Tag Archives: student loan interest rates

Reid Suggests Compromise on Student Loan Rates

From the e-mail inbox, Senator Harry Reid (D-NV): “Washington, D.C. – In a letter to Speaker John Boehner and Minority Leader Mitch McConnell, Senate Majority Leader Harry Reid today offered two bipartisan proposals to pay for a one-year extension of student loan rates to prevent them from doubling on July 1st. The first proposal expands an offset that recently passed the Senate on a strong bipartisan vote of 74-22 as part of the transportation jobs bill. The combination offers a bipartisan path forward to break the impasse currently facing the student loan bill.”

OK, but I’m still not happy.  First, there is really no excuse for putting student loan interest rates up for revision on an annual basis.   Last time I looked it still took four years to get a college degree, and longer if the individual was interested in advanced degrees.  Advanced degrees being the kind that get a person into the 3.6% and below unemployment categories. [DoL]

Secondly, not so long ago it was declared unnecessary to put the cost of military operations in Iraq and Afghanistan  on the books, and thus the Bush Administration ran those activities via emergency supplemental appropriations without any mention of “pay fors.”  Neither was it deemed necessary to subject  the Medicare Part D program to “pay fors,” with some demonstrably budget busting results as of January 1, 2006.   However, when we’re speaking of educating our future work force — now, suddenly it’s absolutely essential we “pay for” every federal expenditure.

Granted, it is more fiscally responsible to know from whence the money is coming to pay for federal expenditures.  However, would it crush the Job Cremators so much to have a loophole for ultra-wealthy hedge fund and lobby shop operators closed? — as was suggested, and as caused Senator Dean Heller (R-NV) to issue his usual  cri de coeur for “small business.”

And thus we continue to tinker, Senator Reid offering the following:

(1)    Reforms to employer pension payment contributions. The proposal outlined by Senator Reid would create a “stabilization range” for employers to compute their pension liabilities. Instead of being forced to use the two-year corporate bond rates in computing their pension liabilities, the new proposal would allow them to compute liabilities using rates for a 25-year period within which the two-year rates must fall.  To the extent that the two-year rates fall outside this range, the company would be allowed to use a rate closest to the two-year rate that falls within the stabilization range to compute its pension funding requirements.  This more flexible approach would narrow fluctuations in computing pension contributions and result in businesses taking fewer tax deductions for contributions.

(2)  Change contributions to Pension Benefit Guarantee Corporation premiums. In addition, Senator Reid proposed increasing premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corporation.  Currently, employers pay a flat dollar premium of $35 per pension plan participant as well as a variable premium equal to $9 for each $1,000 that the plan is underfunded.  To help improve the PBGC’s finances, these premiums could be increased as part of this proposal.

“The combination of these two proposals will provide sufficient resources to fund both a one-year extension of the current student loan interest rate and re-authorization of the nation’s surface transportation programs.”

OK, if we adopt these proposals then we get a continuance of the 3.4% student loan rate AND the re-authorization of the surface transportation programs.  And, I can hear it now — OMG, a more flexible approach to calculating pension fund contributions will be “a plague upon Capitalism?”  Or, increasing the premiums for the PBGC will be a “onerous burden on job creators?”   The former argument is offset by the fact that BUSINESS groups are the ones asking for the recalculation of the pension funding formula. [WallStJournal]

There are reasons to be concerned about the recalculation of pension fund contributions, none of which have anything to do with plaguing Capitalism.  One major cause for careful consideration is that changing the formula could have detrimental effects on defined benefit plans.  [WallStJournal]

The Pension Benefit Guarantee Corporation is already facing some serious issues, some of which were outlined in a 2010 report from the GAO:

“Plans in the worst condition may find that the options of increasing employer contributions or reducing benefits are insufficient to address their underfunding and demographic challenges. For these plans, the effects of the economic downturn, declines in collective bargaining, the withdrawal of contributing employers, and an aging workforce will likely increase their risk of insolvency. Without additional options to address plan underfunding or to attract new employers to contribute to plans, plans may be more likely to require financial assistance from PBGC.  Additional claims would further strain PBGC’s insurance program that, already in deficit, it can ill afford.”

Economic growth, as we’ve seen in the private sector over the past 27 months, will help these issues, but asking employers to pay increased premiums to backstop an already serious issue isn’t too much to ask.  If the corporations make additional contributions, then the PBGC isn’t further behind the eight-ball when companies fail.

On the optimistic side, both suggestions from Senator Reid have received bi-partisan support in the past.  On the pessimistic side, chucking their previously held positions over the side has become a Republican art form — witness the individual mandate for health care insurance coverage, and “cap and trade” schemes for pollution elimination.

Since it’s been “campaign season” since January 20, 2009 I am a bit leery of Republican cooperation in the U.S. Senate.  Meanwhile, the clock is ticking as students and their parents try to get body and soul together concerning educational expenses for the next school term.

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Filed under Economy, education, employment, Heller, Reid, Student Loans, unemployment

Heller Logic: The Art of the Glittering Silly Syllogism

Senator Dean Heller’s (R-NV) commentary on the failure of S. 2343 (The Student Loan Interest Rate Bill) to break through a Republican filibuster:

“Instead of compromising, the Democrats want to raise taxes on small business at a time when we need jobs,” said Nevada Sen. Dean Heller, who voted against the measure. “They brought this vote to the floor knowing that it wouldn’t pass.” [LVSun]

In order to buy this a person needs to suspend most activities which normally take place in the cerebral cortex.  What did we say about “small businesses” yesterday?   Heller’s argument depends on a silly syllogism:

(1.)  Small Businesses can be S corporations.  (2.) S. 2343 raises self employment taxes on S corporations.  (3.) Therefore S. 2343 raises taxes on small businesses.

Once more, here’s why this is a Silly Syllogism:  The bill raised self-employment taxes on TWO types of S corporations — NOT all of them, only ones categorized as “professional business services.”   The bill didn’t even raise self-employment taxes on many of the professional business service S corporations because those self-employment taxes would apply IF and ONLY if the S corporation/partnership had at least $200,000 in annual modified adjusted gross income.

So, to what is Senator Heller objecting? “Democrats want to offset the cost of that change by getting rid of a tax loophole that lets certain corporations avoid paying Medicare and Social Security taxes.” [LVSun]  (emphasis added)  Therefore, it’s reasonably apparent that Senator Heller opposes getting rid of the ‘professional business service’ loophole for SOME configurations of S corporations.

Conflating the self-employment taxes paid by furniture dealers, lighting contractors, service station owners, and other small businesses listed yesterday, with “professional business services” like Washington, D.C. lobby shops, industrial-sized law firms, and Wall Street hedge funds isn’t precisely “protecting small businesses” … especially if the owners of small service and retail businesses which are NOT hauling in over $200,000 in modified adjusted gross income have kids in college.  Conflation is a handy rhetorical tool, but it usually doesn’t serve to make family budgets stretch to meet educational expenses for the offspring.

Heller: “They want to raise taxes on small business at a time when we need jobs.”  No, “they” want to close a tax loophole which allows highly profitable S corporations to avoid self-employment taxes which most other small business owners pay.  By valiantly protecting the interests of hedge funds, large lobby shops, and big law firms, Senator Heller has placed himself firmly among the ultra-right wing champions of the Financialists.

Not surprisingly, there was a time when Republicans thought this loophole was icky — when former presidential candidate Sen. John Edwards used it to create a sub-chapter S corporation for his law firm, and avoided some $591,000 in payments to Medicare/Social Security by paying himself a $360,000 annual salary instead of reporting the $26.9 million he made in four years.  [NYT] Ah, but that was then, and now the Republicans have enthusiastically embraced the loophole for their friends in corner offices of lobby shops, law partnerships, and hedge fund firms.  Meanwhile, there are two other points to be made about Heller’s newly discovered love of loopholes for the 1%.

First, there’s that “They brought this vote to the floor knowing that it wouldn’t pass,” argument.  Why wouldn’t S. 2343 pass?  It got 52 votes in the Senate — that’s a majority when the base number is 100.  No, it didn’t even get to a floor vote because the Republicans were filibustering it.  Unfortunately, the corporate media has been slow to report the Filibuster Follies of the 112th Congress, because the artificial 60 vote threshold just to bring a measure to the floor for an up or down vote has become common place.   Senate Republicans have filibustered just about every major piece of legislation. There’s a word for that: Obstructionism.  It really doesn’t do to attack the opposition for bringing legislation to the floor when it’s the GOP which is preventing floor votes on major bills.

Secondly,  there’s that “Instead of compromising,…” portion of Heller’s commentary.    Compromise with what?  The Republican version of the bill seeks to divert funds from preventative health care programs, while the Democratic version seeks to close the S corporation loophole.   One observation is obvious, when the versions are so completely different any compromise is, well, compromised.  Another reasonable observation is that in order to secure passage Democrats would have to accede to Republican demands — while offering no guarantee that the measure would achieve enough votes to break a filibuster.

A third observation is also possible, that it is more important to Republicans like Senator Heller to protect self-employment tax loopholes for the 1% than it is to secure funding for Nevada’s public health programs:

“Since 2010, Nevada has received $7.5 million in grants from the Prevention and Public Health Fund created by the Affordable Care Act. This new fund was created to support effective policies in Nevada, its communities, and nationwide so that all Americans can lead longer, more productive lives.”  [HHS]

That funding which House Speaker John Boehner was pleased to call a “slush fund,” has been of use in Nevada.  Some examples: The state has received $583,000 for “Community Transformation Grants, which empower communities to use evidence-based interventions to prevent heart attacks, strokes, cancer, and other conditions by reducing tobacco use, preventing obesity, and reducing health disparities. These dollars also help support a chronic disease prevention grant program and strengthen evidence-based employer wellness programs.”  We’ve also received $3,863,000 for anti-smoking programs, “This funding supports anti-tobacco education campaigns, telephone-based tobacco cessation services, and outreach programs that are proven to reduce tobacco use and those focused on vulnerable populations, consistent with the HHS Tobacco Control Strategic Action Plan.”   [HHS]   [More here]

But, hey, why would Nevada need smoking cessation funding assistance?  Maybe because we’re an island of dark green in a region of lighter shades?

However, by Senator Heller’s lights it’s evidently more vital to protect those who use the S Corporation Loophole to avoid paying into Medicare and Social Security than it is to help Nevada “kick the habit” and promote anti-obesity efforts to make our children healthier?

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Filed under 2012 election, filibuster, health, Health Care, Republicans

Just a few late night questions

#1.  The Republicans on Capitol Hill appear determined to oppose reduction of the student loan interest rates without some “pay for.”  First, why was there no “pay for” when they passed tax reductions for the richest among us? Secondly, Bankrate.com is reporting that 30 year fixed mortgages cost 3.82%, a new car loan for 48 months has an interest rate of about 3.28%, and a home equity loan for $30,000 carries 5.78%, so why must student loans be more expensive than just about any other major form of credit?

#2.  Why did House Speaker refer to the Affordable Care Act provisions for cancer screenings for women as a “Slush Fund?”   Republicans would like to cut the $17 billion set aside for breast and cervical cancer screenings, child immunizations, and wellness education.

#3. Which is ultimately more important to the health and well being of our entire nation: (a) tax breaks on multimillion dollar estates, or (b) feeding school lunches to 280,000 children for the next ten years?

#4. What is more important to national commerce, protecting the Bush Tax Cuts for millionaires and billionaires, or doing something about the 69,220 highway bridges in this country that are structurally deficient?  [DoT, RITA table I-28]  Isn’t there something of a disconnect when we consider that bridges are generally built to last 50 years, but at the rate we are repairing and replacing them it may take 100  years to fix the problems we already have?

Just asking…

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Filed under Congress, Federal budget, highways, Republicans, Student Loans, Taxation, Women's Issues