Middle-Class Families Squeezed By Record Levels of Debt
Bush, with the assistance of Joe Knollenberg's rubber-stamp, turned record budget surpluses into record deficits.
President Bush inherited a unified budget surplus of $236 billion from President Clinton, the largest surplus in American history.[41]
Budget surpluses were expected to continue for another ten years when President Bush took office in January 2001.[42]
By 2002, however, the unified federal budget had returned to a deficit of $158 billion and has reached historic highs.
Last year, the budget deficit was $248 billion, or 1.9 percent of GDP.[43]
Bush & Knollenberg have increased the national debt by $3 trillion.
President Bush, with the help of Joe Knollenberg's rubber stamp, has presided over the largest explosion of debt in our nation’s history.
Every year since taking office, President Bush asked Congress to increase the statutory debt limit, resulting in a $3 trillion, or 51 percent, increase.[44]
At the end of 2006, the federal debt totaled $8.68 trillion.[45] By 2012, the President’s budget would increase the public debt to 12.2 trillion.[46]
Enormous trade deficit is undermining U.S. competitiveness.
In 2006, the U.S. trade deficit was at an alarming record high of $765,262 billion – twice the size of the trade deficit in 2001.[47]
Even more troubling, our trade in Advanced Technology Products, a strong indicator of U.S. competitiveness, which was in surplus as recently as 2001, experienced a deficit of more than $38 billion in 2006.[48]
Debt owed to foreigners climbs to record levels.
In order to finance record budget deficits, the United States has had to borrow at unprecedented rates from foreigners.
As of February 2007, the United States had accumulated $1.1 trillion more in debt to foreigners than this country had accumulated in its first 224 years.[49]
By contrast, during the last three years of the Clinton Administration, the United States paid off more than $200 billion in debt to foreigners.[50]
Record government and personal debt levels threaten economic future.
Record federal deficits and debt create record interest costs for Americans.
In 2006, interest costs on the federal debt will total $405.9 billion and this figure will grow to $614.9 billion by 2016.[51]
“Flat wages and rising debt nationally have converged to leave millions of middle-class households feeling acutely vulnerable to bumps in their financial planning…
According to a study by the Federal Reserve Board, the ratio of financial obligations -- primarily mortgage and consumer debt -- to disposable personal income rose to a modern record of 18.7 percent earlier this year.”[52]
Average student loan debt soars to more than $19,000.
Interest rates for Stafford student loans have risen substantially over the past two years, from 3.4 percent to 7.14 percent for outstanding loans and 6.8 percent on new loans.[53] As a result, loan payments will be considerably higher for students taking out new loans and for those who did not consolidate loans in recent years. Without adequate federal grants funding, students and their parents must rely more on student loans to finance their college educations.
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 $7,650 in the 1992-1993 to $17,400 in 2003-2004. When private loans are factored in as well, average student loan debt in 2003-2004 was more than $19,000.[54]
Erosion of employer-provided pensions threatens Americans’ retirement security.
Workers should be able to count on the retirement promises made by their employers. Increasingly, that is not the case.
An analysis by the Pension Benefit Guaranty Corporation (PBGC), the federal entity created by Congress to protect employee pensions, found that nearly 10 percent of pension plans halted benefit accruals in 2003 alone, the latest year for which complete data is available. [55]
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References:
[41] President Bush’s Budget for Fiscal Year 2002, A Blueprint for New Beginnings at 201 (February 28, 2001), available at http://www.whitehouse.gov/news/usbudget/blueprint/blueprint.pdf.
[42] Id. at 7.
[43] Congressional Budget Office.
[44] Philip D. Winters, “The Debt Limit: The Ongoing Need for Increases,” Congressional Research Service Pub. No. RL31967 (updated March 21, 2006).
[45] U.S. Department of the Treasury, “The Debt to the Penny and Who Holds It,” available at http://www.treasurydirect.gov/NP/BPDLogin?application=np.
[46] Congressional Budget Office and analysis by Senate Committee on Budget Democratic Staff.
[47] U.S. Census Bureau, Foreign Trade Statistics, U.S. Trade in Goods and Services - Balance of Payments (BOP) Basis, available at http://www.census.gov/foreign-trade/statistics/historical/gands.txt.
[48] U.S. Census Bureau, Foreign Trade Statistics, Advanced Technology Product Data, available at http://www.census.gov/foreign-trade/Press-Release/2007pr/02/exh16.txt.
[49] U.S. Department of Treasury, Major Foreign Holders of Treasury Securities (updated April 23, 2007), available at http://www.treas.gov/tic/mfhhis01.txt and http://www.ustreas.gov/tic/mfh.txt.
[50] Id.
[51] Congressional Budget Office (March 2007).
[52] Jeffrey H. Birnbaum and Chris Cillizza, “'Mortgage Moms' May Star in Midterm Vote; With Wages Stagnant and Debt Growing, Democrats See an Opportunity,” Washington Post at A01 (September 5, 2006).
[53] David P. Smole, “Stafford Loan Interest Rate Reduction: Background and Issues,” Congressional Research Service Pub. No. RS-22568 (January 30, 2007).
[54] National Center for Educational Statistics, 2003-04 National Postsecondary Student Aid Study (NPSAS:04), Undergraduate Financial Aid Estimates for 2003-04 by Type of Institution (June 2005), available at http://nces.ed.gov/pubs2005/2005163.pdf, and 1993 National Postsecondary Student Aid Study (NPSAS:93) (October 1995).
[55] Pension Benefit Guaranty Corporation, “Study of Frozen Defined Benefit Pension Plans,” available at http://www.pbgc.gov/docs/frozen_plans_1205.pdf and http://www.pbgc.gov/media/news-archive/2005/pr06-12.html (December 21, 2005); Joel Friedman and Robert Greenstein, “Boosting Income And Contribution Limits For Pension Savings Would Swell Deficits, Do Little For Middle-Class Families,” Center on Budget and Policy Priorities (May 18, 2005).
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