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Congress passes student loans, highway jobs bill

FILE - In this May 8, 2012 file photo, Sen. Barbara Boxer, D-Calif., center, and Rep. John Mica, R- Fla., left, listen as Sen. James Inhofe, R-Okla., right, speaks during the first meeting of the House and Senate conference on the transportation bill on Capitol Hill in Washington. Congress on Friday, June 29, 2012 emphatically approved legislation preserving jobs on transportation projects from coast to coast and avoiding interest rate increases on new loans to millions of college students, giving lawmakers campaign-season bragging rights on what may be their biggest economic achievement before the November elections. FILE - In this May 8, 2012 file photo, Sen. Barbara Boxer, D-Calif., center, and Rep. John Mica, R- Fla., left, listen as Sen. James Inhofe, R-Okla., right, speaks during the first meeting of the House and Senate conference on the transportation bill on Capitol Hill in Washington. Congress on Friday, June 29, 2012 emphatically approved legislation preserving jobs on transportation projects from coast to coast and avoiding interest rate increases on new loans to millions of college students, giving lawmakers campaign-season bragging rights on what may be their biggest economic achievement before the November elections. (AP Photo/Susan Walsh, File)
By Alan Fram and Joan Lowy
Associated Press / June 29, 2012
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WASHINGTON—Congress emphatically approved legislation Friday preserving jobs on transportation projects from coast to coast and avoiding interest rate increases on new loans to millions of college students, giving lawmakers campaign-season bragging rights on what may be their biggest economic achievement before the November elections.

The bill sent for President Barack Obama's signature enables just over $100 billion to be spent on highway, mass transit and other transportation programs over the next two years, projects that would have expired Saturday without congressional action. It also ends a bare-knuckle political battle over student loans that raged since spring, a proxy fight over which party was best helping voters muddle through the economic downturn.

Obama signed a one-week temporary measure Friday evening, permitting the highway and loan programs to continue until the full legislation reaches his desk.

Under the bill, interest rates of 3.4 percent for subsidized Stafford loans for undergraduates will continue for another year, instead of doubling for new loans beginning on Sunday as scheduled by a law passed five years ago to save money.

Had the measure failed, interest rates would have mushroomed to 6.8 percent for 7.4 million students expected to get the loans over the coming year, adding an extra $1,000 to the average cost of each loan and antagonizing students -- and their parents -- four months from Election Day.

The Democratic-led Senate sent the measure to Obama by a 74-19 vote, just minutes after the Republican-run House approved it 373-52. The unusual display of harmony, in a bitterly partisan year, signaled lawmakers' eagerness to claim credit for providing transportation jobs, to avert higher costs for students and their families and to avoid being embarrassed had the effort run aground.

This year has seen the two parties mostly drive each other's plans for tax breaks and economic revival into a stalemate, although lawmakers have enacted bills retaining the Social Security payroll tax cut for a year and renewing a government agency that promotes U.S. exports.

"It's important for Congress to act, not just talk about problems we have but to get things done," said Rep. John Mica, R-Fla., a chief House author of the transportation measure.

"We have a bill that will boost this economy," said Sen. Barbara Boxer, D-Calif., a sponsor who said the measure would create or save 2.8 million jobs. "We have a bill that is supported by conservatives and liberals, progressives and moderates. I think this is a great day."

All the no votes were cast by Republicans.

The compromise ended up sprinkled with unrelated nuggets dealing with Asian carp, roll-your-own tobacco and federal timber aid. But its most significant provisions dealt with transportation and student aid.

The final transportation measure dropped a provision -- which had drawn an Obama veto threat -- that would have forced government approval of the controversial Keystone XL oil pipeline from Canada to the Texas coast. But it contains curbs on environmental reviews of transportation projects. Republicans sought those curbs in hopes of cutting construction time almost in half.

The bill consolidates federal transportation programs and gives states more flexibility in spending money from Washington. It also contains an array of safety initiatives including requirements aimed at enhancing bus safety. And it makes advocates of bike and pedestrian paths compete for money with other transportation projects.

White House spokesman Jay Carney said the administration was glad Congress acted "before middle class families pay the price for inaction." He said Obama will keep pressing for approval of more of his job-creating proposals from last year, to hire teachers, police officers and firefighters and for tax credits to companies that hire new workers.

Most of the overall measure was financed by extending federal taxes on gasoline and diesel fuel for two more years. Those levies, unchanged for nearly two decades, are 18.4 cents a gallon for gasoline and 24.4 cents for diesel and now fall well short of fully financing highway programs, which they were designed to do.

About $20 billion would be raised over the next decade by reducing tax deductions for companies' pension contributions and increasing the fees they pay to federally insure their pension plans. In return, a formula was changed to, in effect, let companies apportion less money for their pensions and to provide less year-to-year variation in those amounts.

To raise other revenue, the government will start charging interest on subsidized Stafford loans no more than six years after undergraduates begin their studies. Today no interest is charged until after graduation, no matter how long that takes.

In addition, a loophole was tightened to make it harder for businesses with roll-your-own cigarette machines to classify the tobacco they sell as pipe tobacco -- which is taxed at a lower rate than cigarette tobacco. The change is expected to raise nearly $100 million.

Some federal workers would be allowed to work part-time as they gradually retire, saving the government money because the workers would receive only partial salaries and retirement annuities.

As often happens with bills that are certain to win the president's signature, the measure became a catch-all for other unrelated provisions.

One would order the government to accelerate work on a plan for preventing Asian carp, which devour other species, from entering the Great Lakes from the Mississippi River. It drew opposition from Sen. Dan Coats, R-Ind., and some other lawmakers arguing that blocking the fish could interfere with shipping, but the Senate turned their objections aside.

Federal flood insurance programs that protect 5.6 million households and businesses were extended, allowing higher premiums and limiting subsidies for vacation homes to help address a shortfall in the program caused by claims from 2005's Hurricane Katrina.

The measure also steers 80 percent out of billions in Clean Water Act penalties paid by BP and others for the 2010 Deepwater Horizon oil rig explosion to the five Gulf states whose beaches and waters were soiled by the disaster. The money would have otherwise gone to federal coffers.

Federal timber subsidies worth $346 million would be distributed for another year to rural counties, while other funds would be steered to rural school districts. The bill also eases restrictions that force most American food aid to be shipped abroad on U.S.-flagged vessels.

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