"With college costs still rising and families facing growing uncertainty in today's economy, federal student aid is more important than ever," Chairman George Miller said.  "Over the past two years, the Democratic Congress has made college affordability a top priority -- providing historic investments in federal student aid and safeguarding federal student loans from the turbulence in the nation's financial markets. This study reinforces that these efforts are critically needed to help make college more affordable and accessible for students and their families.

"This report also shows that the Pell Grant scholarship -- which Congress has significantly boosted in the past two years --  is playing an increasingly important role in expanding college access, especially for low- and middle-income students. As we work to get our economy back on the road to recovery, it is vital to make sure that students are aware of all their student aid options and are fully maximizing their federal student loans before turning to more expensive private loans."

According to the report, the number of students receiving almost all federal grants and loans have increased over the last ten years and the number of students receiving Pell Grant scholarships has increased from 3.7 million in 1997-98 to 5.4 million in 2007-2008.

Last year, Congress enacted the College Cost Reduction and Access Act, which provides the largest increase in student financial aid since the GI bill. The law increases the maximum Pell Grant scholarship by more than $1,000, cuts interest rates on need-based student loans in half, creates income based repayment programs for students graduating with college debt and gives loan forgiveness incentive programs for public service workers.

Congress also recently enacted the Ensuring Continued Access to Student Loans Act to ensure that students and families can continue to have access to all the federal college loans they are eligible for.

In August, Congress enacted the Higher Education Opportunity Act, the first reauthorization of the nation's primary higher education laws in a decade. The law addresses rising college tuition prices, makes textbook costs more manageable, simplifies the federal student aid application process, makes the Pell Grant scholarship available year-round for the first time, provides new consumer protections for federal and private student loan borrowers, and much more.

The dramatic loss comes at a time when the PBGC is beginning to implement a new controversial investment policy approved in February. The new policy would significantly shift PBGC assets from fixed-income securities, such as U.S. Treasuries, into more risky securities like real estate, emerging market debt, junk bonds and venture equities.

“With the current market turmoil, we have to ask the question whether it is wise to invest our nation’s pension backstop in volatile equities,” Chairman George Miller said.

The head of the PBGC, Charles Millard, appeared before the Committee today regarding the agency's financial problems that may threaten the retirement security of millions of Americans. The PBGC is a government agency that insures traditional private-sector pension plans, manages failed pension plans and pays benefits to workers of those plans.

PBGC investment documents »

Economists predicted that, based on past recession trends unemployment could soon reach eight percent or higher, and middle-class families’ incomes could drop by more than $2,000 this year.

“It is urgent that we prepare now to take the next steps to rescue the economy by creating jobs, providing immediate relief to the states and small businesses, and by making real investments in energy, technology and education,” Chairman George Miller said. “We must have a plan that speaks directly to the needs of American families and workers today.”

The number of out-of-work Americans has increased by 2.2 million in the last year. They join more than 2 million workers who have been unemployed longer than 27 months. In October, many workers began exhausting their unemployment insurance benefits.  By the end of this month, an estimated 775,000 workers will be left without a safety net, and a total of 1.1 million workers will be in the same straits by the end of the year.

In a letter to Chairman Miller released at the hearing, economist Alan Blinder of Princeton University predicted that “unemployment will top out in the 8-8.5 percent range” if the coming recession is as severe as the recessions of 1981-82 and 1973-75.  “My worry,” wrote Blinder, “is that we may be heading in that direction.”

“We are clearly in the early stages of a potentially very serious recession that will likely be as deep as anything we have experienced in a generation,” said Ron Blackwell, chief economist of the AFL-CIO. “Just how deep and protracted this recession will be depends on a timely, aggressive and well-focused economic recovery package.”

To help families make ends meet while they look for a new job, the Democratic Congress voted to extend unemployment benefits in early October. Unfortunately, that effort was blocked by Senate Republicans. The Bush administration threatened to veto the extension claiming it would encourage out of work Americans not to find a new job.

“There is nothing enjoyable about being up at night worrying about how you are going to make ends meet,” said Dana Stevens, an unemployed worker from Thorofare, NJ. “For anyone to suggest that receiving unemployment is like getting a free vacation is insulting and degrading to the millions like myself who are desperately trying to get back to work.”

Millions of workers not only lose their jobs during a recession, but household incomes for those with a job also decline on an average of four percent. Jared Bernstein, director of the Living Standards Program at the Economic Policy Institute, said that if past trends repeat themselves this time around, middle-class families’ who earn around $60,000 will see their income fall about $2,500 this year.

“Due to factors regarding job loss, fewer hours, and the slower wage growth driven by the weaker job market, incomes usually fall in recessions,” said Bernstein.

In September, the House of Representatives also approved an economic rescue and job creation package to help head off a deeper recession. It would have created good-paying jobs by investing in new energy technology and infrastructure.  The bill would have also provided access to job training and helped working families with grocery and health care bills. Senate Republicans and the Bush administration also opposed this effort.

Many economists say that making infrastructure investments are some of the most effective uses of federal dollars that create jobs in both the short-term and the long-term.

Robert Pollin, a professor of economics at the University of Massachusetts-Amherst, said a $150 billion job creation program will create 2.9 million jobs in the short-term alone.

“In the midst of the severe financial crisis and deepening recession, it is imperative that the federal government take action as soon as possible to counteract the downturn,” said Pollin.

Pollin’s latest research also reveals that infrastructure investment produces a second wave of private sector job creation within two years, pushing the 2.9 million new jobs up to 3.3 million new jobs in a two-year time frame.

To encourage long-term job creation, investments are needed to build the nation’s technological backbone that will help foster growth in the emerging high-tech industry and green economy.

“Advanced networks will allow increased opportunities for the creation of even more highly skilled technology jobs to invent new products and improve existing ones in the vital areas of energy, health care, education, public safety and services,” said Christopher Hansen, president and CEO of AeA. “These are the jobs of the future.”

Witnesses:

Panel 1:

Hon. Charles E. F. Millard
Director of the Pension Benefit Guaranty Corporation

Panel 2:

Jared Bernstein
Director of the Living Standards Program
Economic Policy Institute

Ron Blackwell
Chief Economist
AFL-CIO

Christopher Hansen
President and CEO
AeA (formerly the American Electronics Association)

Robert Pollin
Professor of Economics
Founding Co-Director of the Political Economy Research Institute
University of  Massachusetts at Amherst

Dana Stevens
Unemployed Worker
Thorofare, New Jersey

William W. Beach
Director
Center for Data Analysis
The Heritage Foundation

The PBGC is a government agency that insures private-sector pension plans, manages failed pension plans and pays benefits to workers of those plans.

The head of the PBGC, Charles Millard, will testify before the House Education and Labor Committee on Friday regarding the agency's financial problems that may threaten the retirement security of millions of Americans.

"At a time when Americans' anxiety about their economic future is escalating, Millard's testimony is vital to better understand the financial situation of the nation's pension guarantor," said Chairman Miller. "Now is the time to gather all the information we need in order to rescue the economy and help workers and retirees."

According to a document obtained by the Education and Labor Committee and based on preliminary unaudited figures, the PBGC lost more than $3.1 billion in its trust fund related to the agency's stock investments for the first 11 months of its 2008 fiscal year. The PBGC trust fund invests pension assets in order to pay out benefits to workers whose pension plans were turned over to the agency.

The recent dramatic loss also comes in light of a new controversial investment policy the agency recently approved. The new policy would significantly shift PBGC assets from fixed-income securities, such as U.S. Treasuries, into more risky securities like real estate.

Millard recently testified before Congress recently that the new investment policy would not add any additional risk to the long-term stability of the trust fund.

The invitation to answer questions from Congress comes after the Millard rebuffed a committee subpoena in July that demanded the agency turn over documents regarding a report into the agency's mismanagement and lax governance practices.

Witnesses:

Shlomo Benartzi, Ph.D.
Professor
UCLA Anderson School of Management
Los Angeles, CA

Mark Davis
Partner
Kravitz Davis Sansone
Encino, CA

Jacob S. Hacker, Ph.D.
Professor
University of California at Berkeley

Additional witnesses to be announced.

Affordable colleges
The Committee has enacted three laws that together will make college more affordable and accessible for middle class students, create a more efficient, consumer-friendly, and fair American higher education system, and protect federal student loans from turmoil in the economy.

High quality education
The Committee enacted legislation to strengthen the nation’s premiere early childhood program, giving more young children the skills they need to succeed in school and in life. The Committee also helped enact emergency aid to help Gulf Coast schools and colleges still working to recover from Katrina and Rita. In addition, the Committee took a key step toward improving learning conditions for schoolchildren by passing legislation to help schools modernize their facilities and become more energy-efficient.

A competitive workforce
The Committee has enacted legislation that builds on the principles Democrats first laid out in their “Innovation Agenda – A Commitment to Competitiveness to Keep America Number One.” These new laws will help prepare more Americans for jobs in emerging, high-tech industries that will keep our nation more competitive and create more good-paying jobs here at home.

Fairness in the workplace
During the first 100 hours of the 110th Congress, the House passed the first increase in the minimum wage in ten years. Since then, Committee has passed a series of key measures to strengthen workers’ rights, improve workplace safety, end discriminatory practices that have unfairly eroded workers’ pay and other benefits, and help workers balance demands of work and family.

Retirement security
While roughly 50 million American workers now have 401(k) style retirement plans, studies show that the vast majority of these workers don’t know how much they are paying in fees to the companies that service their 401(k) plans – fees that could be eating away at their retirement savings. The Committee passed legislation to help workers better understand these hidden fees and strengthen their retirement security.

Safe children and youth
The Committee enacted laws to protect America's children and youth, including runaway, homeless and missing children, and to increase penalties when employers violate child labor laws. The House also passed legislation to protect teens in public and private residential programs.

Accountability and responsibility
The Committee conducted oversight over government agencies in its jurisdiction, shining a light on the Bush administration’s failures to safeguard taxpayer dollars used to fund education programs and its efforts to weaken protections for workers. In some cases, the Committee’s investigations paved the way for legislation and spurred the U.S. Department of Justice to pursue a criminal investigation.

By the numbers...
The Committee has held 113 hearings and heard from 683 witnesses in its efforts to grow and strengthen the nation’s middle class. In the next Congress, the Committee will continue to build on this record by working to improve the lives of children, students, workers and families.

Though the Department is required to conduct audits of applications submitted to ensure against fraud, the OIG found that the Department actually discontinued some types of audits nearly three years ago. Additionally, the OIG found that the Department did not even audit many applications which had been selected for either random or targeted audits.

The OIG concluded:
“The effect of [the DOL] not auditing applications selected for audit is that fraudulent or non-meritorious applications may have been certified. Certifying non-eligible foreign workers could negatively affect the U.S. workforce by reducing the amount of jobs available for U.S. workers.”

Chairman Miller's letter to Secretary Chao states:
“The OIG report demonstrates that your Department has failed to properly implement the Program Electronic Review Management (PERM), a program that is similar to one you propose in the H-2A and H-2B regulations. Thus, we worry that the Bush Administration scheme for the H-2A and H-2B programs could lead to more fraudulent or non-meritorious requests for temporary foreign guest workers, at the expense of U.S. workers, with little risk of detection.”

Note: Sensitive information has been redacted from the OIG report.

“The credit crisis and stock market crash is making an already dire unemployment situation worse,” Chairman Miller said.  “The top economists who have briefed the Democratic leadership today and over the last few weeks all agree that unemployment is going to continue to rise.  We are going to examine the best ways to get Americans back to work and put our economy on the road to recovery.

“The emergency financial bill we approved late last month was one important step toward rescuing the economy, but we knew then that additional, comprehensive measures would be needed to help stabilize and heal our broken economy.  We need a longer-term economic recovery plan that will create jobs, grow the economy, and protect Main Street. These hearings will be vital to our efforts to develop a plan that rebuilds our economy while protecting taxpayers and helping workers and their families seize the opportunities that our 21st century economy presents.”

The hearing is expected to take place late next week.  The exact date and location will be announced later.  Last week, Chairman Miller announced a second hearing on how the financial crisis is impacting workers’ retirement savings, on Wednesday, October 22 in San Francisco.  He held a hearing on this topic last Tuesday as part of a series of hearings House Democrats are conducting to look at the causes of the financial crisis and appropriate responses to it.

According to the Congressional Budget Office, this multi-trillion dollar loss in workers’ retirement wealth could further slow the ailing economy. 

“To the extent households view balances in defined-contribution plans as part of their overall portfolio of wealth, a decline in those balances could lead people to reduce or delay purchases of goods and services,” said Peter Orszag, director of the CBO. “It could also lead some workers to delay their retirement.”

According to a survey released today by the AARP, in the last year 20 percent of baby boomers stopped contributing to their retirement plans because they have had trouble making ends meet. As several witnesses explained, workers closest to retirement may suffer the biggest hit from the financial meltdown. 

“The current financial crisis has certainly highlighted the fact that 401(k) participants—whose 401(k) account represent their sole retirement savings—bear all the investment risk,” said Jerry Bramlett, president and CEO of BenefitStreet, Inc., an independent retirement plan administration firm. “The pain is particularly acute for those participants closer to retirement whose retirement income expectations have been significantly impaired possibly resulting in the need to postpone retirement.”

The AARP also found that a third of workers surveyed are considering delaying retirement as a result of the financial and housing crises.

“In the last few weeks, we’ve been confronted with older worker and retirees’ lives being turned upside down; their panic tops-off an already existing state of chronic anxiety about retirement futures,” said Teresa Ghilarducci, professor of economic policy analysis at The New School for Social Research.

Witnesses also said that while the current financial crisis is reducing workers' savings today, retirement insecurity had been steadily growing over the past decade.

 “While the events that have taken place over the past several weeks have shone a spotlight on how affected Americans’ retirement plans can be by such volatility in the financial markets, it is important to keep in mind that Americans’ retirement security has been in distress for much longer than the past few weeks,” said Christian Weller, senior fellow at the Center for American Progress  “In fact, retirement security has been a growing concern for Americans for many years due to limited retirement plan coverage, little retirement wealth, and increasing risk exposure of the individual.”

Chairman Miller said that greater transparency in retirement plans and the fees workers pay is needed, especially when workers are losing money and looking for the best deal.

“401(k) holders lack critical information about how their money is managed and what fees they pay. I’m here to say right now, those days are over,” said Chairman Miller. “We must have more transparency in 401(k) investment practices. The Wall Street veil of secrecy must end.”

Earlier this year, the Committee passed a bill introduced by Chairman Miller that would require workers to receive clear and complete information about fees that – in some cases – are cutting deeply into their 401(k)-style retirement savings.