The Food and Drug Administration Safety and Innovation Act--Motion to Proceed--Continued

Floor Speech

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Mr. REED. Mr. President, I am joined by my colleague, Senator Brown of Ohio. We are extraordinarily apprehensive that in 45 days the interest rate on subsidized student loans will double in the United States. Young people and middle-aged people who are struggling to educate themselves and reeducate themselves will be faced with a tremendous increase in the cost of college and postsecondary education. The interest rate will go from 3.4 percent to 6.8 percent. This is particularly ironic when the Federal Reserve routinely lends to large banking institutions huge sums of money at less than 1 percent. So this is a huge impact on middle-income Americans who are struggling with so many challenges: housing costs, employment problems--the whole plethora of issues they face.

It is estimated that more than 7 million students, including 43,000 in Rhode Island, will suffer because of this doubling that will take place. A lot of our colleagues have said: Of course we don't want to see this happen. I thought it was terribly ironic yesterday that they, with very few exceptions, voted consistently for budgets that would, in fact, double the student interest rate. In fact, one of the budgets they voted for previously, the Ryan budget from the House, would also eliminate the in-school interest subsidies for certain loans. So there is this incongruity between, oh, we are all for keeping interest rate low for students, but, of course, in our budget we double it.

There is another problem, and it has been reported in so many different national and local newspapers. There is a huge problem with student debt. We have reached the $1 trillion mark in student debt. This could be the next big, huge bubble we face financially. It certainly impairs the ability of young men and women when they graduate to go and take the job they want, to buy the house they want, because they are struggling with huge debts, and we are adding to that by doubling the interest rate.

This is a policy issue, but it is also an intensely personal issue. I received letters from many constituents about the potential impact, and I know Senator Brown from Ohio has as well. I wonder if the Senator has some comments at this point.

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Mr. REED. Mr. President, if I could reclaim my time, the Senator has been a tremendous leader on this issue because he leads from the front. He is in Ohio. He is talking to students and families. He understands the personal ramifications that are involved.

Let there be no mistake. This is a program that benefits middle and lower middle-income Americans. Nearly 60 percent of the dependent students who qualify for subsidized loans come from families with incomes of less than $60,000. This is not a perk for the superwealthy. Nearly 70 percent of independent students--that is the term of art for those adults or older people who may have some previous training but they have to go back to the community college to get a certificate and are trying to transition from a job that was shipped overseas to one they think they can get here.

Nearly 70 percent of independent students borrowing these loans have incomes of less than $30,000 a year. So we are talking about people who cannot afford a doubling of the interest rate.

But there is another issue too. It is not just, as Senator Brown pointed out, to fulfill legitimate and, in fact, admirable personal ambitions of establishing oneself in a community by buying a home or raising a family; this is about our future, our productivity as a nation, our ability to compete in an incredibly difficult international, global economy.

We have looked at the statistics at universities such as Georgetown University. Their Center for Education and the Workforce said over 60 percent of the jobs by 2018--a few years from now--will require some postsecondary education--60 percent. But in 2010, only 38 percent, roughly, of working adults held a 2-year or 4-year degree. So we have this gap, a 20-percentage point gap, between the skills we need through postsecondary education and the skills we have. We hear not just from analytical papers that are done by think tanks; we hear it every time we go back to either Ohio or Rhode Island because employers come up to us and say: I have jobs to fill, but I can't find people with the skills, the training that I need to give them a job.

Mr. BROWN of Ohio. Will the Senator yield?

Mr. REED. I am happy to yield.

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Mr. REED. I would be happy to, reclaiming my time. First, let me echo what Senator Brown said, how this is about being competitive. When he talked about the Pell grants, I have to reference my colleague and predecessor, Claiborne Pell, because he seized on the lesson of the GI Bill and said: Let's extend it broadly to college students. So Pell grants, Stafford loans, all of those vehicles were created. Frankly, I think that is not only the reason we have led the world and the Nation in creativity, but it is the reason America, as well as--and probably better than any other place in the world, was able to proliferate computers and technology, et cetera, because we have a literate, well-educated citizenry who first could invent these devices and then could use them properly. We are in danger, if we don't continue to support education, of losing our innovative edge and losing our capacity as a people to adopt innovation and technology and to continue to lead. For all of these reasons, our economic future is linked to continuing to support higher education.

There is another point I wish to make before I talk about the way we have proposed to pay for this; that is, there have been some on the other side who say the problem is that tuition is going out of sight, and we are contributing to those tuition hikes. Well, under the subsidized loan program, the maximum borrowing is $23,000. So this is not the driving force. Colleges have to recognize they have to rein in costs, but this is not the driving force. This is the way so many families are able to make it through college and make it into the economy and move up the economic ladder.

But what our colleagues have said is they are all for preventing this doubling. Of course, yesterday they voted consistently, with very few exceptions,
to double the interest on Stafford loans. So what they say and what they do sometimes are different.

But then they said the real dispute is how to pay for it. They want to pay for it by going after the money in the prevention fund, which is part of health care reform. But this prevention fund is absolutely critical. As Senator Brown indicated, people need diagnostic tests. They need to be able to go to a medical facility and get advice, assistance, and tests so they can avoid problems. That is not only sensible for the individual; that is the only way we are going to get a handle on the proliferation of costs in the health care sector.

One of the ironies of our current health care system, pending the, we hope, implementation of the affordable care act, is that we have millions and millions of Americans who have no real access to health care, no access to preventive care, no access to simple things such as cheap pharmaceuticals to control cholesterol until they get to be 65 years old. Then they go into the doctor's office, and they have Medicare. But their problems are so much more expensive.

I was speaking to ophthalmologists in my office, and they said: You are absolutely right. We see people come in for the first time with health care under Medicare who have serious problems such as diabetes and glaucoma. If we had seen them 10 years ago--if a physician had treated them--through a prescription or another very inexpensive therapy, they could have avoided these tremendous costs. That is what they are going after.

By the way, that is, to me, another middle-class program because, frankly, if one is well off and well situated financially, one will get all the preventive care one needs. It is those people who are struggling in the middle class and moving into the middle class who need this prevention fund.

So what we have proposed--is not to attack another benefit, or a smart, wise, cost-effective approach to health care that would benefit middle-income Americans--instead we are going after a tax dodge, plain and simple. This is a tax dodge that has been called out by the Government Accountability Office as something that has been used to avoid over $23 billion in taxes on wages in 2003 and 2004--a huge gulf.

In 2005, Treasury Inspector General for Tax Administration called this loophole a ``multibillion employment tax shelter.''

Let me tell my colleagues how it works. An individual who is a professional--a lawyer, an accountant, a consultant, a lobbyist--and the skills of that individual represent what he or she does as a lawyer, an accountant, et cetera. They are personal skills. But instead of being paid by an employer directly, they substitute a subchapter S corporation so they are now an employee of the corporation. They take a minimum a salary, if you will, from the corporation, but then at the end of the year, the corporation gives the individual the surplus as a dividend, which is taxed much cheaper, so the person can avoid payroll taxes. It is legal, but it is a tax dodge. It is a loophole.

This loophole is so egregious that conservative columnist Bob Novak called it out, Sean Hannity of Fox News called it out, and the Wall Street Journal called it out saying it is a simple way to avoid paying payroll taxes, Medicare taxes, as well as other employment taxes.

Closing this loophole is sound policy. We should do this anyway. But when we do it in conjunction with this student lending, we actually are able to help struggling families and close an egregious loophole.

What some of our opponents have suggested is that this is just another tax increase. We have been very careful. We restrict these to professional endeavors. We also restrict the impact to those making over $200,000 a year. So this is not targeted at the mom-and-pop stores. This is not targeted at the local laundry or the local dry goods store or the local hardware store that is organized as a subchapter S. In fact, Politifact, one of the agencies that does independent analyses of various claims, clearly rejected this characterization as a tax increase on the mom-and-pop stores and on the small business companies and the job generators as false. So we have not only a sensible, but a compelling way to pay for this.

So everyone agrees we can't let this happen on July 1. We have an egregious loophole that should be closed anyway to pay for it, and I suggest we move on. Just, procedurally, let's bring this to a vote. If they want to put up the prevention fund for a vote, if they want to put up any other means to pay for it, fine.

Let's have our vote, and let's avoid the doubling of student loan interest rates on July 1.

I know the Senator from Ohio has some comments.

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Mr. REED. Reclaiming my time, again, let me thank the Senator from Ohio for his leadership, for his passion, for his commitment. We are hearing from the other side that this is just about how to pay for this necessary legislation to prevent the doubling of the interest rate. We have offered a compelling way to pay for it in terms of closing this egregious loophole. They have, as Senator Brown indicated, once again, put on the chopping block, if you will, preventive services for families across this country and potentially the most sensible way to begin to reduce our health care costs over time.

They have--when they have wanted to--completely ignored paying for things such as tax cuts. We have seen that. Just recently the House passed the so-called Small Business Tax Cut Act with no offsets. So to literally hold these students hostage to their unwillingness to bring the bill to the floor, to debate it vigorously--to vote on their proposal to pay for it and to vote on our proposal to pay for it--is, I think, unfortunate, if not unconscionable.

We have 45 days left.

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