Photo: Flickr / AdamLogan
There was a big fight in D.C. this past week over student loans.
The issue is a scheduled increase in interest on new student loans from 3.4% to 6.4% set for July 1. Clearly this is a dumb plan. I don’t see any political opposition to the idea that the summer of 2012 is a horrible time to double the cost of student loans. It will shock no one that the ‘solutions’ being put forward by the politicos are the same ones they propose for every other problem.
The House Republicans have put forward a Bill to extend the 3.4% rate for a year. The cost (increased deficit) of the twelve month extension is $6B. The Republicans want to offset the $6B with (surprise) $12B in reduced spending for the Affordable Care-Act. The Republicans love to trade marbles for reduced Obamacare. They want a 2-1 reduction in medical spending versus education costs. Maybe the “Reds” have the chips to push this outcome. They might settle for a 1-1 deal, but the White House will hate this outcome.
The Senate Democrats want to raise taxes on those making over $250K to offset the cost of the one-year deferral. Their argument is similar to the Buffett tax plan they tried a few weeks ago. Lacking support, it was so clear it wouldn’t pass that it was never voted on. I would give the Senate legislation on student loans a zero chance in the House. It is D.O.A.
There will be the same ideological pissing match and the same result. We will get a one-year extension “paid” for with “promised” reductions in expenses starting in 2017. Another kick of the can, and another big problem in 2013.
This is what happens over a crummy $6B. On January 1, 2013, there are cutbacks and higher taxes totaling $500B scheduled. The coming “Tax Armageddon” is supposed to be resolved in a lame duck session of Congress after the November election. There is a “zero” chance of that working out.
Business Insider Emails & Alerts
Site highlights each day to your inbox.