American Decline or Renewal? Part 2

Opening Statement By Chairman Brad Miller

A casual examination of the time-honored measures of economic confidence among working families, the unemployment and inflation rates, shows that everything is just fine.  The current unemployment rate of 5.5 percent and inflation rate 4.2 percent, are a very far cry from June 1980’s 7.6 percent unemployment and 14.4 percent inflation.  But a closer look presents a very different picture for working Americans.  Consumer confidence last month came in at its lowest level since June 1980.  Only 13 percent of Americans rate the national economy positively, and 74 percent say it’s getting worse, according to a national poll released just one week ago.

Over the last generation, economic conditions have fundamentally changed for American families and simple comparisons of unemployment and inflation rates fail to capture these changes.  Today, U.S. households carry debt that is equal to 132 percent of their disposable annual income, nearly twice the average debt load of 68 percent in 1980.  For the past four years, Americans have spent the equivalent of every penny they’ve earned – including what they’ve earned for retirement.  In 1980, they were saving at a rate of 10 percent.  The unemployment rate may be lower now, but the consequences of joblessness are more likely to be dire.

Still, an illusion of well-being persists in the minds of those who cling to the traditional ways of looking at things.  This mirage obscures the profound changes in the American economy and keeps us from taking a hard look at the realities that so many of our families and communities face.

Here’s another statistic that would provide comfort to traditional thinkers: U.S. manufacturing productivity rose 3.6 percent in the first quarter of 2008.  If this is true, why are Americans so worried?  Here's why: Manufacturing output actually dropped during this same period and, American workers' hours dropped even more.  Productivity is manufacturing output divided by the number of hours worked.  This apparent positive for the economy is only statistical; in reality both output and workers hours are down.  When output and employment were rising, a productivity gain signified a robust economy.  In today's climate, it masks the fact that we are producing less of what we need, and taking home less for doing it.

It is obvious that we must go beyond conventional analysis if we are to form an accurate picture of what is happening to our people and our nation today.  We need to ask what changes in the past 30 years have skewed the results of familiar economic formulas.  We need to ask what is behind those changes.  Finally we need to understand how what we do know – whether its scientific, technological, or educational – can be applied effectively to ensure that our citizens and our communities can look forward to a secure and prosperous future in this globalized economy.

This hearing represents a second step along that path.  On May 22, this Subcommittee heard suggestions offered from a variety of perspectives on how to structure incentives so that U.S. firms will maintain and expand, at home in America.  Today, we will hear about what has happened when we have failed at this in the past, and about the efficacy of our efforts to aid the recovery of those individuals and communities who have directly paid the price.

We are fortunate to have with us witnesses who speak from widely varied experience:

• John Russo – an academic who has lived through, and studied, one of the leading episodes of deindustrialization in America, that affecting Youngstown, Ohio;
• Frank Morgan – an attorney who has represented displaced workers whose applications for Trade Adjustment Assistance, or TAA, have been denied by the Labor Department;
• Howard Rosen – one of the leading advocates of TAA, who will report on the program’s shortcomings and put forward a national strategy for dealing with economic dislocation;
• Jeannie Moore – a community college official who has played a leading role in one of the most striking community turnarounds in the country, that of Kannapolis, North Carolina;
• Thomas Palley – an economist who has long studied globalization and will assess our options for shaping its influence and its addressing its effects; and
• Ms. Diana Furchtgott-Roth – a senior fellow at the Hudson Institute in Washington, DC.  She earlier served at chief economist of the U.S. Department of Labor and as chief of staff of the President’s Council of Economic Advisers.

This is a complex topic.  Coming to grips with it will involve challenging received wisdom and long-held assumptions and replacing them with original thinking and novel ideas.  But the difficulty of the task is no excuse for shrinking from it.

Now I recognize the distinguished Ranking Member from Wisconsin, Mr. Sensenbrenner.

Witnesses

Panel

1 - Dr. John Russo
Coordinator of Labor Studies Program; Co-director of Center for Working-Class Studies Warren G. Williamson School of Business Administration, Youngstown State U
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2 - Mr. Frank H. Morgan
Attorney White & Case LLP White & Case LLP
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3 - Mr. Howard F. Rosen
Executive Director, Trade Adjustment Assistance Coalition Resident Visiting Fellow, Peterson Institute for International Economics Resident Visiting Fellow, Pet
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4 - Ms. Jeanie Moore
Vice President, Continuing Education Programs Rowan-Cabarrus Community College Rowan-Cabarrus Community College
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5 - Dr. Thomas I. Palley
Founder Economics for Democratic & Open Societies Project Economics for Democratic & Open Societies Project
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6 - Ms. Diana Furchtgott-Roth
Director of the Center for Employment Policy Senior Fellow, The Hudson Institute Senior Fellow, The Hudson Institute
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