Senate Standoff Over Student Loans

 

 

THE SENATE: Holds a procedural vote at noon on legislation to block this summer’s hike in student loan interest rates, then takes its usual Tuesday break for caucus lunches. Although both parties want to maintain the status quo for Stafford loans, they disagree on how to pay for the legislation. Republicans say they have the votes to stall the Democratic bill.

Both parties appear disinclined to compromise on student loan legislation and instead are prepared to engage in finger-pointing and political brinkmanship until the July 1 doubling of the interest rate draws closer.

Senate Minority Whip Jon Kyl predicted that Republicans will block cloture Tuesday on a motion to proceed to the Democrats’ student loan bill (S 2343) because Majority Leader Harry Reid is unlikely to guarantee a vote on the GOP alternative (S 2366).

On the Senate floor Monday, the two parties belittled each other’s proposed offsets for a one-year extension of the current 3.4 percent student loan interest rate. In fact, several Republicans suggested that this week’s debate is an exercise in futility.

“When it’s clear that [Reid’s] version isn’t going to go anywhere, I presume that leaders in the House and Senate will get together and find a way to ensure that the interest rate doesn’t double,” Kyl, R-Ariz., said.

Sen. Michael B. Enzi, R-Wyo., urged Reid to pull the student loan legislation from the floor.

“Neither option is ideal,” Enzi said. “These aren’t the options we should be voting on. I urge the majority leader to pull the bill from the floor, find a solution we can all agree on. I’m not aware of anybody that’s opposed to an extension of the reduction of the interest rate.”

Reid, for his part, made clear Monday that the Republicans’ proposed pay-for — eliminating the 2010 health care law’s public health and prevention fund — is a non-starter for Democrats.

“This is a program that is so vitally important to the health care delivery system in our country,” said Reid, D-Nev. “Republicans know their proposal would never pass the Senate. Never.”

Split Over Offsets

Senate Democrats prefer to offset the estimated $6 billion cost of the legislation by closing a tax loophole on S corporations, companies that pass their income, losses, deductions and credits through to shareholders for federal tax purposes. Under the proposal, shareholders who are also employees would be subject to Social Security and Medicare payroll taxes on their dividends and shares of the company’s profits, in addition to their wages.

Senate Republicans argued that the offset represents a tax increase and would prevent small businesses from hiring.

“They’d like to raise money in the middle of the longest recession we’ve had since the Great Depression on job creators,” said Sen. Lamar Alexander, R-Tenn.

Democrats, however, emphasized that their proposal would only affect those earning more than $250,000.

“Our proposal isn’t a new tax,” Reid said. “It would simply stop wealthy Americans from dodging the taxes they’re already required to pay.”
Republicans contend that their alternative legislation, which Alexander introduced as a companion to the bill (HR 4628) that the House passed April 27, would rightfully eliminate a “slush fund” in the health care law (PL 111-148, PL 111-152).
“I find this disturbing and disappointing,” responded Sen. Tom Harkin, D-Iowa. “That term ‘slush fund’ is a malicious untruth. This fund is saving lives and saving money. Eliminating this fund would be bad public policy.”

‘Political Season’

Republicans also used Monday’s debate to slam Obama and other Democrats for turning the interest rate hike into a campaign issue.
“The president is on the campaign trail promising to fix it,” Alexander said. “It is the political season, and so students as well as senators and all of us need to listen very carefully when someone begins to stir the crowd about a popular issue, and surely being able to pay for college is a popular issue.”
Obama and top administration officials continued their public relations push this week.
On Monday, the president held a conference call on the interest rate issue with elected officials and student government leaders. On Thursday, Vice President Joseph R. Biden Jr. is slated to speak to students and representatives from higher education and youth organizations at the White House. In addition, several Cabinet secretaries and other senior White House officials are scheduled to discuss the issue at events across the country.
The White House on Monday announced support for the Senate Democrats’ student loan bill, saying in a Statement of Administration Policy that it would be paid for “in a fiscally responsible manner.” The administration has threatened to veto the House-passed version because it would eliminate the health care fund.
Kyl dismissed the suggestion that Obama and other Democrats could succeed in using Tuesday’s cloture vote to cast Republicans as uninterested in helping cash-strapped college students.
“I realize that’s the scenario that Democrats would like to try to create, but the media and I think our constituents are more sophisticated than that,” Kyl said. “They understand that there is a unanimity to prevent the increase in interest rates and that it is simply a disagreement about how to pay for it.”

 By Lauren Smith, CQ Staff

Niels Lesniewski contributed to this story.