And This Is The Bill With The Smooth Sailing

Barron YoungSmith (I'll admit to the name irking me) reports on President Obama's student loan reform, one of the most no-brainer bills of all time, but one which has been stymied for decades by business interests wanting to cash their corporate welfare checks:

Last month, taking cues from Obama, the House of Representatives passed the Student Aid and Fiscal Responsibility Act, which would alter the way the government funds Pell Grants and other student loans. Under the current system, the government gives banks huge subsidies to encourage them to lend to students. Effectively, this means the government is bribing banks to extend student loans by handing them money and letting them cream huge profits off the top. It is a vast waste of taxpayer money, since Uncle Sam could accomplish exactly the same thing by cutting out the middleman and lending directly to students [...]

The next hurdle is the Senate, where Tom Harkin's HELP Committee plans to introduce a student loan bill as soon as it's cleared some *ahem* backlog on health care reform. It looks as if Harkin's committee will introduce a bill that, like the House version, hews very closely to President Obama's proposals as well. And, since the bill is moving through the notorious budget reconciliation process instead of the normal legislative track--a decision made by Obama's allies who want to increase the likelihood of passage--it will pass through no other committees, save the quiescent Budget Committee, and it will not face the threat of a filibuster.

Game over? Not quite. In a testament to the sway that student lenders exercise over the Senate, it's not clear that Democrats have the 51 votes necessary to pass the bill in its current form. Ben Nelson, the staunch friend of lending companies, is against it--as are Blanche Lincoln, Mark Begich, Jeff Bingaman, and Tom Udall. And Senators Bob Casey, Arlen Specter, Bill Nelson, Mark Warner, Jim Webb, and Mary Landrieu are all said to be wavering because their states contain student loan companies. Many are searching for a way to keep lending companies involved in the process--an anguished Senator Casey even held a field congressional hearing in Philadephia this week, hoping to clarify his thoughts on the issue--and they'll be tempted to back some of the numerous pro-lender amendments that will be offered once the bill is open for floor debate. (Even in the House, Democrats couldn't prevent a mass revolt until they watered down the legislation by exempting existing state-based non-profit lenders from subsidy cuts.)

(Seriously, what the fuck, Tom Udall? I expect this from a lot of the others, but you?)

It's insane that there would be eleven lawmakers who call themselves Democrats opposed to something this obvious. It's a pure bank subsidy with no reason to exist whatsoever. There's no argument to be made other than "let's give the banks we bailed out even more free taxpayer money." And yet, I count eleven Senators up there wavering, despite the fact that this bill would create the largest benefit to students in history and cement Democratic gains among young people, while saving the government money. With college costs rising we're not even going to have a higher education system in this country, at least not one for anyone but the super-rich, if we don't accomplish this. Even this bill, which would expand Pell Grants with all the savings from no longer subsidizing banks to make student loans, would fall short of keeping pace with costs (although they would index an increase to inflation).

Really, if we can't do this, Congress might as well pack it in and go home for a couple years to do some soul-searching.

The Sea Change In Higher Education

Quietly and with little fanfare, the President has embarked on a lasting, substantive benefit to Americans seeking college loans. And because he'll seek budget reconciliation for it and the measure clearly cuts costs, he'll get it, and finally we'll have a common-sense initiative that saves money, helps kids and ends the myth that privatization always benefits the country.

President Obama's health-care goals may be garnering attention, but his higher-education proposals are no less ambitious.

If adopted, they could transform the financial aid landscape for millions of students while expanding federal authority to a degree that even Democrats concede is controversial.

At stake is a plan to expand the Pell Grant program, making it an entitlement akin to Medicare and Social Security. Key to the effort is a consolidation of student lending that would give the U.S. Department of Education a near monopoly over the practice -- a proposal that has mobilized the private loan industry, which lent $55.3 billion to 6.4 million students in the 2007-2008 school year.

Obama outlined his initiatives, which also include incentives for colleges to cut costs and to raise graduation rates, in the fiscal 2010 budget that Congress approved Wednesday, and Democratic leaders said they hope to make them law by October.

The private loan industry takes federal grant money, delivers it to kids, and takes their profit share off the top. There is absolutely no reason for them to exist. With the savings from ending the privatization of the student loan industry, we can make Pell Grant funding permanent and help millions of Americans go to college. Without affordability, our efforts to bolster education in this country, in particular higher education, will never succeed. Furthermore, unsustainable student loan debt burdens young people coming out of college, lowers their purchasing power and forces their decision-making, furthering the debt peonage society.

The leeches in the private loan industry think they've created something:

"The only reason they're doing this is the government can make a lot of money," said Kevin Bruns, executive director of the trade group America's Student Loan Providers. "Private-sector lending built this entire industry, and now the federal government has piggybacked off of it."

Uh, no. Unaffordable higher education costs built the industry. They forced students to get loans or forego college. And middlemen benefited for no reason for decades. The taxpayer need not fund this industry any longer.

Obama is ushering in a sweeping change here, and practically nobody is talking about it.

The Looming Budget Fights

The Obama Administration budget has a number of elements that would restore fairness and progressivity to the tax code, end the creeping privatization of government functions, cut down on waste, fraud and abuse in contracting, and invest in some of the most important elements, notably education, health care and clean energy, that will drive our economic future. It is a telling quirk of the entrenched nature of Washington, however, that the most promising parts of this budget, the parts that do the most to shake up the status quo, are precisely the parts that will be fought so strenuously by those who wish to maintain that status quo.

For instance, there's the perfectly sensible alteration of the financial aid system for higher education, which would eliminate the middleman in the student loan market, reducing rates for college students while saving the government money through increasing efficiency and cutting subsidies to loan officers.

Among other changes, the Obama budget eliminates the Federal Family Education Loan Program, which excessively subsidizes banks, and moves to the U.S. Department of Education’s Direct Loan program. The Congressional Budget office projects this move to save $94 billion over nine years. The Obama budget then redirects the savings to students. The Congressional Budget Office estimates that in 2010-2011, $5 billion would be cut from subsidies to banks and lenders, and invested in students instead.

Redirecting the bank subsidies toward Pell grants would solidify the grant program as the premier source of assistance for low-income students. The Pell grant maximum would increase from $5,350 to $5,550; the estimated national average Pell grant award would increase by $121, from $3,299 to $3,423. Increasing the award will also enable an additional 130,000 more students to attend college per $100 increase in the maximum award.

However, because this system would take aim at the student loan industry that has built up in particular Democratic areas, top Democrats want to scuttle the deal.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) and House Appropriations Chairman David Obey (D-Wis.) are opposed to provisions in Obama’s budget plan that would remove private banks from the federal student loan program and transfer the expected savings — $94 billion over a decade, according to the CBO— to a new program that would instead guarantee Pell Grant funding for eligible students [...]

Conrad is under some pressure from his home state to preserve a role for banks in the federally backed student loan program.

“If the president’s proposal goes through, that will deeply affect the Bank of North Dakota,” according to Julie Kubisiak, the director of student loans at the state-owned bank. She said the bank’s entire advisory board, consisting of the governor, attorney general and other officials, have written to the state’s Congressional delegation opposing the change.

That's ALL this is about. There's some lip-flap about not wanting to create a new entitlement by guaranteeing Pell Grant funding, but it's B.S. The banks want to keep their subsidies. I mean, it's not like they've created any hardship for the country lately, is it?

Then there's the battle over ending subsidies to the oil industry:

The Obama administration's push to raise taxes on the oil industry is reigniting a battle the industry fought and won last year.

Under pressure to narrow projected deficits, President Barack Obama's 2010 budget proposal calls for raising more than $31 billion over the next decade by eliminating the oil and gas industry's eligibility for various tax breaks.

The plan would slap companies with a new excise tax on production in the Gulf of Mexico worth $5.3 billion between 2010 and 2019, and repeal the industry's eligibility for a manufacturing tax credit worth $13.3 billion in that period. The industry says the final cost of Mr. Obama's proposals on petroleum production could top $400 billion, once his plan to put a price on greenhouse-gas emissions is factored in [...]

The oil industry, which in its campaign donations has long favored Republicans, is taking its case to voters. A new ad campaign by the American Petroleum Institute in about a dozen states says new taxes would "hobble our ailing economy" and "cost thousands of American jobs."

"I think we should pay our fair share of taxes, but I don't think we should look at this industry as the source of all money to pay for the renewable energy industry," said Peter Robertson, vice chairman of Chevron Corp. Mr. Robertson said Mr. Obama's tax proposals will discourage domestic oil and natural-gas production and undermine his goal of reducing U.S. dependence on foreign oil.

I know that President Obama vowed to fight the special interest he takes on in his budget. And It's good to see the grassroots advocacy groups rallying behind this, particularly against conservative Democrats who want to hide their views from their constituents. But the power is very entrenched. So this will be a very big struggle.