Right before adjourning for the Fourth of July recess, congressional leaders agreed to a two-year reauthorization of highway, transit, and surface transportation programs, as well as a deal that prevented the doubling of interest rates for new student loans. It was crucial that Congress act on these two measures by the end of June; otherwise, current authority for highway and mass transit projects would have elapsed, potentially jeopardizing 2.9 million jobs, and interest rates on Federal subsidized loans would have jumped from 3.4 percent to 6.8 percent for more than 7 million students.
First Transportation Bill Reauthorization Since 2005
Enactment of the transportation bill is the first reauthorization of the programs it covers since Congress passed a five-year measure in 2005. That legislation expired in 2009, and programs have been running on a series of extensions ever since. The new bill will reauthorize programs through 2014, mostly at current levels. Through a compromise, Republicans agreed to drop a provisions approving the Keystone XL oil pipeline through Canada (see the December 2011 Congressional Digest, “Keystone Pipeline”) and preventing regulation of toxic coal ash waste from power plants. Democrats agreed to provisions consolidating highway programs and speeding up Federal environmental review of construction projects, as well as to cuts in “transportation alternatives,” such as bike paths and pedestrian walkways.
Both sides of the aisle hailed the measure’s passage as a major accomplishment. Senate Environment and Public Works Chair Barbara Boxer (D-CA) said, “The bill is funded at current levels, and it will protect and create three million jobs. This job creation is the critical focus of Democrats, because we know that the unemployment rate in construction is at an unacceptable level.”
Senate Minority Leader Mitch McConnell (KY-R) said, “The highway conference report contains significant reforms to the surface transportation program. Projects will now be completed in a more timely manner because for the first time there are hard deadlines on agencies to complete environmental reviews.”
Student Loan Pact Prevents Automatic Rate Increase
The agreement on student loans means that the current 3.4 interest rate (enacted five years ago by Congress to save money) will remain in effect for another year. If rates had doubled, 7.4 million students who are expected to get the loans over the next 12 months would have been affected, and $1,000 would have been added to the typical borrower’s debt.
Both Republicans and Democrats agreed early on that the rate should not be allowed to double. The question was how to cover the cost of keeping it at the current level. Republicans wanted to eliminate a preventive health care fund contained in the health care reform law; Democrats proposed closing a tax loophole that enabled some wealthy individuals to avoid paying payroll taxes. The two sides eventually came up with the money by changing how companies calculate their pension obligations and by increasing the fees the Federal Government collects at the Pension Benefit Guaranty Corp.
No Long-Term Solutions
In both cases, the compromises reached, though a welcome departure from congressional gridlock, are essentially stop-gap measures. The Highway Trust Fund, the main funding source for highway and transit programs, gets its revenue from gasoline taxes and has been coming up short as fuel-efficiency improves. The one-year extension of the student loan rate is also a short-term fix that avoids the broader issue of college costs and accessibility to higher education. Sooner or later, Congress will have to come up better answers ― but not in an election year.