Kennedy on Economic Stimulus
Mr. President, in recent weeks the headlines have been filled with bad economic news. Two weeks ago, it was an alarming increase in the unemployment rate. Last week it was rising prices for basic essentials, like food and gasoline. Week after week, there's more bad housing news. Foreclosures are skyrocketing. Bankruptcies are rising. And just yesterday, the Washington Post discussed the challenges facing the more than 1.4 million Americans who have been actively looking for a job for more than 6 months without success. It's a tragic tale -college-educated professionals and people who have worked for decades are now forced to drain their retirement accounts and rely on charity just to make ends meet.
It seems that every day there's new information showing that the economy is headed in the wrong direction, and that no one will be spared.
These aren't just statistical trends or indicators. Every bad number reflects a real hardship in real people's lives.
When food prices increase by 5%, that means that average families will pay over $400 more dollars next year to put meals on the table. When the unemployment rate rises by 1.5%, it pushes a typical family's wages down $2400.
Each higher cost or lower pay check adds up to big problems for working Americans. Parents are giving up time with their families to work longer hours or take a second job. Employees are struggling with credit card debt and skyrocketing interest rates.
Young couples are losing their first homes because they can't pay the mortgage. Parents are pulling their children out of college because they can't pay the bills.
For these families, a recession isn't just part of the business cycle - it's a life-changing event from which they may never fully recover.
I've heard from many in Massachusetts who are struggling in these tough times. There's Teresa, from Everett. She's a single mother with there children, ages 10, 6, and 3. She's proud that she worked her way out of welfare, but her life as a working mother is increasingly hard.
Her bills are out of control, and each day she's faced with impossible decisions - do I feed myself or feed my children? Can I turn on the heat, or just put on an extra layer of clothing and try to get by? In Teresa's household, a $4.00 gallon of milk has become a luxury she can't afford.
Teresa's family is not alone. A looming crisis is now facing tens of millions of American families. Economists across the spectrum - from former Treasury Secretary Larry Summers to Federal Reserve Chairman Ben Bernanke, and even President Bush himself - all agree that we are facing tough times to come, and government must act.
But even more important than advice from these noted scholars is the clear message of the American people. They're struggling, and they need our help now. They elected us to make their lives and their children's lives better, and now is the time.
We need a simple, effective plan to stimulate the economy and also put money back in workers' pockets and give them the support they need to weather the storm. This plan should be built on one fundamental principle: People do not work for the economy; the economy should work for people.
If we want an economic recovery that works - if we want real opportunity and sustainable growth - that effort must start and end with working families.
Putting people first means targeting our stimulus efforts to meet three essential goals:
First, we must act quickly to provide immediate help for those in crisis. The declining economy may be a current issue in the news, but working families have been suffering for some time. 7.7 million Americans are already unemployed. There have been almost 2 million foreclosure filings in the last year alone, including 225,000 last month. The number of families facing bankruptcy has risen by 40% in the past year. For these Americans, the recession is already here, and they need help now to get back on their feet.
Second, we must do the most for those who need help the most. Targeting families at the very bottom of the economic ladder is essential, because it also provides the biggest economic boost.
Every dollar a low-income household receives is spent on basic needs, putting money back into the local economy right away. In regions with many struggling families, such spending is critical to help keep entire communities afloat.
Finally, we must find solutions that will make a real difference in people's lives. It's not enough just to tinker at the margins. Our economic problems are getting worse every day, and we need strong medicine to make things right.
There are a number of short-term steps we can take to achieve these goals and restore hope and opportunity to families across the country. They're simple, they build on existing programs, and they're effective. We should pass them, and we should pass them now.
For workers who are struggling to find a job, we must support them in the difficult process of finding work.
It's becoming harder and harder to find a good job in today's economy. The nation is enduring profound changes as we adapt to the global economy. Entire industries are disappearing, leaving workers and communities devastated in their wake. 1.3 million workers have been getting up every morning, day in, day out, and looking for a job for more than 6 months. That number will only rise as the recession deepens. Just last week Goldman Sachs economists predicted that the unemployment rate would reach 6.5 percent by the beginning of 2009, compared to 5 percent today.
To help these unemployed men and women weather the storm, we need to extend unemployment benefits and expand access to these benefits. As workers, they have paid into the system and they deserve help when they lose their jobs. We should also provide transitional health care assistance, so they don't lose their health coverage while they're searching for work.
Perhaps most important, we should do more to help unemployed workers find the good jobs they're seeking. We have open jobs - 93,000 in Massachusetts alone. And we certainly have unemployed workers. But many job seekers don't have the skills they need for the jobs that are open now. We need to train workers immediately to fill these positions, but this Administration has been cutting job training funds for years. We've got 21 workers on a waiting list for every available job training slot in Massachusetts - it's time to help these workers match their skills to the needs of our economy.
And it's not just those who have lost their jobs and are facing a crisis. Millions more families are living on the brink of disaster because they are struggling to pay their bills. Since President Bush took office, the cost of health insurance has risen 38%. Housing prices are up 39%, and college costs are up 43%. The price of a tank of gas has gone up 78%. A gallon of milk costs 16% more, a pound of ground beef is up 13%, and a dozen eggs cost 78% more.
People's paychecks can't begin to keep up with these spiraling costs. Wages have increased only 6% - not nearly enough to keep pace with a family's essential expenses. More and more families are falling into debt just to make ends meet. A recession will only exacerbate these trends, and force many families now on the brink into outright poverty.
That's why we need a temporary boost in basic support programs to help working families cope with the relentless pressures of everyday life during this difficult time. That means expanding access to home heating assistance. A typical household may have to spend as much as $3000 on heating oil this winter, but fuel assistance will cover less than a third of these costs. Of the 35 million households eligible for fuel assistance nationwide, only five million receive such benefits - six out of seven families in need receive no help at all because states run out of funds.
Last week, the White House released $450 million in emergency assistance to states across the nation, including $27 million for Massachusetts. But the reality is that when oil prices are surging past $3.30 per gallon and households will need at least 800 gallons of heating oil this winter, it's just not enough.
Bob Coard of Action for Boston Community Development, one of the largest community action agencies in the Northeast, says that the emergency funds will be barely enough to make a 100 gallon delivery to ABCD's clients----and that $100 gallon delivery will cost about $300 and will provide a family with heat for only about 2-3 weeks.
Massachusetts is comparatively very generous in providing fuel assistance. Its maximum benefit of over $860 is more than twice the national average. Even so, that's barely enough to fill a heating oil tank just once at today's prices.
What are those families to do when the heating oil runs out? Last week, I heard from families in Massachusetts.
Margaret Gilliam, who takes care of her grandchildren in Dorchester, has already spent more on heating oil this heating season than she did all of last year, and we still have many weeks of cold weather ahead.
Diane Colby, a single mother of two in Lynn, Massachusetts, keeps the thermostat at just 62 degrees to stretch out the heating oil as long as possible. She has to sit down and decide which bills get paid and which don't. Otherwise, she can't afford to keep the heat on.
We must ensure that these families receive the help they need through the winter by providing additional fuel assistance.
Helping families also means increasing benefits under the food stamp program. This program not only helps families get back on their feet - it helps stimulate the economy as well. Even President Reagan's economic advisor, Martin Feldstein, has recommended food stamp supplements as an effective way to boost economic growth.
Shoring up struggling families also means help for overburdened states. States are on the front lines of our efforts to battle a recession. In these turbulent times, states are facing greater needs, but tighter budgets.
We need to help states by providing emergency funds to keep vital family programs like Medicaid running smoothly, without resorting to tax increases or benefit rollbacks that will slow the economy down.
Helping families means targeted tax rebates for low and middle income workers. An immediate tax rebate that gets money into workers' pockets fast is a good economic stimulus, so long as it's focused on the people who need help the most.
We've tried tax rebates before, but they haven't worked as well as they should because previous rebates left out those at the very bottom of the economic ladder - the families struggling every day to pay their bills, heat their homes, and pay their mortgages.
Now the President wants to do the same thing again. He's proposed a tax break in his stimulus package that would completely leave out the poorest Americans. That's just bad policy.
Not only are low-income families the ones who suffer most in a recession, helping them is the best way to be certain that any stimulus goes directly into the economy and benefits our country the most.
We can't keep repeating the mistakes of the past - any tax rebate we pass now should be for everyone, so that everyone can get back on their feet.
The President's tax cuts for business are also ill-advised. Past experience shows that such corporate tax breaks do not provide an effective stimulus. The problem with our economy today is a lack of demand, not lack of capacity. Businesses will not produce more until they know that customers are ready to buy. Personal tax cuts targeting middle and low income families and funding boosts for programs like unemployment insurance and food stamps are a better stimulus that business tax cuts because they encourage consumers to start spending.
The economy is at a crossroads and we must act carefully to choose the right path for the future. I'm confident we can do it, and I'm certain that we must do it. We owe the American people our best efforts, and I look forward to working with my colleagues on both sides of the aisle to put our economy back on track.