John Boehner, Chairman
2181 Rayburn HOB · (202) 225-4527

FACT SHEET

Democrat Leaders, AFL-CIO Put Politics Before America’s Working Families

Debunking Democrat Distortions About President Bush, Congressional Republicans & the U.S. Economy

October 10, 2002

President Bush and Republicans have worked tirelessly for pro-family, pro-worker policies that provide new pension protections for workers concerned about their 401(k) retirement plans, new patient protections and access to quality health care for families, and important tax relief for family pocketbooks. Even during a time of war and economic uncertainty, Republicans have consistently offered solutions, not just overheated rhetoric, in an ongoing effort to provide workers and families with greater economic security.

In conjunction with the AFL-CIO, Democrat leaders are attempting to politicize the economic hardships of American workers in a desperate attempt to divert attention from the Democrat-controlled Senate's failure to provide any bipartisan solutions this year. The AFL-CIO on September 30 released a thinly veiled election year document packed with distortions, half-truths and misleading assertions about the economic record and agenda of congressional Republicans and President Bush.

Following is a summary of some of the myths being perpetuated this fall by partisan Democrats and their election-year allies in an effort to mask their own record of failure on the economy.

PENSION SECURITY

Democrat/Big Labor Myth: "Republicans have failed to pass meaningful 401(k) legislation."

Reality: House Republicans took action immediately following the Enron collapse to reform pension laws and protect working families. On April 11, 2002, the House passed the Pension Security Act (H.R. 3762) with significant bipartisan support. President Bush supports the legislation. Even after the collapse of WorldCom this summer, the Democrat-controlled Senate still REFUSED TO ACT on comprehensive pension reform.

Thousands of workers lost their retirement savings in recent collapses at Enron and WorldCom, and President Bush immediately called for congressional action to shield American workers against losing their life’s savings in similar corporate meltdowns.

The Democrat-controlled Senate has blocked strong pension protections that would have made a difference for workers at Enron and WorldCom – protections that were passed by the GOP-led House with bipartisan support and supported by President Bush. Because of Senate Democrat inaction, U.S working families remain vulnerable to significant losses in their pensions and 401(k) savings plans.

A host of protections in the House-passed Pension Security Act are stalled in the Senate. These provisions would:

· Give workers the freedom to diversify their 401(k) accounts and retirement savings.

· Bar employers from forcing workers to invest any of their own retirement savings contributions in company stock.

· Allow workers to receive professional investment advice about their 401(k)s and retirement investments - at employer expense, not the worker’s.

· Allow workers who purchase professional investment advice to qualify for a payroll tax deduction, under a provision authored by Rep. Rob Portman (R-OH).

· Allow workers to hold senior company insiders accountable when their pension savings are abused.

· Give workers better information about their pension plans and rights to diversify.

Unfortunately, despite repeated promises, Senate Democrats have not made pension reform a priority. It has been six months since the House acted on employee pension protections but the Senate has yet to consider any bill to enhance pension security. Senate Democrat inaction has denied President Bush the chance to sign comprehensive, bipartisan pension reforms into law.

HEALTH INSURANCE

Democrat/Big Labor Claim: "Millions of workers have lost health insurance under failed Bush-GOP policies."

Republican Reality: Democrat leaders have blocked common-sense GOP efforts to expand access to health insurance.

Last year, the House ended six years of congressional gridlock by passing a bipartisan patients’ rights compromise supported by President Bush and negotiated by Reps. Charlie Norwood (R-GA) and Ernie Fletcher (R-KY). The measure would hold health plans accountable while preventing frivolous, unlimited lawsuits against employers and unions that voluntarily provide health coverage to families. It also included initiatives such as association health plans (AHPs) and medical savings accounts that would increase access to health care and reduce the ranks of the 41.2 million Americans who have no health insurance.

Unfortunately, Senate Democrats refused to support this bipartisan compromise because it included a reasonable cap on trial lawyers’ ability to profit from multi-million dollar health care lawsuits. The Democrat approach would, for the first time, subject employers and health plans to new lawsuits in state courts with no limits on damages or protection from frivolous lawsuits. Patients and families continue to take a back seat to trial lawyers on Democrat leaders’ priority list.

The House Employer-Employee Relations Subcommittee, chaired by Rep. Sam Johnson (R-TX), has held a series of hearings over the last two years on how employers and employees are responding to rising health care costs, which rose 13 percent in 2001, and how those costs have contributed to the decline in health care coverage. Instead of focusing on new mandates on employers or health care providers, the House has focused on real solutions that make it easier for small employers to offer more benefits as well as creating new options that expand consumer choice.

Notably, employer-sponsored health coverage declined only because small businesses with less than 25 workers have been forced to drop coverage because of rising health care costs. The proportion of employees with health insurance coverage at larger firms remained unchanged. This reflects the higher costs that small businesses face because they lack economies of scale and aren’t free from burdensome state mandates like their larger employer counterparts.

In order to help small businesses pool their resources to offer health insurance to their workers, the committee included AHPs in the House-passed patients’ rights compromise. Small firms deserve the opportunity to obtain high quality health insurance that is competitively priced. Real health care reform means crafting policy that will improve quality, choice, and accessibility for all Americans -- particularly those who lack health coverage.

TAX RELIEF

Democrat/Big Labor Myth: "The economic crisis is deepening for working families."

Republican Reality: The Bush tax relief plan passed by Congress has dramatically blunted the impact of the recession on middle-income families. The tax relief was delivered at a critical time, providing an important boost to taxpayers’ wallets and pocketbooks. As the tax relief plan continues to phase in over the next few years, it will put more money into the pockets of working families and stimulate additional economic growth.

Recent Census Bureau data has shown that real median household income declined $934 in 2001 because of the economic slowdown that began in 2000 and became a recession in 2001. However, enactment of the Republican tax relief plan helped blunt the impact of recession on the budgets of American families by dramatically reducing taxes.

In fact, despite the recession, the real after-tax income of a household earning the 2001 median income remained virtually unchanged from the previous year. And for a lower-income family the tax relief actually helped boost income relative to 2000.

The boost to low-income families’ after-tax income was a result of two critical components of the new tax law - the rebate check and the increased child tax credit. This boost helped mitigate the effects of the recession significantly.

According to the Ways & Means Committee, as a result of the Bush tax relief:

· A typical household earning the median income, $42,228, in 2001 received a $600 rebate check and an additional $200 reduction in taxes as a result of the increased child tax credit. Since nominal median household income remained virtually unchanged and the standard deduction and the personal exemption increased, taxes were reduced even further.

· A typical household earning the median income realized a loss of $934 in real income between 2000 and 2001. However, more than 90 percent of that loss was restored by the tax relief plan enacted by Congress.

· A typical household earning at the 40th percentile (approximately $33,500) in 2000 and 2001 saw their income fall $607. However, the Bush tax relief plan provided these families more than $800, which resulted in a net increase of their real income.

UNEMPLOYMENT AND JOB TRAINING

Democrat/Big Labor Myth: "Long-term unemployment is up, and workers are running out of benefits."

Republican Reality: Republicans acted swiftly to extend and expand unemployment benefits, as well as provide job training and health care for workers displaced by the economic aftershocks of September 11th.

According to the Ways & Means Committee, the Job Creation and Worker Assistance Act, signed into law by President Bush in March 2002, provides:

· Up to 13 weeks of extended unemployment benefits in every state;

· Up to 13 added weeks of extended benefits in high unemployment states (AK, AR, CA, ID, MA, NV, NJ, OR, PA, WA, WI have qualified to date); and

· $8 billion in surplus Federal unemployment funds to states.

An estimated 2.8 million people already have benefited from extensions, which about 1.1 million people per week continue to collect. These extended benefits remain available through December 2002 and Congress also recently passed an $11 billion expansion of Trade Adjustment Assistance for workers who lose jobs because of foreign competition. In total, this Congress has provided $19 billion in immediate support for unemployed workers.

During the recessions of the 1980s and 1990s, when the Democrats were in the majority, Congress never approved benefit extensions when the unemployment rate was as low as the current 5.7 percent level. Extensions occurred only at higher jobless rates.

Health Care and Job Training for Displaced U.S. Workers. On August 6, 2002, President Bush signed into law the Trade Promotion Authority and Trade Adjustment Assistance Act, which incorporates key elements of his "Back-to-Work Act" proposal to expand the federal "safety net" for workers displaced by the September 11th attacks and its economic aftershocks. The Back to Work agreement authorizes and appropriates $510 million in special National Emergency Grants (NEGs), administered by the Labor Secretary, to help displaced workers maintain health coverage, childcare assistance, and receive job training as the economy recovers from its current slowdown. It also appropriates $60 million for these grants in the first year.

MINIMUM WAGE

Democrat/Big Labor Myth: "We must raise the minimum wage to put more money in the pockets of working families."

Republican Reality: Raising the minimum wage hurts the very people supporters claim they are most trying to help - young people, welfare mothers, and lower-skilled workers who are just moving into the workforce.

The best way to put more money in the pockets of American working families is through tax relief by allowing families to keep and spend more of their own money. We made big strides on this issue last year. The Bush tax relief plan that Congress enacted last year removed thousands of low-income Americans from the tax rolls and allow millions of families to keep more of their paychecks.

The last thing we need to do is impose new mandates on employers that force them to lay off workers or cut benefits. Our economy is improving, and we need to make sure that it continues to expand and grow.

SOCIAL SECURITY

Democrat/Big Labor Myth: "Republicans want to privatize Social Security, putting this important safety net at risk to the swings of the stock market."

Republican Reality: Our government made a solemn promise to its people, and Republicans will keep that promise. Seniors who now receive benefits will always receive them. We will NEVER fail to deliver for today’s seniors and those near retirement. Republicans will keep their promise on Social Security and work to strengthen this vital program for future generations.

Social Security faces serious financial challenges soon after the baby-boomers begin retiring later this decade. Making Social Security truly secure for the 21st century and beyond is a national priority for the public, Congress, and President Bush. However, efforts to strengthen Social Security cannot be done hastily or without bipartisan cooperation. That is why President Bush formed a bipartisan Presidential Commission to review Social Security and recommend reforms to put the system on sound financial ground. Here are some of the solutions discussed by the commission:

· Modernization must not change existing benefits for current retirees or near-retirees, and it must preserve the disability and survivors' components. The promises made to current retirees must be kept.

· The entire Social Security surplus must be preserved only for Social Security.

· Social Security payroll taxes must not be increased, as they have been 20 times since the program began in 1937.

· The government itself must not invest Social Security funds in the private economy/stock market.

· The personal retirement accounts are a voluntary add-on to the current system. They do not privatize the system. Personal accounts invested in safe private financial markets will earn higher rates of return than the traditional system and help workers enhance their personal savings and their freedom to retire. Someone retiring today after 45 years of work would be entitled to a monthly benefit of $1,128 a month from Social Security. If that same retiree had invested those Social Security taxes in the stock market over the last 45 years, that person would have a nest egg of $590,000, or income of more than $3,700 a month.

· Ownership of a real financial asset without the political risk of future changes would mean more security for working Americans to build their own retirement assets, and to pass those assets on to their children.

· Strengthening Social Security to include personal accounts can add valuable protections for widows, divorced persons, low-income households and other Americans at risk of poverty in old age.

· For more information on Social Security, visit the Ways & Means Committee website at http://waysandmeans.house.gov.