Many hard-working American families are struggling to keep their heads above water because costs for essentials like gasoline, health care, and college tuition are soaring, while home values decrease and incomes remain stagnant.  While Senate Democrats cannot turn around seven years of Bush Republican policy overnight, we have taken important first steps to make the American Dream affordable again.  Democrats will continue to fight to address the core issues that concern middle-class families with initiatives that respond to:

 

• Historically high gas prices: addressing the root causes of high gas prices by stopping tax giveaways to Big Oil and forcing them to change their ways;

 

• Housing affordability: helping families keep their homes and stopping the slide in home values that has sapped family savings and wealth;

 

• College affordability: making college more affordable so that a new generation of Americans can obtain the education they need to compete in the 21st century; and

 

• Skyrocketing health care costs: controlling health care costs and securing guaranteed, quality, affordable health coverage for all Americans.

 

Democrats are Committed to Lessening the Burden That High Gasoline Prices are Putting on Families

 

For more than seven years, Bush Republicans entrusted our nation's energy policy to Big Oil; the resulting damage to U.S. taxpayers and our national security has been extensive.  Big Oil has reaped the benefits from this failed Bush Republican policy by making $123 billion in profits in 2007 and over $600 billion during the Bush Administration at the same time that families are paying record gasoline prices at the pump.  At the same time, Big Oil has spent approximately $185 billion on stock buybacks since 2002 rather than making meaningful investments in clean alternative fuels, new refinery capacity and utilization, and renewable forms of electricity.

 

Senate Democrats have proposed a more responsible energy policy that would put consumers first, force Big Oil to pay its fair share, and invest in renewable energy.  The Consumer-First Energy Act of 2008 (S. 2991), which was introduced by Majority Leader Reid on May 7, 2008, includes the following provisions:

 

Windfall profits tax.  The Consumer-First Energy Act of 2008 would create a tax on the "windfall profits" of the major oil companies at a special supplemental rate of 25 percent.  Companies could avoid this tax by investing in clean, renewable energy.  The bill would also eliminate the deduction for domestic production that the major oil and gas companies use to reduce their taxable income from the sale, exchange, or other disposition of oil and natural gas. The legislation would tighten the rules restricting the use of foreign tax credits on oil- and gas-related income. All revenue collected from the windfall profits tax and the elimination of unnecessary tax breaks would be deposited into an Energy Independence and Security Act Trust Fund.

 

Price gouging.  The Consumer-First Energy Act of 2008 would provide the President, the Federal Trade Commission, and state Attorneys General with the tools necessary to investigate potential price gouging during energy emergencies.  Specifically, the legislation would:

 

•      Give the President the authority to declare a temporary national energy emergency in instances where the President determines that a threatened or existing disruption of oil, petroleum, or biofuel supplies or significant pricing anomalies constitute a danger to the health, safety, welfare, or economic well-being of the citizens of the United States.  This is similar to the emergency authority provided to Governors under many state statutes; and

 

•      Upon declaration of an energy emergency, price gouging will be prohibited and punishable by federal civil and criminal penalties.  This provision is modeled after anti-price gouging legislation in at least 30 states.  The legislation would also empower state Attorneys General with the authority to bring a civil action on behalf of citizens for price gouging during an energy emergency.

 

Strategic Petroleum Reserve (SPR).  The Consumer-First Energy Act of 2008 would require the Secretary of Energy to suspend acquisition of petroleum for the SPR through 2008, including through the direct purchase or royalty-in-kind contracts.  It allows the Secretary to resume filling if the price of petroleum falls to $75 per barrel.  The Senate passed this provision as an amendment to the Flood Insurance Reform and Modernization Act by a vote of 97 to 1.  Filling of the Strategic Petroleum Reserve takes 70,000 barrels of oil off the market each day and a temporary suspension could reduce gas prices by about 5 cents.

 

No Oil Producing and Exporting Cartels (NOPEC).  The Consumers-First Energy Act of 2008 would amend the Sherman Antitrust Act to allow the Attorney General to bring enforcement actions against any country or company that is colluding in setting the price of oil, natural gas or any petroleum product. Additionally, it would seek to address OPEC state claims that their anti-competitive behavior has sovereign immunity from U.S. courts due to a court ruling in 1979.  The bill would not authorize private lawsuits against OPEC.

 

Market speculation.  Speculation from the financial traders of crude oil, without adequate oversight and consumer protection, has led energy experts to believe that these traders are driving increases in the price of oil. The Consumer-First Energy Act of 2008 would amend the Commodity Exchange Act to limit the price impacts of excessive speculation by preventing traders of U.S. crude oil from routing their transactions through off-shore markets in order to evade speculation limits and also impose reporting requirements.

 

The bill would also require the Commodities Futures Trading Commission to substantially increase the margin requirement on crude oil future trades within 90 days to limit excessive speculation and protect consumers.  The current margin requirement varies between five and seven percent which essentially means that a commodity trader can control $10 million worth of future oil contracts by only putting $500,000 to $700,000 down.

 

Energy Price Impacts on Consumers

 

•      Gas prices have eclipsed $3.70 (a 155 percent increase since President Bush took office).  The average American household spent nearly five percent of its income on gasoline when the price per gallon of gas was only $1.51 in 2001. Now, after adjusting for inflation, Americans spend more than twice as much per gallon.  A new poll indicates that 60 percent of Americans are cutting spending because of rising gas prices.  Additionally, half of households with incomes below $20,000 say they face severe hardships because of soaring gas prices.

 

•      Diesel prices have increased from $1.51 to $4.33 (a 187 percent increase since President Bush took office).  The average independent truck driver can expect to spend an estimated $110,000 on fuel in the next year alone-up from $36,400 in 2001.

 

•      The ten largest air carriers have seen their jet fuel costs increase by $3.2 billion in the last fiscal quarter ($9.6 billion for first quarter of Fiscal Year 2008 versus $6.4 billion for the fourth quarter of Fiscal Year 2007).  The Los Angeles Times reported on May 13, 2008, that "the airlines are tacking on hundreds of dollars to some airfares to recover the expense of escalating fuel costs. Last week fuel charges on some domestic round-trip tickets climbed to $130."  Airlines have also raised airfares ten times since mid-December, often because of fuel costs.

 

•      Utility bills are also placing a larger burden on families, especially lower-income families, and it is estimated that at least 5.8 million households will have received grants from the Low-Income Heating Energy Assistance Program (LIHEAP). This is the highest number in 16 years; and

 

•      Americans have padded the treasuries of OPEC countries with almost $100 billion more in taxpayer dollars more in 2007 than in 2001($140 billion versus $41 billion).

 

Democrats are Committed to Helping American Families Weather the Housing Storm

 

Years of abuse by the mortgage lending industry and under-regulation by the Bush Administration have resulted in a housing crisis of epic proportions that is crippling the entire American economy. Two million Americans are estimated to be at risk of losing their homes to foreclosure. Worse, nearly 45 million of their neighbors are seeing their property values decline as houses are foreclosed on around them. Towns and cities across America, especially those already vulnerable, are experiencing business closings, increased crime, and an undermined tax base due to the abandonment of their once bustling neighborhoods.

 

Unwilling to stand by as millions lose everything, the Democrat-led 110^th Congress worked quickly to lessen the squeeze on American homeowners nearing or facing foreclosure by providing additional funds for foreclosure counseling in appropriations for Fiscal Year 2008, expanding refinancing opportunities in the economic stimulus package, and reform the tax code to ensure borrowers are not penalized when their mortgages are modified.

 

The Senate has passed additional legislation to comprehensively address the nation's housing woes, including measures to:

 

•      provide even more funding for foreclosure counseling to help families avoid foreclosure and stay in their homes;

•      reform the Federal Housing Administration to expand opportunities for affordable home loans;

•      provide emergency assistance to help communities redevelop abandoned and foreclosed homes; and

•      improve loan disclosures to help families avoid bad loans in the future.

 

Moreover, this week, the Senate Committee on Banking, Housing, and Urban Affairs passed out of committee the Federal Housing Finance Regulatory Reform Act of 2008, which would reform the regulation of government-sponsored enterprises (GSEs) to ensure their ability to better provide Americans in need with affordable housing financing options. 

 

While Democratic Senators are working to address the nation's housing crisis, President Bush and some Senate Republicans have resorted to obstructionist tactics aimed at blocking or delaying passage of these and other critical pieces of legislation to help Americans buy a home and keep a home. Nevertheless, Democrats remain undeterred. As we move forward in the 110^th Congress, the American people can count on Democrats to work in a bipartisan manner to protect the dream of homeownership for this and future generations. It is our hope that Republicans will join us in this effort.

 

Abuses in the mortgage market have led to an increase in delinquencies and home foreclosures. Subprime mortgages once helped millions of Americans, most with limited or blemished credit, achieve the American dream of homeownership. These loans also helped millions more homeowners, many of whom were older Americans with good credit, but on fixed incomes, refinance their homes. Unfortunately, while many lenders and brokers offered these mortgages fairly and responsibly, many others engaged in abusive and predatory lending practices, using aggressive tactics to deceive vulnerable borrowers into "exploding" adjustable-rate mortgages (ARMs) they could never afford, trapping them in high-cost loans with costly pre-payment penalties, and then immediately selling-off the loans to investors.

 

Other actors contributed to the mortgage mess as well. Appraisers, under pressure from lenders, inflated home values, which resulted in "upside down" mortgages where a homeowner owes more than the house is worth. Unscrupulous mortgage servicers charged borrowers excessive fees and routinely posted payments late to mortgage holders, which resulted in additional fees and made it nearly impossible for borrowers to pay down their interest and principal. Moreover, Wall Street investors, who purchased these loans from lenders, created a perverse incentive structure in which lenders were paid more for selling risky loan products to unsophisticated borrowers. Worst of all, the Bush Administration's laissez-faire regulatory approach to the marketplace resulted in regulators turning a blind-eye to the out-of-control mortgage market.

 

This "perfect storm" has resulted in a personal and financial nightmare for millions of American homeowners. The Center for Responsible Lending estimates that from 2003 to 2006 the percentage of subprime mortgages relative to all mortgages jumped by 20 percent, with 89-93 percent of all subprime mortgages made from 2004 to 2006 containing exploding ARMs. Many of these loans will reset in the next two to three years, with monthly payment increases ranging from 30 to 50 percent. As these loans adjust higher and higher, homeowners will be pushed closer and closer to losing their home - their most important asset - to foreclosure.

 

America is experiencing the worst mortgage crisis in decades. In March 2008, the Mortgage Bankers Association reported that foreclosures in the fourth quarter of 2007 were at their highest level on record and the percentage of homeowners currently behind in their payments was at its highest level in 21 years. Subprime ARMs, representing 42 percent of foreclosures, are the biggest part of the problem, but prime adjustable-rate loans, representing 20 percent of new foreclosures, are problematic as well. Given that more and more ARMs are scheduled to reset to a higher rate in the coming months, trapping an estimated two million homeowners in foreclosure and representing $165 billion in lost equity, this upward trend is very alarming.

 

And while much of the discussion has been on foreclosures, even families who manage to forestall losing their homes find themselves living on a financial "banana peel." More than one million borrowers with subprime or other exotic mortgages are 60 or more days delinquent on the mortgage payments. Thus, combined with the two already facing foreclosure, Moody's estimates that three million home loans will default over the next two years.

 

Minority communities are among the hardest hit by high-cost lending. Through the many hearings held during the 110th Congress, and the many criminal investigations launched, on the issue of subprime mortgage lending, it has become clear that a considerable number of mortgage brokers targeted subprime and exotic loan products to minority and elderly borrowers, even those with high incomes who would have qualified for a prime mortgage with better terms. According to the Center for Responsible Lending, in 2005 and 2006, more than 50 percent of all mortgage loans sold to African-Americans and 40 percent of those sold to Latinos were higher-cost subprime loans. And according to the National Association of Realtors, the use of subprime loans among Asian Americans grew by 181 percent from 2004 to 2005. As a result, minority communities have been disproportionately impacted by rising foreclosure rates.

 

Subprime borrowers are not the only victims of this crisis, neighbors, communities, and new home buyers are feeling the crunch. 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 within their neighborhood. The U.S. Conference of Mayors recently reported that the nation may lose $1.2 trillion in property values in 2008 due to the current housing crisis. A study of home prices in the Chicago Metropolitan area estimated that a single home foreclosure lowered the value of homes located within a one-eighth mile area by 1.5 percent, which equals approximately $3,000 in that market, in other markets that cut may be closer to $5,000, affecting 45 million homes.

 

Moreover, the resulting credit crisis in the mortgage markets is making safe, affordable mortgages less available for aspiring homeowners or borrowers in need of a refinancing alternative. A Federal Reserve study found that approximately 40 percent of lenders have increased loan standards for even the most creditworthy borrowers. As a result, the American dream of owning a home is becoming less and less of a reality for many Americans.

 

The subprime mortgage crisis has hardly been contained to the housing industry. There is no doubt that the housing industry, including the home construction industry, has been negatively impacted by the nation's housing crisis. A recent report from the National Association of Realtors showed that the inventory of unsold homes is rising rapidly from 4.5 in 2005 to 10.0 in August 2007; and the Department of Commerce reported that new single-family homes sales fell 4.7 percent in December 2007, a nearly 26 percent drop over the year, as Americans are finding it more difficult to purchase homes even as home prices have dropped. Nonetheless, despite earlier assertions by the Bush Administration and Wall Street analysts that the nation's housing woes would be contained to the housing industry, a variety of other industries are also being affected, including the retail and transportation industries.

 

Senate Democrats are committed to ensuring that Americans can buy a home - and keep a home. With housing agencies, homeowner advocacy groups, many in the private sector, and the American people at our side, Democrats have proposed a series of measures aimed at comprehensively addressing all aspects of the housing crisis in an effort to help as many homeowners as possible and begin repairing the American economy.

 

Congress overwhelmingly passed an economic stimulus package to help alleviate the squeeze on American homeowners. In February 2008, Congress passed and the President signed into law the Recovery Rebates and Economic Stimulus for the American People Act (P.L. 110-185), which should help jumpstart the stalled economy by providing rebate checks to eligible single, married, and elderly Americans, providing tax relief for American businesses, and helping families avoid foreclosure by expanding financing opportunities. Specifically, the law would:

 

•      Temporarily increase conforming loan limits for single-family homes from Fannie Mae and Freddie Mac to 125 percent of the area median home price (with a maximum of $729,750) in an effort to increase credit availability in the mortgage market; and

 

•      Temporarily increase the Fair Housing Administration loan limit to 125 percent of the area median home price (with a maximum of $729,750), which would expand affordable mortgage loan opportunities.

 

The Democrat-led 110^th Congress has also:

 

•      Passed, and the President signed into law, the Mortgage Debt Forgiveness Relief Act of 2007. This new law (P.L. 110-142) offers tax relief to Americans facing foreclosure by providing a three-year exception for debt forgiveness on home loans and extends a provision that allows homeowners to deduct mortgage insurance payments from their taxable income; and

 

•      Provided $180 million for foreclosure-avoidance and loss mitigation services in the Consolidated Appropriations Act, 2008 funding for the Department of Housing and Urban Development (P.L. 110-161).

 

The Democrat-led Senate also passed the Foreclosure Prevention Act of 2008 (H.R. 3221). This bill would help struggling families keep their homes by increasing pre-foreclosure counseling funds and expanding refinancing opportunities; and for service members, the bill would increase mortgage foreclosure protections. The legislation would also help communities impacted by foreclosures by allowing localities with high foreclosure rates to access Community Development Block Grants (CDBG) funds to purchase foreclosed properties for rehabilitation, rent, or re-sale. The bill would further extend relief to struggling businesses by making it easier for them to utilize losses incurred in 2006, 2007, and 2008 to offset prior years' income to recoup previously paid income taxes. Looking toward the future, the bill would amend the Truth-in-Lending Act to improve loan disclosures during the original loan and refinancing process so that borrowers, and by extension our nation, never find themselves in this situation again. The measure also encompasses the major provisions of the FHA Modernization Act of 2007.

 

The Senate approved the FHA Modernization Act of 2007 (S. 2338) by an overwhelming 93-1 vote. The bill would strengthen and modernize the Federal Housing Administration (FHA) to help homeowners facing foreclosure obtain safe and affordable home loans. This legislation will address problems in the mortgage market that have shut off funding for home loans, make FHA loans a more viable alternative to the subprime market, and help bring stability to local communities and the national economy.

 

The Senate Banking, Housing, and Urban Affairs Committee recently took the next, most ambitious step in addressing the nation's housing woes by approving legislation to reform GSEs.  On May 20, 2008, the Banking Committee favorably reported the Federal Housing Finance Regulatory Reform Act of 2008.  This legislation would reform the regulation of government-sponsored enterprises (GSEs) to ensure their ability to better provide Americans in need with affordable housing financing options.  Specifically, the measure includes provisions to:

 

•      Establish and empower a new, stricter regulator to monitor Fannie Mae and Freddie Mac;

•      Establish a high cost loan limit of 132 percent (which would currently allow for the purchase of loans up to $550,000);

•      Create the Housing Trust Fund, of which 75 percent of the monies must be used to benefit extremely low-income families, and a Capital Magnet Fund, which will leverage $10 for every dollar contributed by the Fannie and Freddie;

•      Authorize and fund the HOPE for Homeowners Program, which will help 500,000 families keep their homes by providing FHA-guaranteed loans, after lenders agree to write-downs, for troubled borrowers; and

•      Authorize the Federal Home Loan Bank to use affordable housing program funds to refinance single-family first mortgages for households at or below 80 percent of area income.

 

Democrats are Committed to Helping Families Squeezed by Rising College Costs

 

Higher education is becoming increasingly important to achieving the American dream, yet more and more Americans are being priced out of the promise and opportunity that higher education provides.  Democrats recognize that students and their families are struggling to cover the rising cost of college and have made college affordability a top priority.  That is why Congress, under Democratic leadership, has overwhelmingly approved legislation to increase access to higher education.

 

College costs have risen by over 60 percent during the Bush Administration.   Average tuition, fees, and room and board costs at four-year private universities have increased by $10,067, from $22,240 in the 2000-2001 academic year to $32,307 in the 2007-2008 academic year.  Tuition, fees, and room and board charges at four-year public colleges jumped from $8,439 for the 2000-2001 academic year to $13,589 for the 2007-2008 academic year - an increase of $5,150, or 61 percent. (College Board, Trends in College Pricing, 2007).  

 

Moreover, while the federal Pell Grant program has proven to be indispensable for millions of students who might not otherwise have had the financial resources to pursue a college degree, the maximum Pell Grant award has not kept pace with the rising cost of college.  While twenty years ago, the maximum Pell Grant covered 51 percent of the cost of tuition, fees, and room and board at a public four-year college, it covered only about one-third of those costs in the 2005-2006 academic year. (HELP Committee Analysis of Department of Education data)

 

Students struggle with the burden of student loan debt.  More than 60 percent of undergraduates at four-year colleges have to take out loans, and the average amount of federal student loan debt upon graduation has increased from $7,663 in 1992-1993 to $17,400 in 2003-2004.  When private loans are factored in, the average student loan debt in 2003-2004 was more than $19,000. (National Postsecondary Student Aid Study 1993 and 2004, National Center for Education Statistics) These increased debt burdens are affecting graduates' career and personal decisions. 

 

Lenders have been exploiting the student loan system.  While students struggle to pay off their loans, the lenders who offer loans to students have been making record profits.  The federal government has paid large subsidies to lenders who participate in the federal student loan program -- a relic from the program's inception more than forty years ago when it was believed that incentives were needed to encourage lenders to take part in the program.  Moreover, recent investigations have shown that lenders have been exploiting the student loan system, to the detriment of the very students they are supposed to be helping.

 

Under Democratic leadership, Congress passed landmark legislation to make college more affordable.  Under Democratic leadership, Congress overwhelmingly approved the College Cost Reduction and Access Act to increase access to higher education and direct federal dollars to students - where they are needed most.  This landmark bipartisan legislation, signed into law last fall, will:

 

•      Increase student aid for low- and middle-income students. The College Cost Reduction and Access Act provides over $20 billion in new student aid and benefits - the largest increase in student aid since the G.I. bill.  The legislation helps make college more affordable by:

 

o       Raising the maximum Pell Grant by $500 to $4,800, and to $5,400 by 2012, an increase of more than 25 percent over the next five years;

 

o       Simplifying the financial aid process for low-income students by increasing the income level at which a student is automatically eligible for the maximum Pell Grant; and 

 

o       Increasing the amount of student income sheltered from the financial aid calculation process, thereby reducing the existing penalty on students who work.

 

•      Ease the burden of student loan debt.  The College Cost Reduction and Access Act  will helps make student loan debt more manageable by: 

 

o       Capping monthly federal student loan payments at 15 percent of a borrower's discretionary income; and

 

o       Reducing the interest rate on subsidized student loans from 6.8 to 3.4 percent over five years. 

 

•      Reform the student loan system so it works for students, not banks.  The College Cost Reduction and Access Act provides benefits to students at no new cost to taxpayers by reducing excessive lender subsidies and redirecting these funds to students who need it most.  The legislation also establishes a pilot program to encourage market competition among lenders, so that they are not overcompensated for the services they provide to students.

 

•      Increase access to higher education.  The College Cost Reduction and Access Act increases preparation for and access to college.  Specifically, the legislation creates College Access Challenge Grants to increase college outreach activities in every state, and restores funding for Upward Bound, a program that seeks to increase high school completion and college participation and graduation rates among low-income students and first-generation college students.  The legislation also strengthens minority serving institutions, which are responsible for serving many of our nation's minority students who would not otherwise obtain a degree; the College Cost Reduction and Access Act invests an additional $500 million in these institutions.

 

Congress has also passed legislation to protect student borrowers from the turmoil in the U.S. credit markets.  In recent months, problems in the mortgage market have made it difficult for some lenders who participate in the federal student loan program to secure the capital they need to finance college loans.  To help ensure that that access to college loans is not jeopardized by turmoil in the credit markets, Congress passed the Ensuring Continued Access to Student Loans Act, which was signed into law earlier this month.  This legislation will: 

 

•      Increase the amount of federally subsidized loans available to students.  This will reduce students' reliance on higher cost non-federal private loans.

 

•      Provide parents with improved access to low-cost federal loans.  The legislation will improve parents' access to federal "PLUS" loans as alternatives to private educational loans and home equity lines of credit by: 

 

o       Providing for deferral of repayments on parent PLUS loans until the student graduates from school; and

 

o       Allowing parents who are impacted by the mortgage crisis to qualify for PLUS loans.

 

•      Help students access low-cost federal loans by stabilizing the private student loan program.  The legislation helps stabilize the Federal Family Education Loan ("FFEL") Program by allowing the Department of Education to serve as the secondary market of last resort for loans originated in the FFEL program.  Allowing lenders to sell outstanding loans to the Department will free up lender capital to make new loans for the upcoming school year and keep them from dropping out of the program.

 

•      Help students access low-cost federal loans by shoring up the existing "lender of last resort" program.  The "lender of last resort" program is designed to ensure that eligible student borrowers who are unable to locate a lender still have access to FFEL funds.  The legislation will bolster this program by: 

 

Allowing the Secretary of Education to advance capital to guaranty agencies to make these loans if lenders won't; and

 

Making it easier for students to get federally-guaranteed loans by allowing the Secretary of Education to designate entire schools as "lender of last resort schools" under limited circumstances where many students at a specific school are having trouble accessing student loans.

 

•      Decrease students' reliance on loans to pay for college expanding eligibility for need-based financial aid.  The savings generated under this legislation will be used to expand eligibility for grant aid.  Approximately 100,000 more students will qualify for up to $4,000 per year in additional grant aid.

 

Democrats are Committed to Helping Working Families Squeezed by Rising Health Care Costs

 

American families are struggling to find affordable health insurance coverage. Rising health care costs are straining family budgets as well as state budgets; forcing employers to drop or scale back health insurance coverage for their workers; increasing the number of uninsured Americans; and impeding access to needed health care services. Unfortunately, President Bush has allowed the problem to worsen on his watch and made covering the uninsured a low priority. In fact, the health care proposals proposed by President each year in his budget request, upon close examination, would do little or nothing to make health coverage more affordable and would actually leave many Americans worse off than they are today.

 

Democrats are committed to containing health care costs and securing guaranteed, quality, affordable health coverage for all Americans. As a first step, the Democratic-lead Congress overwhelmingly approved bi-partisan legislation last year that would invest $35 billion in the successful Children's Health Insurance Program ("CHIP"), and extend coverage to millions of uninsured children whose parents work hard but cannot afford private coverage.

 

The cost of obtaining health coverage has increased substantially during the Bush Administration. The cost of family health insurance has skyrocketed 78 percent since 2001, compared to a 19 percent increase in wages and a 17 percent increase in overall inflation._[1] The average premium for a family of four topped $12,000 in 2007, with the average family contribution of over $3,200. From 2001 to 2007, the amount families pay out of pocket for their share of premiums has increased by approximately $1,500 dollars._[2]

 

Rising 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 individuals with employment-based health benefits decreased from 68.4 percent in 2000 to 62.2 percent in 2006._[3] 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._[4]

 

And as health care costs escalate, families - even those with insurance - have to spend a greater portion of their income on health care. 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._[5] Nearly one out of four Americans under the age of 65 - 61.6 million people - is in a family that will spend more than 10 percent of its pre-tax income on health care costs in 2008._[6] The vast majority of these people (82.4 percent) have health insurance._[7] And 17.8 million Americans under the age of 65 - more than three-quarters of whom have health insurance - are in families that will spend more than 25 percent of their pre-tax income on health care costs this year._[8]

 

Rising costs have caused a dramatic increase in the number of uninsured and underinsured Americans. The number of uninsured Americans has increased every year since President Bush took office, from 39.8 million in 2000 to a record high of 47 million in 2006._[9] In 2006, the number of uninsured children grew by 710,000 to reach 9.4 million._[10] On top of the 47 million uninsured Americans, approximately 16 million are underinsured, which means their health coverage does not adequately protect them from catastrophic health care expenses._[11]

 

Rising health care costs are a problem for middle-class, working families. Nearly half of the people in families that will spend more than 10 percent of their pre-tax income on health care costs this year, and nearly one-third of the people in families that will spend more than 25 percent of their pre-tax income on health care costs this year, are from middle-class families - those earning between $30,000 and $75,000 per year._[12] Moreover, the uninsured are overwhelmingly members of working families; over 63 percent of the uninsured are members of families with full-time, year-round workers._[13]

 

People without health insurance suffer serious consequences. People without health insurance receive inferior care that contributes to poor health and premature death. The uninsured are more likely: to forego needed care, to receive fewer preventive services, not to receive appropriate care to manage chronic diseases such as heart disease and diabetes, to obtain substandard care when admitted to a hospital, and not to receive necessary follow-up care after injuries or diagnoses of a disease._[14] Researchers at the Urban Institute have estimated that from 2000 through 2006, 137,000 people died because they lacked health insurance, including 22,000 people in 2006 alone._[15] Americans who are underinsured are almost as likely as the uninsured not to receive needed medical care and, thus, suffer the consequences._[16]

 

There are also significant economic costs of the uninsured. The economic costs of caring for the uninsured are ultimately shifted to the insured in the form of higher premiums._[17] When the uninsured cannot afford to pay their medical bills, providers seek to recover the lost revenue by raising their rates for services, resulting in insurers' raising their premiums. In addition, the uninsured's increased likelihood of poor health potentially reduces their capacity to work, negatively affecting workplace productivity and employers' bottom line._[18] The Institute of Medicine estimated that the economic cost of the diminished health and shorter lifespan for the uninsured was between $65 to $130 billion in 2000_[19] ($87 to $174 billion if indexed to 2007 dollars). Moreover, economists predict that worsening economic conditions will likely create more demand for enrollment in programs like Medicaid and CHIP over the next few years._[20] This increased demand combined with federal funding cuts proposed by President Bush in both of these programs could, in turn, create additional pressure on state budgets that are already strained by the weakening national economy.

 

The Bush Administration has failed to respond effectively to rising health care costs and the increasing number of uninsured. Making health coverage more affordable has not been a priority for the Bush Administration.  The Administration has also misdiagnosed the main reason for rising health costs - arguing that Americans are over-insured and pay too small a share of their health costs, making them frivolous users of the health care system and, as a result, driving up costs.  The proposals offered by President Bush to address this misdiagnosis, such as Association Health Plans and tax deductions for the high-deductible policies that accompany Health Savings Accounts, would actually increase health costs for many people, especially those most in need of health coverage.  Moreover, the large majority of the benefits would generally go to people who already have insurance. A recent analysis by Professor Jonathan Gruber of MIT of the health insurance tax proposals included in the Bush Administration's own 2006 budget found that 77 percent of the benefits would go to people who were already insured._[21] Tax subsidies generally operate to "buy out the base" of insured without providing much new coverage._[22]

 

Democrats will continue to work to cover our nation's uninsured, starting with our children. Twice last year, Congress passed bipartisan CHIP reauthorization legislation that would invest $35 billion in new funding for CHIP, extending coverage to almost four million uninsured children. And twice, the President vetoed the legislation. This year, the President proposed funding in his budget far below the level for which Congress has demonstrated its bipartisan support, while simultaneously cutting funding for Medicaid. On top of years of all but ignoring the plight of millions of uninsured Americans, the President continues to undermine the will of Congress and deny the nation's 9.4 million uninsured children access to doctors, life-saving prescription drugs, immunizations, preventive screenings and the basic medical care necessary to start life healthy. Despite President Bush's obstruction on the issue, 69 Senators, 43 governors, hundreds of organizations, and the vast majority of the American people continue to support the bipartisan CHIP legislation - to give our nation's uninsured children the doctors' visits and medicines they need when they are sick, and the checkups they need to stay well.