Economy & Trade, Financial Crisis, Headlines, Labour, North America

U.S.: Economy Goes Down, Congressional Pay Goes Up

Adrianne Appel

BOSTON, Jan 9 2009 (IPS) - U.S. workers are losing jobs in record numbers, scores of businesses are shuttering and hundreds of thousands of families are newly homeless – and Congress just gave itself a generous pay raise.

Figures released Friday show that 524,000 people in the U.S. were thrown out of work in December, pushing the official jobless rate to 7.2 percent, according to the U.S. Labour Department. This is the highest unemployment rate in 16 years, and economists predict it is likely to climb further. Most of the 2.6 million jobs slashed in 2008 were cut in the final months of the year.

It was also in December that Congress decided it would boost its salaries by 4,700 dollars each for a 174,000-dollar salary this year. The raise will cost taxpayers 2.5 million dollars.

The average U.S. worker who is not a millionaire earned 41,861 dollars in 2005, according to the Economic Policy Institute.

Leaders in the U.S. Congress will earn more, with Speaker of the House Nancy Pelosi at 223,500 dollars, followed by House and Senate leaders, who earn 193,400 dollars.

The raise was granted quietly, by default, due to a law passed by Congress in 1989 that gives them the raise automatically, unless the majority leaders allow it to be debated. Just a handful of lawmakers protested the recent raise, including Rep. Ron Paul, a libertarian who ran for president.

“Turning down our automatic pay increase this year is the least Congress could do to demonstrate fiscal responsibility and solidarity with our constituents in these tough economic times,” Paul said.

Some citizen groups were outraged at the raise.

“As lawmakers make a big show of forcing auto executives to accept just one dollar a year in salary, they are quietly raiding the vault for their own personal gain,” said Daniel O’Connell, chairman of The Senior Citizens League.

“This money would be much better spent helping the millions of seniors who are living below the poverty line and struggling to keep their heat on this winter,” O’Connell said.

In addition to their base salaries, lawmakers also receive hundreds of thousands – or millions if you are a senator – in what are considered legal campaign donations from businesses and individuals, that can be spent on a range of activities, including dinners and parties. The funds can be received and spent anytime, not just during election years.

For example, House Majority leader Steny Hoyer received 3,677,920 dollars from businesses that include JP Morgan Chase and Comcast during 2007 and 2008, according to Open Secrets, which tracks campaign spending.

Hoyer spent almost all the money during that time, even though his seat was not in jeopardy. His one opponent raised just 22,570 dollars.

Among other charges, Hoyer spent 7,023 dollars on catering at the Hotel George in Washington, DC.

Sen. Charles Schumer, a member of two finance-related committees, spent 16 million dollars in campaign donations in 2007 and 2008, and raised more than 13 million dollars. This was not an election year for Schumer, whose seat is safe until 2010. How he spent the money is unknown, because the Senate passed a law recently that exempts them from having to reveal how they spend their donation money.

“The era of the forgotten middle class is over,” Schumer said Thursday. “Everyone should be able to raise a family, send their kids to college, and care for their elderly parents without having to take on a second job or extra shifts.”

“In everything we do, our priorities will be the priorities of working families,” he said.

During 2007 and 2008, the U.S. middle class, hit with job insecurity, rising food prices and soaring mortgage interest rates, cut back drastically on spending like going out to eat and buying new clothes.

Many retailers Thursday reported sales decreases during the fall, and they anticipate a larger decrease for the winter months.

The newly poor are flocking to soup kitchens and homeless shelters, agencies report. Emergency food banks saw a 30 percent increase in requests for food in 2008, according to Feeding America, a coalition of food banks.

Pres.-elect Barack Obama Friday urged Congress to get to work and pass his 750-billion-dollar stimulus package that includes tax cuts and infrastructure improvements, aimed at creating about 3 million new jobs during the next few years.

“For the sake of our economy and our people, this is the time to act, and act without delay,” Obama said.

“If nothing is done, this recession could linger for years,” said Obama, who takes office Jan. 20. Congress is expected to debate the package until at least early February, and to pass it, though the contents of the bill could change.

The Congressional Budget Office painted a grim picture of the coming years, in an economic report it released this week.

It predicted a deep recession that will last well into 2009, and a slow recovery in 2010. The gross domestic product will fall by 2.2 percent in 2009, and increase to just 1.5 percent in 2010. Healthy GDP for the U.S. is considered to be about 3 percent.

People will continue to cut spending into 2010, and unemployment in 2010 will be about 9 percent.

The U.S. government is deep in debt, and it again will have to borrow heavily this year to pay for all commitments, which total more than 3 trillion, not including Obama’s plan. This is 1.2 trillion dollars more than the government has in hand.

The U.S. will have to borrow to finance its 2009 budget, and add significantly to its hefty debt of more than 10.6 trillion dollars.

The U.S. has been carrying a debt for years, but Pres. George W. Bush added significantly to it, adding about 500 billion dollars per year since the start of the Iraq war.

Obama’s plan is built on the assumption that the federal government will not begin to receive robust tax dollars from workers again, until the economy is back on its feet.

“Unless we take decisive action, even after our economy pulls out of its slide, trillion-dollar deficits will be a reality for years to come,” he said Thursday.

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