Tuesday, August 11, 2009

Ill Winds Blowing Fast & Hard

Things Grow Worse So Fast These Days

Posted by Neal McCluskey

This morning, Forbes.com posted an op-ed I wrote on the Student Aid and Fiscal Responsbility Act (SAFRA). It lays out a lot of the problems with this horrible bill, but given the blistering pace at which Congress is trying to blow stuff by the public, op-eds can’t be written and posted quickly enough to keep up with all the latest news. Indeed, congressional leaders are moving so fast their own budget office can’t keep up.

In my op-ed, I offer the following warning about the likely, true impact of the bill, which supporters say won’t end up costing a new dime thanks to $87 billion in savings to be achieved by ending federal guaranteed student lending and going completely to direct lending:

Finally, roughly $10 billion is supposed to go toward reducing the federal government’s deficit, a ludicrously small figure considering that it recently surpassed $1 trillion for fiscal year 2009 and the SAFRA bill supposedly creates savings without causing current beneficiaries any pain. If all the proclaimed savings don’t appear, the last two words in ‘Student Aid and Fiscal Responsibility’ become an even bigger joke.

Well, reading the bill, and then taking in two CBO analyses of it released after the House Education and Labor Committee passed it, shows that the latter half of the bill’s title really is laughable.

First off, the bill doesn’t say one word about reserving bucks for deficit reduction.

Next, looking at the first CBO estimate released after Education and Labor passed the bill, it’s clear that once one considers all the new spending in it, SAFRA will cost taxpayers many additional ducats. While the bill is expected to save a net $7.8 billion in direct spending over ten years, it’s expected to cost $13.5 billion in additional appropriated funding, such as administrative costs, for a net new cost to taxpayers of $5.7 billion. And that’s not all….

In a letter to Senator Judd Gregg (R-NH) written a few days after the official cost estimate, the CBO said that had its estimate fully accounted for additional risk to the government of doing all direct lending, the projected savings would have been about $33 billion lower than projected. Add that greatly reduced savings to the net costs in the previous estimate, and suddenly a bill being touted as a deficit reducer is a deficit grower, to the estimated tune of almost $40 billion!

Of course, those probably won’t be the final numbers, so there will no doubt be more news on this bill to come.


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