Political Upside to Stalled Student Loan Bill

Democrats Sense Messaging Win Over GOP’s Blockage of Bill on Loan Interest Rates

Posted May 8, 2012 at 6:33pm

Seeing a political opportunity, Senate Democrats will continue to criticize Senate Republicans on the floor this week for voting against their student loan bill before moving to the next item of business, which could be the Democrats’ small-business tax cut package.

“We are going to be conducting efforts to … show the American people how important this is and why the Republicans should let us move forward with this legislation,” Majority Leader Harry Reid (Nev.) said.

Democrats plan to take to the floor to highlight the stories of students who will be affected should Congress fail to act by July 1, when current law expires and the 3.4 percent interest rate on Stafford loans will double.

Rather than trying to move on to another piece of legislation, Democrats will allow the student loan bill to remain the pending business before the chamber.

“We are going to be coming to the floor and sharing stories about students that we’ve met and the hardship that this Republican position has created,” Majority Whip Dick Durbin (Ill.) said Tuesday.

His comments come after Senate Republicans, who say they also want to avert the interest rate increase, blocked the Senate from moving forward on the Democratic bill.

Republicans oppose the offset, which they argue would hurt job creation and the economy.

In a 52-45 vote along party lines, the student loan measure fell short of the 60 votes needed to overcome a filibuster. Sen. Olympia Snowe (R-Maine) voted present, and Reid voted against the bill in order to preserve his right under the rules to bring it up again.

The bill would have covered the $6 billion cost of preventing the interest rate increase by eliminating a corporate tax loophole that allows wealthy individuals to pay less in Social Security and Medicare taxes.

After the vote, Reid recommended that presumptive GOP presidential nominee Mitt Romney call Minority Leader Mitch McConnell (Ky.) to win him over. Democrats have said Romney used a similar offset as governor of Massachusetts, and Romney has said he wants to make sure interest rates remain low.

“I suggest he pick up the phone and call Sen. McConnell and tell him he favors what we are trying to do,” Reid said.

Republicans said they blocked the Democrats’ bill because they wanted to jump-start negotiations on a bipartisan pay-for that can pass both chambers.

McConnell said Reid should call Speaker John Boehner (R-Ohio) to get the talks going.

“We agree that we need to keep the rate from going up; we ought to sit down and negotiate a way to pay for it,” McConnell said after the vote. “My friend and colleague and counterpart might want to call the Speaker and say, ‘Why don’t we resolve this matter … rather than leaving all these young people with a sense of uncertainty as to whether their rates are going to go up.’”

When asked about calling the Speaker, Reid said, “Boehner has no votes over here.”

Republicans and business groups have said the Democrats’ offset would make businesses less likely to hire because it would increase their tax burden. Senate Republicans prefer the House-passed bill, which is offset by eliminating a fund in the 2010 health care overhaul that covers prevention and public health.

“This is not something we ought to be wasting time on the Senate floor dealing with when we already know we want to get the result and we have a difference over the pay-for, so we ought to sit down and talk about how to pay for it,” McConnell continued, adding that Democrats are seeking to create a controversy where there is none in order to gain political advantage.

Democrats suggested that Republicans opposed the bill out of fear of reprisals from conservative groups, such as Grover Norquist’s Americans for Tax Reform and the Club for Growth. The groups have advocated for conservative candidates against GOP incumbents in primary elections, including in Indiana.

“They’re scared to death” of crossing Norquist, Durbin said. “This primary [Tuesday] in Indiana is a reminder to them that Grover is watching every step and every vote you take.”

While they continue to make political points on the failed student loan measure, Senate Democratic leaders are considering what the next order of business will be. Among the leading candidates is a small-business tax cut bill, but no final decisions have been made, a senior Senate Democratic aide said.

Under the tax bill, businesses could receive a 10 percent income tax credit on new payroll added in 2012. The credit would apply if businesses hired new people or increased wages for existing employees.

The bill also would extend “bonus depreciation” for one year, which allows businesses to write off the entire cost of major equipment purchases in the year they are made rather than depreciate those expenses over many years.

Other possible agenda items include votes on a variety of budget resolutions and a pay parity bill.