Restoring a Strong Economy That Works for All Americans
As I travel across Iowa, it is painfully clear to me that the current downturn in the economy - not to mention rising gasoline and food prices - is taking a major toll on people, especially working families and seniors. It’s not just that people are having a tougher time paying bills and making ends meet. There is also a more general anxiety created by a drumbeat of bad news about job losses and foreclosures. A growing number of Iowans are losing their homes. And when that "For Sale -- Foreclosure" sign goes up, in one homeowner’s yard, it can bring down the value of every house in the neighborhood.
I certainly don’t want to minimize the real pain that people are feeling, but Iowans are not ones to wallow in pessimism and despair. There are plenty of things we can do to correct the mistakes and excesses of the recent past, and reclaim control of our economic destiny in the United States. First, however, we need to squarely confront the problems that have developed in recent years.
For starters, the U.S. economy has become an economy driven by debt and often irresponsible borrowing at all levels - and there is a price to be paid for this. The worst offender is the federal government. By late 2000, the U.S. was running large surpluses, and we were on track to completely eliminate the national debt within the decade. But, under the current Administration, that positive prospect has disappeared. In just seven years, largely due to unaffordable tax cuts and the Iraq war, the current Administration has run up trillions of dollars in deficits and new debt, and there is no end in sight. This has weakened the dollar, which is a major reason for the run-up in oil and gasoline prices. And it puts upward pressure on long-term interest rates, which is bad for businesses, and hurts credit-card borrowers and people who hold adjustable-rate mortgages.
Meanwhile, banks and others have engaged in aggressive - some call it "predatory" - lending practices. No question, some borrowers bought homes they knew they could not afford. But millions of others were taken advantage of - saddled with mortgages they didn’t understand and that were made on unfavorable terms. Financial institutions then packaged these shaky mortgages into securities that they sold to investors and speculators. These practices created a ticking time-bomb of bad debt that is now exploding across the entire U.S. and world economy.
Finally, we have grossly neglected necessary investments in our nation’s infrastructure. We have spent untold billions of dollars on schools, hospitals, roads and bridges in Iraq. But our neglect here at home is increasingly showing up in collapsing bridges, crumbling schools, and antiquated locks, dams, and levees.
Putting the Economy Back on a Solid Footing
Congress is acting aggressively to stimulate the economy and extend relief to struggling homeowners, but we can and must do much more.
In January, Congress passed a $168 billion economic stimulus package that will provide $600 for individual taxpayers and $1,200 for couples (eligibility phases out for higher-income workers). Very-low-income workers, as well as most senior and disabled veterans will be eligible for payments of $300. As these checks arrive in the spring, they will boost consumer spending and give the economy a shot of adrenaline. In early April, the Senate passed legislation to help millions of homeowners at risk of foreclosure.
However, as this adrenaline wears off, we need to do much more to restore sustainable growth and vitality to our economy. For example, we need to strengthen the safety net by improving the food stamp program and extending unemployment insurance. And to create new jobs immediately, we need to accelerate current federal infrastructure construction projects, and get new projects in the pipeline as soon as possible. We also need to take a hard look at the realities faced by the middle class and do more at the federal level to help working families now and as they prepare for retirement.
Providing Targeted Assistance
Addressing the Home Foreclosure Crisis
Thousands of Iowa homes are in foreclosure. And each abandoned home reduces the value of all the surrounding homes. At the same time, the entire economy is hurt when the home-construction industry is in recession. While individual buyers should be held accountable for buying a home they simply could not afford, financial institutions also need to be held accountable for questionable lending practices and risky packaging of sub-prime mortgages into untested financial products.
To prevent these abuses in the future, I have cosponsored the Foreclosure Prevention Act. This legislation seeks to help struggling families remain in their homes by expanding refinancing opportunities and allowing for the modification of mortgages on primary residences in bankruptcy in some cases. Of the two million homeowners facing foreclosure, an estimated 600,000 would receive relief under this bill. This is good news, and not just for those who will get to keep their home. We all have a stake in mitigating this crisis, which is a clear and present danger to our economy.
The bill would also provide funding for agencies like the Iowa Finance Authority so they can provide direct assistance to people who need to refinance their mortgages. It allows distressed borrowers to renegotiate the mortgages on their homes during bankruptcy proceedings - an option that is currently allowable on vacation homes and family farms. Many Americans are facing situations where they are trapped in mortgages with sky-high interest rates, and have no choice but to forfeit their homes.
If you are personally having difficulty with your mortgage, I urge you to contact one of my Iowa offices.
Unemployment and Unemployment Insurance
Many workers are already suffering from the downturn, and we need to respond more aggressively. The people most in need are those who have lost their jobs. Recent numbers from the Department of Labor show a dramatic increase in the number of long-term unemployed Americans, as well as a sharp increase in the amount of time that it took unemployed Americans to find a new job. That’s why I am an original cosponsor of the Emergency Unemployment Compensation Extension Act to temporarily extend unemployment benefits to an additional 20 weeks, plus 13 weeks on top of that in states with unemployment over six percent. I am also a sponsor of the Unemployment Insurance Modernization Act to recognize today’s workplace realities by providing unemployment to part time workers.
Food Stamps
I regret that the Economic Stimulus Package did not do more to provide direct assistance to needy families by reforming the food stamp program and providing a boost in direct food assistance. After all, a gallon of milk now costs more than a gallon of gas in many places. And while families seek to find alternatives to driving, there are no alternatives to eating. Not only is expanding food assistance compassionate, it makes solid economic sense. Every dollar spent on food stamps creates $1.73 in new economic activity, because food stamp recipients spend every penny of benefits that they receive, and they spend that money overwhelmingly on food that is produced, packaged, and transported here in the United States. And when food stamp recipients get more generous benefits, this frees up money for them to spend on housing, transportation, day care, and other things that stimulate the broader economy.
Infrastructure Investments:
I believe that the single best way that we can stimulate the economy is by making investments that will put people to work right away. This will boost consumer spending and help put our country on solid ground for the future. We can do that by accelerating construction of buildings and other infrastructure projects that the government needs to complete in the next several years. In the Department of Agriculture alone, there is a $1 billion backlog of approved water and sewer projects awaiting funding. Similarly, new roads, bridges, courthouses, and schools across the country are approved and ready to go, but awaiting funding. Let’s do the work now, when the economy needs a boost!
Another infrastructure investment I strongly support is the creation of a federal school modernization fund to repair and upgrade thousands of schools across America. I have done this on a smaller scale in Iowa with the Harkin School Construction Grant program. Between 1998 and 2007, these grants have provided $120 million in federal dollars to the Iowa Department of Education to make competitive grants for school renovation and construction. Because the grants require a local match, over $700 million has been leveraged for construction and repairs in more than 260 school districts across Iowa. These are investments that we need to make for our children’s future. Let’s make them now.
The Economic Stimulus Act also provides short term tax incentives for businesses to stimulate the economy and create jobs this year. By allowing larger tax write-offs for capital investments by small businesses, and by increasing the amount of depreciation that can be claimed for purchases of new equipment and machinery this year, the bill seeks to keep American business growing investing and purchasing, and along with that to create new jobs.
Creating a Solid Foundation for the Future
As much as we need to work on measures to boost the economy in the short term, equally important is the need to ensure the long term prosperity of our working families. Fundamentally, I believe we need to undo the failed economic policies of the Bush Administration, repeal the unaffordable tax cuts for the wealthiest Americans, and rededicate ourselves to tax policies that help working people and middle-class families. In addition, we need to do more to ensure that a college degree, which has become a necessity not a luxury, remains affordable. And we need to help Americans to build and manage retirement savings.
College Affordability
A college education is becoming both more important and less affordable with each passing year. The cost of tuition at public and private universities has skyrocketed some 40 percent over the last six years. As a result, Iowa students now graduate with an average of almost $23,000 in student-loan debt, the sixth highest rate in the country. We rely on the availability of federal grant aid to increase access to higher education, but that grant aid has failed to keep pace with inflation.
In 2007, I was able to increase the maximum Pell Grant amount by $250 - the first increase in seven years. The College Cost Reduction Act, a top priority of the new majority in Congress, was signed into law in 2007. It builds on my success by providing additional increases in Pell Grants over the next five years, funded by cutting the excessive subsidies paid to private lenders. More critically it brings much-needed relief to recent graduates by capping loan payments at 15 percent of discretionary income and providing new loan-forgiveness programs for Iowans and others who enter public service careers including teaching, nursing, and law enforcement.
It is a top priority of mine to ensure that a college degree - and the greater skills, higher salary, and better employment opportunities that come with it - is within reach of every American.
Policies that Reflect Middle Class Family Values
Over the past 40 years there have been huge changes in our workforce. Most mothers work and the balance between work and family is difficult. An entire generation is facing the dual responsibility of caring for aging parents and growing children. Yet our tax policies and our workplace policies have not kept pace with these realities.
I strongly support new efforts to increase tax credits for those struggling with the costs of dependent care, both for children and aging parents. I also believe we need to build on the success of the Family Medical Leave Act by providing workers with paid sick leave. I am a sponsor of the Healthy Families Act, which would require businesses employing more than 15 people to provide seven paid sick days. Current estimates are that 50 percent of private-sector workers and 76 percent of low-income workers do not have paid sick leave. A recent study showed that people coming to work when they are ill cost businesses $180 billion annually in lost productivity. I believe that parents should have the ability to take their sick child to the doctor, and workers should have the ability to take care of their own health without worrying about losing pay or being fired for an absence.
More fundamentally, I believe that we need to examine ways to create a more flexible workforce in order to take best advantage of our amazingly talented and productive workers. Not only are we making it unnecessarily difficult for families with obligations to care for children and aging parents, the tremendous experience and productivity of the baby boom generation may be lost to retirement if we cannot find ways to allow these older workers to keep working on their own terms. Technology has made working at home and outside the regular bounds of the nine-to-five work day feasible, yet there has been almost no change in how our workplaces are structured that reflects these changes. I believe that it is past time to begin examining how we can do more to promote options such as flexible hours, with workers putting in eight-hour days outside of the traditional nine-to-five window; part-time opportunities where workers put in fewer hours to accommodate family demands, education or lifestyle; job sharing where two individuals work part time while sharing one job; and telecommuting.
Protecting and Building Retirement Security
The current economic crisis poses unique challenges for retirees and those planning for retirement in the near future. The decline in home values and home equity, combined with rapid downturns in the stock market, are making it extremely difficult to plan properly for retirement just as the first wave of baby boomers is approaching retirement age. The challenges retirees face make it even more critical to ensure that the Social Security safety net remains intact and that the pensions that people have paid into, and are depending upon, remain available to them.
Protecting Retirement Investments
Many people don’t realize that a small administrative difference, such as a single additional percentage point in pension plan fees over the 30 years that they are investing, can cut their final account balance by as much as 25 percent. That’s a lot of money when it comes time to retire! I have introduced the Defined Contribution Fee Disclosure Act of 2008 which would provide 401(k) plan participants with easily understandable information about the fees that they are paying both before employees pick the plans they want to invest in, and on their quarterly statements.
Protecting Social Security
Since 1935, Social Security has provided seniors in Iowa and across the country with a stable income in their retirement years, as well as valuable insurance in case of disability. With the looming retirement of "baby boomers," a large burden will be placed on Social Security, and we will need to work together on common sense reform to address this problem before 2041. But Social Security is not "broken," and any changes must ensure that every American continues to be able to rely upon the absolute guarantee of Social Security rather than see forced reductions in payments of up to a third even for those who opt not to risk money in private accounts.
While some have argued that at least partial privatization of the Social Security program is the solution to providing payments to a larger group of retirees, could not disagree more strongly. These proposals simply would not provide the same stable benefits the current system provides, with even those opting not to utilize a private investment account seeing a 30 percent cut in benefits. This would have an especially troubling effect on the disabled, for many of whom Social Security disability is their only source of income.
Ensuring Pension Fairness
Today, more and more corporations, even those with a healthy bottom line, are telling workers that the company can no longer afford to provide them with the benefits they had been promised by their traditional pension plans. Massive corporate fraud like those that occurred in the cases of Enron and Worldcom have also unfairly impacted employees and retirees who believed their pensions were secure. I was pleased to support the Pension Protection Act of 2006 that required employers do a better job of funding pension plans and made it more difficult for companies to default on their pensions by turning then over to the government Pension Benefit Guaranty Corporation (PBGC). I also led the charge in Congress to protect older workers who got caught up in unfair conversions from traditional pensions to cash-balance plans, and I was pleased that this law now requires companies to continue to pay into workers’ pensions during the conversion. These were important changes but I believe that more needs to be done to protect and improve pensions for hardworking Americans.
Some of those same companies underfunding their pension funds are providing their executives with pensions, salaries, and benefits that would have made Midas blush. To address this imbalance, I have introduced the Restoring Pension Promises to Workers Act, which requires that if a company is profitable enough to afford gold-plated pensions for its executives, then it must provide at least a basic pension for rank-and-file employees.
