Sunday, August 06, 2006

Does Corporate Welfare Advocate Gutknecht embrace Student Loans

We know where Corporate Republican Gil Gutknecht stands on Corporate Welfare (DM&E, Telephone, Oil, etc.), but why don’t politicians support the student loan program ?

Let's look at the government funded student loan program. Regardless if you may have had a loan, or a family member did, there is no doubt that this system has a provided the opportunity for many Americans to obtain college or advanced degrees. In fact, I bet more than one politician would have acknowledge that their present life would not be possible if they did not have a student loan.

The Deficit Reduction Act of 2006 increases the rate on student loans taken out by parents, known as PLUS loans. It had been scheduled to rise to 7.9 percent from the current 6.1 percent on July 1; it will now increase to 8.5 percent as of that date. Also, the interest rate on federal Stafford loans, taken out by students, will rise to 6.8 percent from 5.3 percent. The legislation, which President Bush signed in February, also potentially generates nearly $14 billion in revenue over five years by capturing what has at times been a windfall to lenders: the difference between the interest rates paid by students and rates paid by lenders.

As a fiscal conservative and very concerned about the repeated budget deficits and rising national debt, I am pleased that Congress has made an effort in this direction.Yet, I have to ask, is there a better way?

Congress has also created programs that will benefit selected corporations in amounts far in excess than what they anticipate saving in student loans.

Illustrating Corporate Welfare supported by Gutknecht

- At Dakota, Minnesota & Eastern Railroads’ urging and despite opposition from the White House, Congress expanded the Railroad Rehabilitation & Improvement Financing program last year to $35 billion, making it a lucrative source of funding for DM&E. The law would allow DM&E to put down no collateral and to make no payments for up to six years. DM&E now holds about 45 percent of the Railroad Rehabilitation & Improvement Financing portfolio. If the new proposed loan to DM&E is approved, it would hold 91 percent of the loan portfolio.

- Gutknecht enthusiastically endorsed H.R. 4761 in his weekly email. The bill concerns itself with allowing drilling for oil on Outer Continental Shelf (in other words, coastal areas such as Florida and California.) For discussion sake, let’s ignore the impact to tourism and the environment and only focus on the fiscal impact On June 29th, the White House issued a statement on that bill. “The Administration strongly opposes the bill’s revenue-sharing provisions because of their adverse long-term consequences on the Federal deficit . The Administration’s preliminary estimate is that the revenue-sharing provisions of H.R. 4761 would reduce Federal Receipts by several hundred billion dollars over 60 years.” Currently, the way it is supposed to work, the Federal government signs leases to let oil companies drill offshore. Once the companies recoup their original investments, payments to the public, or royalties, kick in. A single oil lease can yield millions of dollars in royalty payments ... and as oil prices go up and up, so do the royalties. Except that some of the leases do not have clauses in them for government payments and some have caps so the oil companies do not have to pay premium prices (like today with oil over $65 a barrel.) But this bill has some changes to it. A provision changes the revenue sharing so that states' share of royalties would soar eventually as much as 75 percent. The Interior Department estimated that the changes could cost the federal government as much as $69 billion in lost royalties over 15 years.

- I wrote Congressman Gutknecht after he participated in a Telecommunications Conference with industry representatives (Sprint, Qwest, Frontier, BEVCOMM, etc.) in Saint Paul. His response letter states “it is sometimes frustrating to see your telephone bill increased significantly by different taxes and fees. In principle, I believe the federal government should keep those items to a minimum.” So, when HR 5252 was considered, Congressmen Gutknecht effectively voted to change the rules of how the Internet operates and allow telephone companies to charge fees and determine what information is made available. Despite appeals by such groups as Christian Coalition of America and Gun Owners of America, Gutknecht listened to the telecommunications industry. I always wondered why BEVCOMM was his top contributor and why the telephone industry was at the top of his donors list ( currently number 2 on the list while not being listed in the top 25 for 2004 election session.) I supposed being the Telecommunications Task Force Co-Chairman may encourage donations. This is not the first time that Congressional action while under the guise of helping the consumers has created opportunities for telephone companies to charge new fees that consumers may not want or need. The Telecommunications Act of 1996 allows a monthly fee of 33 cents for each land based telephone account … a small fee paid by each consumer adds millions of profit to the telephone company for a service that was previously provided (if you want more details, just ask.)

So while family incomes are, at best, remaining relatively steady, colleges are increasing fees, and student loans face higher interest rates, Congress has chosen to float the National Debt up to benefit DM&E, the communications and oil industries. In fairness, Gil Gutknecht was not the only voice is support of these issues – so were John Kline and Mark Kennedy.

If government is in the loan business, shouldn't loans benefit a broad group of citizens and not preferred industries ?

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