer. In 2006, over one in six of the unemployed had been out of work for more than 26 weeks.[27] The number of long-term unemployed has increased by 61 percent since President Bush took office.[28]

Bush's deficit-financed tax cuts have widened the income gap between millionaires and middle-class workers. In testimony before the Congress, Federal Reserve Chairman Ben Bernanke warned against rising income inequality: "[T]o the extent that incomes and wealth are spreading apart, I think that is not a good trend."[29] Bernanke's predecessor as Federal Reserve Chairman, Alan Greenspan, expressed similar concerns in congressional testimony in July 2004.[30] In January 2007, for the first time, President Bush finally acknowledged that "income inequality is real; it's been rising for more than 25 years."[31] The Wall Street Journal, however, has attributed the widening income gap to President Bush's tax policies: "[I]t appears that the highest-salaried workers - executives, managers and professionals - are widening their lead on the typical worker...The Bush tax cuts appear to have widened the income gap, according to many analyses."[32]

In fact, President Bush's capital gains and dividends tax cuts will cost $197 billion over ten years, with most of the benefits going to multimillionaires. In an analysis by the Tax Policy Center, economists found that the immediate effect of the Bush tax cuts has been "skewed in favor of those with high incomes," benefiting the most wealthy households the most.[33] In 2006, for example, "families making more than $1 million a year saw their after-tax income increase by 6 percent because of the tax cuts, while families making $40,000 to $75,000 saw after-tax income rise by about 2.5 percent."[34]

More American families and children face severe financial problems. The average annual increase in the poverty rate during President Bush's first term is second only to that during George H.W. Bush's administration and contrasts sharply with the declines in the Clinton and Kennedy-Johnson Administrations.[35] The poverty rate has increased 12 percent to 12.6 percent since 2000.[36] Nearly thirty-seven million Americans were living in poverty in 2005,[37] an increase of 5.4 million over the 2000 level, the year before President Bush took office.[38] 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.[39] The number of children living in poverty has increased 6.5 percent during the Bush Administration.[40]

Middle-class families, and our nation, deserve better. President Bush should join Democrats in helping middle-class families. From the report:

Democrats are working to ensure fair prices for Medicare prescription drugs and improve the drug benefit for beneficiaries.  When it comes to the Medicare prescription program, Democrats want to put seniors, people with disabilities, and taxpayers first.  Democrats are seeking to eliminate the current-law prohibition on drug price negotiations in order to help ensure that all people with Medicare have access to the fairest prices for their medicines.  Unfortunately, to date, Republicans have sided with special interests, and blocked the legislation through a filibuster.

Democrats will work to provide Americans with more sustainable and affordable sources of energy.  Democrats are working to pass legislation that will enhance America's security by reducing the nation's dependence on foreign and unsustainable energy sources and the risks of global warming by requiring reductions in greenhouse gas emissions; diversifying and expanding our use of secure, efficient, and environmentally friendly energy supplies and technologies, by repealing tax giveaways to big energy companies; reducing the burdens on consumers of rising energy prices; and preventing energy price gouging, profiteering and market manipulation.

The Democratic Senate has rejected funding cuts to energy and environment programs.  Democrats took a first step toward a national energy policy that promotes energy independence, protects the environment, and confronts global climate change by increasing funding for energy and environment programs in Fiscal Year 2007.  H.J.Res. 20, the Revised Continuing Appropriations Resolution, 2007, increased funding for basic science research at the Department of Energy by $200 million and for energy efficiency and renewable energy programs by $300 million.  Efficiency and conservation are the cheapest and fastest ways to reduce energy costs and greenhouse gas emissions.

In theS. Con. Res. 21, the Fiscal Year 2008 Senate Budget Resolution, Senate Democrats increased funding for energy and environmental programs, which have sustained dramatic cuts during the Bush Administration.  Among many other cuts, the Bush Administration reduced funding for clean water, public lands, oceans, climate research, energy efficiency and conservation, and energy cost assistance for low-income Americans.  While the Administration has cut these important programs, the President, in his 2008 Budget Request, failed to repeal lucrative subsidies for oil and gas companies.

Democrats will raise the minimum wage.  In February, after a ten year battle, both houses of Congress have passed versions of H.R. 2, the Fair Minimum Wage Act of 2007.  The bill, which will raise the federal minimum wage from $5.15/hour to $7.25/hour in three steps over two years, will benefit 13 million workers and help reverse years of wage stagnation without harming the economy.  Of those who would be directly or indirectly benefited, nearly 59 percent are women and 46 percent are their family’s sole breadwinner.  Moreover, this raise of $2.10 per hour will benefit well-over six million children whose parents will receive an increase in earnings.  As the House and Senate work to clear the bill for the President’s signature, the nation can be assured that Democrats are dedicated to giving workers their long overdue raise.

Democrats will restore fiscal responsibility to Washington, while providing tax relief to the middle class.  As an important first step in restoring our nation’s fiscal security, S. Con. Res. 21 would bring the budget back into balance by 2012.  Under the resolution, gross debt as a share of gross domestic product will begin to fall after 2009.  And spending as a share of gross domestic product will decline in every year after 2008.  The plan also restores crucial budget enforcement provisions such as strong pay-as-you-go (PAYGO) budget rules that proved to be highly effective in promoting fiscal discipline and producing record surpluses in the 1990s.  In addition, the budget calls for providing meaningful tax relief to the middle class.

Democrats are also working to eliminate unfair tax burdens on middle-class Americans.  Skyrocketing health care, education, housing, and gas costs have placed middle-class families in a tight economic squeeze.  Making matters worse, more and more of these families are being forced to pay the Alternative Minimum Tax (AMT), which was originally intended only for the super-wealthy to ensure that they paid a minimum tax.   S. Con. Res. 21 includes AMT relief for middle-class taxpayers, to prevent millions of Americans from being subjected to the tax.

Click here to read the full report. You can also read other reports from DPC by going here.

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