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Student Loan Reform: 'A Political Stunt That Everyone Knows Won't Pass'

Nathaniel Haas |
June 11, 2014 | 5:40 p.m. PDT


It’s not a loophole, Senator Warren. It’s an income tax, and you are raising it. (Twp, Wikimedia Commons)
It’s not a loophole, Senator Warren. It’s an income tax, and you are raising it. (Twp, Wikimedia Commons)
Congress doesn’t deserve any credit (no pun intended) when it comes to helping students fight the weight of a crushing education loan.

This isn’t because of a failure to draw up legislation, but rather because of a willingness to put politics over the end goal of passing that legislation, or, as Senator Lamar Alexander (R-TN) called it, "a political stunt that everyone knows won't pass."

Spoiler alert: on Wednesday, it didn't pass.

SEE ALSO: Republicans Block Student Loan Bill

Americans now owe more in student loans (just over $1 trillion) than they do for credit card debt. The average borrower owes an average of $29,500 upon graduation. Clearly, our students need help, and the Democrats have attempted to come to the rescue.  

On Monday, President Obama signed an executive order aimed at alleviating the burden student loan debt has on students after they graduate. The executive order would expand the Pay As You Earn (PAYE) program, which gives borrowers who sign up the ability to cap their student loan payments at 10 percent of their monthly income. Before the executive order, five million people (including anyone who borrowed before 2007) were excluded from the program.

SEE ALSO: Obama Makes Paying Student Loans Possible

The good news? The executive order expands the PAYE program to anyone who has borrowed a student loan, which will save students an average of $1500 per year on loan payments. The bad news? The work Democrats have done in the Senate has failed worse than Eric Cantor's reelection campaign. 

The Senate voted Wednesday on the Bank On Students Emergency Loan Refinancing Act, a piece of legislation proposed by Senator (and Democrat party rockstar/potential presidential hopeful) Elizabeth Warren. The bill would allow students to refinance their outstanding student loans at the interest rate current borrowers receive (3.86 percent). According to numbers put out by the Congressional Budget Office, such a program would come at a cost to the taxpayers of $51 billion dollars over the next 10 years, as the federal government pays the difference between new and old loan rates to the loan servicers. 

Without going into details, the premise of the bill is sound. Admittedly, the bill does not represent a concerted effort to rein in the cost of college tuition (the elephant in the room), but students who have already borrowed wouldn’t get left out in the cold. Most of the other objections to the bill have come from the next step in the process: how to fund the bill. When it comes to that, the Democrats went off the rails. 

In anticipation of concerns from the right that the bill would add to the deficit, Senator Warren and company advertised the bill as budget neutral. 

But it has become roughly the twentieth bill Democrats have proposed to make budget neutral through the Buffet rule, which increases income taxes on Americans who rake in more than $1 million a year to 30 percent. The Buffet rule might be even more hated in the GOP than a policy that adds to the deficit.

In other words, making a bill revenue neutral by tying it to an increase in taxes on millionaires, the exact same taxes that the GOP opposes, is the political equivalent of the Democratic party shooting itself in the foot, but on purpose - because that seems exactly what the Democrats want to do. 

“It’s a basic question on our values,” Warren said in an interview. “Does this country protect millionaires’ and billionaires’ tax loopholes? Or does it try to help young people who are just starting their economic lives?” 

First, let’s axe the phrase “tax loopholes” from our political lingo right now. Let’s call a spade a spade, and stop dressing up policy proposals in words and phrases that are only meant to confuse the average voter. This goes both ways (remember the death panels, GOP?). It’s not a loophole, Senator Warren. It’s an income tax, and you are raising it. Grover Norquist and the rest of the “tax” police aren’t fooled, and neither is anyone in the Republican Party. 

Objectively, I think the rich should pay more taxes. I think it’s fair and makes sense for the American economy in the long run. But that’s not the point – the point is that it is reprehensible on the part of the Democrats to continue to tie common sense proposals that both parties can agree on with “poison pills” that tank any chance of a bill like Warren’s from passing. 

In a speech to the Senate before the bill failed, Warren urged the GOP to come up with alternative funding measures instead of killing the bill entirely. The bill failed to the filibuster (falling short of the necessary 60-vote threshold in a count of 56-38.) As I've discussed in a previous column, the filibuster should be abolished, but in this instance even the filibuster can't be blamed for a bill that is so grossly partisan in nature. 

SEE ALSO: It's Time To End The Filibuster Once And For All

There are a myriad of measures that could make Warren’s legislation budget neutral that are far easier to agree on. Back in 2010, the New York Times published a “You Fix the Budget” tool, which is still available online. The tool allows you to cut spending from various parts of the government and see the impact it would have on the yearly budget savings. In five minutes, I made Warren’s bill budget neutral, and I guarantee my proposal would have a greater chance at passing the Senate than the Buffet rule. For the tax fans out there, leaving the rich alone and returning the estate tax to Clinton levels does the trick in a heartbeat. 

But the Democrats, who are approaching a midterm election that promises to be the equivalent of a root canal without Novocain, refuse to back down.

“I want Americans to pay attention to see where their lawmakers’ priorities lie here: lower tax bills for millionaires or lower student loan bills for the middle class,” President Obama said at the signing of the executive order. “This should be a no-brainer.”

I don’t usually turn to Star Wars characters to make arguments on my behalf, but in this case I’ll refer readers to the immortal words of Obi-Wan Kenobi: 

“Only a Sith deals in absolutes.”

President Obama’s attempt to score political points on the GOP is a false choice. He might as well tell his daughters that he’ll only pay for their college if Michelle Obama wears pajamas to the State of the Union, and then blame her when that proposal fails. I want higher taxes on the rich and Warren’s student loan bill to pass. Combining them gets us neither. Blaming the GOP for that is misleading, just like it would be misleading to blame hypothetical Michelle Obama for refusing to wear pajamas to the State of the Union (when Obama should be to blame for setting up the false choice in the first place). 

In fact, the priorities of the GOP aren’t the only ones people are watching. The Democrats seem to think that American voters won’t connect the dots, and supporters of the tactics they are using might think American voters will reward the Democrats at the polls in November. If I’m looking at it from the perspective of a Democrat voter (which I am, by the way), I see things differently. I see no student loan relief and no higher taxes on the rich. (I also don’t see equal pay or an increase in the minimum wage, but those were also introduced as political zingers.) Seeing things that way, I’d vote for the moderate GOP candidate who promises to reach across the aisle 9 times out of 10. 

If Democrats really cared about students, they wouldn’t place nailing the Republican Party above doing everything in their power to pass Warren’s legislation. The Buffet rule provision should be scrapped and that fight should be saved for another day, perhaps one when the Democrats actually have the 60 votes necessary for it. In the meantime, the Democrats should negotiate an alternative means to fund the bill with the GOP. 

Washington is gridlocked, but it isn’t beyond compromise. Congress should ditch the political theater and at least pretend like it’s trying to make that happen. 

Nathaniel Haas is a junior majoring in political science and economics. He currently lives in Washington, D.C. and works as an intern at the United States Senate. His column, "Over The Hill," runs Wednesdays. Reach him here; follow him here.



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