Jack Reed

Mr. REED

Mr. REED. Madam President, I am pleased that last night, my amendment, No. 2126, which would ensure that there are no future delays on the implementation of new sunscreen labeling and testing standards, was adopted as part of the Food and Drug Administration Safety and Innovation Act. Because sunscreens have been considered a cosmetic, they have largely avoided government oversight and the FDA hasn't changed its recommendations for sunscreen standards in over 30 years. However, last June, after years of prodding by our former colleague Senator Dodd, me, and others, the FDA finally acted. The agency finalized comprehensive new sunscreen regulations that were scheduled to go into effect on June 18, just a few weeks from now and in time for summer. Indeed, this was considered a victory for families across the country that spend more time outdoors and under the sun's harmful UVA and UVB rays during the summer months. But just 2 weeks ago, the FDA announced it is now giving the industry an extra 6 months to make changes, meaning the standards will take effect in mid-December instead of this summer. For too long the FDA has allowed manufacturers to get away with inaccurate claims about sun protection. My amendment will protect against any future delays and ensure the new sunscreen safety and labeling standards go into effect no later than the end of this year. I am pleased that the Environmental Working Group supports this amendment, and the Consumer Health Care Products Association, which represents sunscreen manufacturers, has agreed to the amendment's inclusion in this bill. Finally, the Congressional Budget Office has informed me that my amendment would not result in any additional cost to the Federal government. I thank Chairman Harkin and Senator Enzi for reviewing this amendment and including it in this FDA reauthorization bill.

Mr. REED

Mr. REED. Madam President, as Senator Harkin pointed out, the Republican proposal goes right to the heart of prevention, and that will have two effects. It will deny critical services to families all across this country, and it will do something else--it will deny us the chance to bend that proverbial cost curve. If we do not control those costs, we will be in a fiscal disaster. The proposal they are making does not make sense. We have proposed to close a tax loophole that has been described by the Treasury inspector general for tax administration as a multibillion-dollar employment tax shelter. We have restricted it to the people who are receiving over $200,000 a year. This is not small business men and women. This is not the corner hardware store. These are lobbyists. These are lawyers who have craftily used subchapter S corporations to avoid paying payroll taxes. This loophole has been criticized on the editorial pages of the Wall Street Journal. This is no ``just raise taxes.'' This is trying to find a loophole which has been criticized by the right as well as the left to pay for and ensure that we do not double the interest rate on students. I cannot think of a clearer choice: Reject the Republican proposal; accept our proposal; do not allow the subsidized student loan interest rate to rise on July 1.

Mr. REED

Mr. REED. Mr. President, today I would like to recognize Mr. James A. Hanlon, who is retiring this month after nearly 40 years of Federal service at the U.S. Environmental Protection Agency. Jim has spent his long and distinguished career at EPA focusing on water quality issues and helping States and communities comply with Federal clean water requirements. He began his career at EPA as a staff engineer in September 1972, 1 month prior to the passage of the Clean Water Act, and has served in a number of senior positions within the Office of Water and Office of Research and Development. Although he has many accomplishments, I want to particularly acknowledge Jim's role in managing the Clean Water State Revolving Fund Program, a program that has been so important to my home State of Rhode Island. Jim was there at the program's inception, working for several years to design and lead the implementation of the program after it was first created by Congress in 1987. A decade ago, he was appointed Director of the Office of Wastewater Management, where he has continued to manage the Clean Water State Revolving Fund Program and to oversee EPA's broader wastewater regulatory portfolio. Thanks in large part to his leadership, the Clean Water State Revolving Fund Program has successfully provided more than $90 billion nationwide to date to fund critical water infrastructure improvements through Federal grants and contributions from State matching funds and leveraging. For the past several years, Jim has also served as an important resource to the Senate Committee on Appropriations on wastewater policy issues. I am particularly grateful for the assistance he provided to implement the critical $4 billion investment in wastewater projects included in the American Recovery and Reinvestment Act. With Jim's guidance, EPA and the States worked to get an unprecedented 1,870 clean water projects under contract within a year of the law's passage, including ten in my home State. His experience and guidance will be missed. I congratulate Jim on a job well done. He leaves a proud and enduring legacy of public service.

Mr. REED

Mr. REED. Just for a moment, let me raise another pending issue which is of critical importance. In 40 days, as I think many of us recognize, student borrowing rates for college will double unless we act. We have seen both sides of the aisle--colleagues from both sides--come down and say we cannot let this happen. Well, we cannot let it happen. That means we have to take action to prevent the doubling of interest rates on Stafford loans. Unfortunately, last week we had a series of budget votes, which most of my Republican colleagues supported, which would have, if they had passed, mandated the doubling of the student loan interest rate. So I think we have to move away from this debate and actually pass legislation which would prevent the doubling of student loans by July 1. I hope we can do it promptly, certainly before July 1. Also, I hope we find an effective offset. What the Republicans have suggested is using the Prevention Fund. The President made it clear he would veto the legislation if it included that offset. Also, what should be clear that using resources to prevent disease is not only helpful to the American public, but it is also probably one of the most practical ways we are going to be able to begin to bend that very important cost curve going forward. This Prevention Fund is going to help everyone, but it is going to particularly help middle-income families who are struggling with medical bills, who are struggling to find insurance, the same families who are struggling to pay the cost of college for their children. It makes no sense to me to take from one program that will largely benefit working families to pay for another program that will benefit working families. We have an offset which is an egregious tax loophole that allows lobbyists, financiers, et cetera, to create subchapter S corporations to essentially avoid their payroll and Medicare taxes. I think that is an appropriate way to pay for this support for students' education. If there are other ways beyond the prevention fund, I certainly am happy to listen to them. If there are other principled ways to avoid doubling the interest rate for student loans, let's talk about them. Let's get them on the Senate floor and let's debate them. I yield the floor

Mr. REED. I would be happy to.

Mr. REED. I note the majority leader has appeared on the floor and I believe he has a procedural motion. I yield to him. Order of Procedure

Mr. REED. Mr. President, I rise today in support of the Food and Drug Administration Safety and Innovation Act, which is pending before the Senate this week. This legislation will give the FDA, through five agreements made between the agency and industry, the resources to approve additional drugs and devices every year for their safe and effective use. Without these agreements, the FDA, starting in October, would lack these resources which are necessary to approve new drugs and devices, and they would also lack resources to monitor the safety and efficacy of those drugs already on the market. This would result in a reversal of decades of work modernizing our drug and device approval and safety programs. I am particularly pleased that for the first time, the generic pharmaceutical industry will provide the agency with $1.5 billion over 5 years for faster product reviews. In fact, the essence of the legislation is that the industry is actually providing resources for the monitoring and for the approval of drugs. Getting generic drugs onto the market sooner will help lower costs for individuals and families as well as for the Federal and State governments. This measure would also significantly improve FDA's regulatory authority, including its ability to help prevent drug shortages and to partner with the private sector to develop new medications to treat life-threatening diseases that have become resistant to antibiotics, which is a very important measure included within this legislation. I wish to recognize especially Chairman Harkin and Senator Enzi for their very thoughtful, very deliberative, and extremely important work. They have represented through their committee work the model of what we should be doing here collaboratively and on a bipartisan basis to advance important measures for the American people. Both of them deserve great accolades for their work today. I hope we can follow through and bring their work to conclusion. I wish to particularly thank both of them, Chairman Harkin and Senator Enzi, for including provisions pertaining to pediatric drugs and devices that I authored along with my colleagues Senator Alexander, Senator Murray, and Senator Roberts, another bipartisan effort to improve the health of children throughout this country. Until 1997--15 years ago--80 percent of drugs were used off-label to treat children. Doctors were treating children without fully understanding the appropriate dosage requirements or the potential for any dangerous side effects. This frustrated pediatricians and angered many families, but those sentiments were largely ignored by the industry until Congress stepped in. With the passage of the Best Pharmaceuticals for Children Act in 1997 and the Pediatric Research Equity Act in 2003, 427 drugs have been relabeled with important pediatric information. Now 46 percent, rather than 80 percent, of drugs are being used off-label in children, but that number is still too high. The legislation before the Senate makes critical improvements to these laws so we can further lower this percentage. It would make these two acts--BPCA and PREA--permanent, like the laws that govern the approval of drugs for adults. It would also provide the certainty that the pharmaceutical companies believe is necessary to continue to wisely invest in the appropriate use of drugs in children. The legislation will also help ensure pediatric studies are planned earlier in the drug development process and completed sooner. Currently, a disappointing 78 percent of studies that were scheduled to be completed by September 2007 are either late or were submitted late. While Congress, the FDA, advocates, and the industry agree that a pediatric study should not hold up the approval for a drug for use in adults, drug companies should not be allowed to get away with submitting unrealistic study plans to the FDA for approval or failing to complete a required study once they are profiting from these drugs on the market. The legislation that is before us would also require pharmaceutical companies to work with the FDA early in the process of developing these drugs to create a reasonable and sensible plan for studying the products in children. It would also, for the first time, provide FDA with an enforcement tool that will deter companies from neglecting their obligation to complete these studies on time. Our bill also responds to the need for pediatric medical devices--not just pharmaceuticals, but devices--in children, which can lag 5 to 10 years behind those manufactured for adults. The pediatric profit allowance for Humanitarian Use Devices has proven to be a very effective incentive. Three new devices have been approved for their use in children in the last 3 years. This is an incredible increase as a result of this incentive. This policy has shown much promise and I am pleased to see it continue in this bill, along with the Pediatric Device Consortia Grant Program, which has assisted the development of 135 proposed pediatric medical devices in just over 2 years. The Food and Drug Administration Safety and Innovation Act would also extend this Humanitarian Use Device incentive to manufacturers of devices for use in adults with rare conditions. While it is my hope this policy is equally effective in spurring developmental devices for use in adults as it is for children, I am concerned that it could impact the development and the marketing of devices for use in children. I plan to monitor this policy closely should it become law, but I have full expectations that both noble objectives can be achieved. There are some children, however, who do not receive the full benefits of BPCA and PREA. I am pleased the Senate bill begins to address this problem for pediatric cancer patients and children with other rare diseases. It calls on the FDA to hold a public meeting to discuss ways to encourage the development of new treatments for this population. Indeed, for some pediatric cancers, the treatment has not changed in many decades. For other rare diseases, an effective treatment has yet to be found. I look forward to receiving a recommendation that might stem from this important meeting, as well as working with my colleagues to respond to their needs with reasonable and sensible policy. I am truly pleased these pediatric provisions have drawn the support of 24 organizations, including the American Academy of Pediatrics, also including the Pharmaceutical Researchers and Manufacturers of America. I think this stakeholder support is very important not only to the ultimate passage of the legislation, but for its effective implementation. There is another provision I would like to talk about; that is, this bill contains provisions which would require the FDA to decide whether to update the labeling requirements for tanning beds. Every day 2 million Americans visit a tanning salon. Seventy percent of these are women. According to the World Health Organization, the risk of deadly melanoma increases by 75 percent when the use of tanning devices begins before the age of 30. So this is a particular concern with young women beginning to use-- and younger men--beginning to use these tanning devices. Yet the warning labels on tanning beds have not been updated in over three decades and are often placed far from view. In 2007 my colleague, Senator Isakson of Georgia, joined me in requiring the FDA to study the labeling standards for tanning beds and make recommendations about how these standards could be improved. In its report, the FDA found that tanning bed labels could be clarified and located in a more prominent location. But the agency has yet to act. It is my hope the FDA will heed its own advice and update the labeling requirements for tanning beds. Similar to the outdated labeling requirements for tanning beds, sunscreen testing and labeling standards have also been over three decades in the making--three decades. Last year I was pleased when the FDA finally took action. However, just last week the agency announced it would be extending the implementation of these new standards by 6 months, until December. Consumers will have to go another summer without knowing whether they are truly protected from the Sun's harmful UVA and UVB rays. I have filed an amendment to make sure there are no future delays. I look forward to working with my colleagues to see that this amendment is accepted as part of the final FDA legislation which I hope is passed very quickly by the Senate. I again want to thank Chairman Harkin and Senator Enzi for their extraordinarily effective and collaborative work on the Better Pharmaceuticals and Devices for Children Act, which is included in this bill. Student Loan Interest Rates

Mr. REED

Mr. REED. Madam President, today I congratulate the Salve Regina University men's rugby team for winning the 2012 National Small College Rugby Organization's Division III National Championship on April 29, 2012, in Glendale, CO. The Salve Regina Seahawks, ranked number one by the National Small College Rugby Organization, were undefeated this season with a record of 11 0. The team earned a spot in the national semifinals when it defeated Tufts University on November 13, 2011, in the New England Championship and then went on to defeat Molloy College on November 19, 2011, in the Northeast Region Championship. Reestablished in 2007, the Salve Regina Seahawks men's rugby team has appeared in the final four of the National Small College Rugby Organization's Division III national tournament three times in the past five years. The Seahawks' 21 15 victory over the California Maritime Academy Keelhaulers in the championship match was the first national championship victory for Salve Regina University in any sport. I am especially pleased and proud to share that the members of the Salve Regina Seahawks men's rugby team demonstrated great sportsmanship and represented both their school and the State of Rhode Island with distinction. I would like to recognize the Seahawks head coach Michael Martin and his assistant U.S. Air Force Colonel Dan Lockert; team president Richard Casey; captains Paul Schacter and Jesse DiTullio; and members Andrew Baik, Jeffrey Bouley, Patrick Brown, Chris Buckman, Michael Burlingame, Brian Cronin, Christopher Dieselman, Matt Dougenik, Zachary Faiella, Brian Goodridge, James Horn, Martin Kelliher, Alfred Knapp, John Kuchac, Shane Lange, Robert LaRiviere-Tougas, Stephen McEnery, Glen Miles, Zackary Moreau, Daniel Murphy, Troy Ochoa, Joshua Patterson, Nicholas Patti, Nicholas Pesce, Anthony Pesce, Russell Petrucci, Jacob Piazza, Nicholas Pinto, Evan Raiff, Rylan Richard, Nathan Rose, Kyle Russell, Justin Ryel, Carlos Santos, David Seguin, Colby Sherman, Ryan Shilalis, Connor Taub, Grant Thiem, Quinn Turner, Patrick Wendt, and Joseph Zoeller. I would also like to acknowledge the contributions of Salve Regina's president Sister Jane Gerety, RSM, chancellor Sister M. Therese Antone, RSM, and athletic director Colin Sullivan. Once again, congratulations to the members of the Salve Regina Seahawks men's rugby team on this outstanding achievement and well-deserved championship.

Mr. REED

Mr. REED. Mr. President, today I introduce the Graduate Medical Education, GME, Reform Act, along with my colleague Senator Kyl. This legislation is a continuation of my longstanding efforts to support our future health care workforce and improve patient care. While there are a variety of initiatives to support the education and training of physicians, none are more substantial than the GME funding provided by Medicare. This program either directly or indirectly supports every single physician trained in this country. No other Federal or State program can claim this credit. Unfortunately, the size of the program has led some to propose its funding be cut and redirected toward deficit reduction. The President's Fiscal Commission, the Domenici-Rivlin plan, and even some Members of Congress have made this recommendation. Reducing GME funding by the levels specified in these proposals could be devastating to training programs. These proposals stem from an assertion by the congressionally authorized Medicare Payment Advisory Commission, MedPAC, that teaching hospitals are overpaid for the education and training they currently provide residents, and that GME funding should be better used to align residency training with key improvements in our health care delivery system. However, the Fiscal Commission and the Rivlin-Domenici plan ignored the latter aspect of MedPAC's recommendation. MedPAC did not recommend removing GME funding from the system. Instead, MedPAC suggested Congress should make teaching hospitals more accountable for the GME funding they currently receive. In MedPAC's proposal, all GME funding would stay in the system to help support and improve medical education and training. The legislation we are introducing today aligns closely with MedPAC's proposal for greater accountability by teaching hospitals and enhanced effectiveness in the use of GME funding, but with some key changes. One such change would enable hospitals to compete for additional GME funding in order to provide a greater incentive for teaching hospitals to improve their programs. Teaching hospitals incur higher costs than other hospitals. They invest in the newest technologies and employ the physician supervisors most qualified to train our future doctors. Moreover, as a result of the new health care reform law, many of these hospitals, physician supervisors, and residents will treat an influx of patients beginning in 2014. GME funding is critical to building and sustaining our health care infrastructure and future health care workforce. It is critical that GME funding remain intact, but that doesn't mean we shouldn't use this opportunity to encourage these programs to do more to better train residents in: primary care delivery, a variety of settings and systems, care coordination, and how to work in inter- professional and multi-disciplinary teams. The new oversight provided for in the GME Reform Act would help to break down the silos in medicine and ensure that physicians work together to provide patients with comprehensive health care. In addition, the legislation would enhance GME payment transparency, which we hope will help prove to the skeptics that this funding serves a critical purpose. I am particularly pleased that the Association of American Medical Colleges has expressed support for legislation. While the organization would prefer this legislation be included as part of an overall effort to increase the number of residents trained each year, which I also support, I believe we must begin a dialogue about a sensible and thoughtful approach to improving GME accountability and transparency. I hope my colleagues will take careful look at our legislation, and I look forward to working with them on this important issue.

Mr. REED

Mr. REED. Mr. President, today I introduce the Graduate Medical Education, GME, Reform Act, along with my colleague Senator Kyl. This legislation is a continuation of my longstanding efforts to support our future health care workforce and improve patient care. While there are a variety of initiatives to support the education and training of physicians, none are more substantial than the GME funding provided by Medicare. This program either directly or indirectly supports every single physician trained in this country. No other Federal or State program can claim this credit. Unfortunately, the size of the program has led some to propose its funding be cut and redirected toward deficit reduction. The President's Fiscal Commission, the Domenici-Rivlin plan, and even some Members of Congress have made this recommendation. Reducing GME funding by the levels specified in these proposals could be devastating to training programs. These proposals stem from an assertion by the congressionally authorized Medicare Payment Advisory Commission, MedPAC, that teaching hospitals are overpaid for the education and training they currently provide residents, and that GME funding should be better used to align residency training with key improvements in our health care delivery system. However, the Fiscal Commission and the Rivlin-Domenici plan ignored the latter aspect of MedPAC's recommendation. MedPAC did not recommend removing GME funding from the system. Instead, MedPAC suggested Congress should make teaching hospitals more accountable for the GME funding they currently receive. In MedPAC's proposal, all GME funding would stay in the system to help support and improve medical education and training. The legislation we are introducing today aligns closely with MedPAC's proposal for greater accountability by teaching hospitals and enhanced effectiveness in the use of GME funding, but with some key changes. One such change would enable hospitals to compete for additional GME funding in order to provide a greater incentive for teaching hospitals to improve their programs. Teaching hospitals incur higher costs than other hospitals. They invest in the newest technologies and employ the physician supervisors most qualified to train our future doctors. Moreover, as a result of the new health care reform law, many of these hospitals, physician supervisors, and residents will treat an influx of patients beginning in 2014. GME funding is critical to building and sustaining our health care infrastructure and future health care workforce. It is critical that GME funding remain intact, but that doesn't mean we shouldn't use this opportunity to encourage these programs to do more to better train residents in: primary care delivery, a variety of settings and systems, care coordination, and how to work in inter- professional and multi-disciplinary teams. The new oversight provided for in the GME Reform Act would help to break down the silos in medicine and ensure that physicians work together to provide patients with comprehensive health care. In addition, the legislation would enhance GME payment transparency, which we hope will help prove to the skeptics that this funding serves a critical purpose. I am particularly pleased that the Association of American Medical Colleges has expressed support for legislation. While the organization would prefer this legislation be included as part of an overall effort to increase the number of residents trained each year, which I also support, I believe we must begin a dialogue about a sensible and thoughtful approach to improving GME accountability and transparency. I hope my colleagues will take careful look at our legislation, and I look forward to working with them on this important issue.

Mr. REED

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.

Mr. REED. I am happy to yield.

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. 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.

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. With that, I yield the floor.

Mr. REED

Mr. REED. In 46 days, the interest rate on subsidized student loans will be doubled. Zeroing in on these budgets that are before us, all of them seem to support the essence of the Ryan budget, which is to allow this to happen. In fact, the Ryan budget in the House not only allowed a doubling of student interest rates, it also recommended eliminating the in-school interest subsidies for student loans, putting middle- class families at a particularly severe disadvantage. We have 46 days to stop this increase on the interest charges to middle-income students. We have to act. We have seen denial, delay, and disruption. We have not seen the cooperation we need to help students and families throughout this country. The budget before us not only allows this interest rate to double, but it will also, through its tax policies, favor the wealthiest and not those who are struggling in the middle simply to get ahead or simply to stay where they are. One of the other interesting aspects of the proposal is that as we look at this student rate interest doubling, my colleagues on the other side have said: We will fix it. We are for fixing it. But, again, ask yourself: If they are for it, why are they voting for several budgets today that would, in fact, support the doubling? It seems to be an incongruity I cannot understand. In addition to that, they said: Well, if we are going to go ahead and stop this doubling of the rate, let's do it by paying for it with the prevention fund, which is a program in health care that I think, over time, is not only going to help families all across this country, but it is going to begin to do what we have all said we have to do, bend that cost curve for health care. Instead of a debate about how to pay for this in a responsible way-- and we are certainly open to proposals if they have them, other than this prevention fund, which I think is a nonstarter--they have suggested that our proposal, which is to close an egregious loophole in the Tax Code, is somehow a tax increase or somehow does not do the job. But Politifact, which is an objective body that looks at these various charges, has evaluated one claim that, in fact, our offset is a tax increase. Here is what they say: Actually, the bill changed tax rules only for S- corporations, and only on professionals like lawyers and accountants who could be taking advantage of the tax code to avoid paying payroll taxes. The Democrats took the additional step of saying the rule change would only apply to individuals who reported more than $200,000 in income. The bill's intent was to close a loophole on people who are avoiding payroll taxes, taxes that they are supposed to pay anyway. The Republican criticism ``gives the impression that all kinds of mom-and-pop operations might be subject to new, additional taxes, when actually the bill is aimed squarely at high-income professionals who are taking advantage of a loophole. The claim was rated by this organization as false. We are closing a loophole that benefits the wealthy and some of the most powerful interests in this country in order to allow middle-income families to send their children to school. I cannot think of anything more sensible or anything more fair. I will just return to the final point about these budgets. As I read them, they, by and large, echo the Ryan budget, which allows for a doubling of the interest rate on students and does other things that will harm middle-income and middle-class people all to benefit the wealthiest through additional tax cuts. That is not good fiscal policy, not good educational policy. It is not good policy for the growth of this country, to invest in education, and it is not fair. I would hope that we would reject them. I yield the floor.

Mr. REED

Mr. REED. Mr. President, today I introduce the Servicemember Housing Protection Act, and I thank Senators Durbin, Sherrod Brown, Whitehouse, and Begich for joining me as original cosponsors of this bill. In 1940, as World War II escalated across the globe, Congress enacted the Soldiers' and Sailors' Civil Relief Act ``to protect those who have been obliged to drop their own affairs to take up the burdens of the nation.'' In 2003, Congress passed a new version of this law to reflect the new challenges of post-9/11 service and renamed it the Servicemembers Civil Relief Act, SCRA. In 2010, in order to address the country's high foreclosure rates and their impact on servicemembers, Congress further amended this law to enhance foreclosure protections. Also in 2010, when it became evident that military families needed an entity to serve as a watchdog, provide education, and help monitor and respond to concerns, questions, and complaints about consumer financial products and services, I led the bipartisan effort during the Dodd- Frank act debate to create a new Office of Servicemember Affairs within the Consumer Financial Protection Bureau, CFPB. Our country has a strong tradition of ensuring that the laws that protect our servicemembers keep pace with the challenges that they face. The Servicemember Housing Protection Act seeks to address one such continuing challenge helping servicemembers with their housing needs so they can maintain a focus on the difficult task of protecting our country. First, our bill would make it easier for servicemembers to submit their military orders to creditors and get their affairs in order prior to deployment. Currently, creditors require a copy of military orders in order to trigger SCRA protections. However, these orders are often not cut until just before deployment or once the servicemember is already deployed. Redefining military orders as either official orders or a letter from the servicemember's commanding officer would further ensure that a servicemember has more time to prepare for deployment and promptly receives SCRA protections, including the interest rate limitation of six percent on qualifying mortgages. Second, this bill would extend foreclosure protections to surviving spouses. Currently, servicemembers have a 9-month window of foreclosure protection following service, to provide time to reacclimate to civilian life and get affairs back in order. Our bill extends this nine-month window of foreclosure protection to a surviving spouse. After suffering such an unspeakable loss, a military spouse should not have the additional burden of dealing with immediate foreclosure. Lastly, this bill would help facilitate the transition from off-base to on-base housing. Due to the shortage of on-base military housing, many servicemembers temporarily find off-base housing until on-base housing becomes available. When a servicemember on a waiting list is given the chance to move into on-base housing, he or she is sometimes unable to terminate his or her off-base housing lease. Including an order to move from off-base to on-base housing as additional grounds for lease termination would allow servicemembers and their families the opportunity to move into the military housing community. We should extend this opportunity, which already is law in several states, such as Florida, Georgia, and Virginia, to servicemembers serving at any of our military bases. While the men and women of our Armed Forces are protecting our nation overseas, we should do everything possible to protect their families and homes. I urge my colleagues to join Senators Durbin, Sherrod Brown, Whitehouse, Begich, and me, as well as the Military Officers Association of America, in supporting this bill and taking these next steps to add protections for our military families.

Mr. REED

Mr. REED. Mr. President, today I introduce the Servicemember Housing Protection Act, and I thank Senators Durbin, Sherrod Brown, Whitehouse, and Begich for joining me as original cosponsors of this bill. In 1940, as World War II escalated across the globe, Congress enacted the Soldiers' and Sailors' Civil Relief Act ``to protect those who have been obliged to drop their own affairs to take up the burdens of the nation.'' In 2003, Congress passed a new version of this law to reflect the new challenges of post-9/11 service and renamed it the Servicemembers Civil Relief Act, SCRA. In 2010, in order to address the country's high foreclosure rates and their impact on servicemembers, Congress further amended this law to enhance foreclosure protections. Also in 2010, when it became evident that military families needed an entity to serve as a watchdog, provide education, and help monitor and respond to concerns, questions, and complaints about consumer financial products and services, I led the bipartisan effort during the Dodd- Frank act debate to create a new Office of Servicemember Affairs within the Consumer Financial Protection Bureau, CFPB. Our country has a strong tradition of ensuring that the laws that protect our servicemembers keep pace with the challenges that they face. The Servicemember Housing Protection Act seeks to address one such continuing challenge helping servicemembers with their housing needs so they can maintain a focus on the difficult task of protecting our country. First, our bill would make it easier for servicemembers to submit their military orders to creditors and get their affairs in order prior to deployment. Currently, creditors require a copy of military orders in order to trigger SCRA protections. However, these orders are often not cut until just before deployment or once the servicemember is already deployed. Redefining military orders as either official orders or a letter from the servicemember's commanding officer would further ensure that a servicemember has more time to prepare for deployment and promptly receives SCRA protections, including the interest rate limitation of six percent on qualifying mortgages. Second, this bill would extend foreclosure protections to surviving spouses. Currently, servicemembers have a 9-month window of foreclosure protection following service, to provide time to reacclimate to civilian life and get affairs back in order. Our bill extends this nine-month window of foreclosure protection to a surviving spouse. After suffering such an unspeakable loss, a military spouse should not have the additional burden of dealing with immediate foreclosure. Lastly, this bill would help facilitate the transition from off-base to on-base housing. Due to the shortage of on-base military housing, many servicemembers temporarily find off-base housing until on-base housing becomes available. When a servicemember on a waiting list is given the chance to move into on-base housing, he or she is sometimes unable to terminate his or her off-base housing lease. Including an order to move from off-base to on-base housing as additional grounds for lease termination would allow servicemembers and their families the opportunity to move into the military housing community. We should extend this opportunity, which already is law in several states, such as Florida, Georgia, and Virginia, to servicemembers serving at any of our military bases. While the men and women of our Armed Forces are protecting our nation overseas, we should do everything possible to protect their families and homes. I urge my colleagues to join Senators Durbin, Sherrod Brown, Whitehouse, Begich, and me, as well as the Military Officers Association of America, in supporting this bill and taking these next steps to add protections for our military families.

Mr. REED

Mr. REED. Mr. President, unless we act quickly, students across the country will face the largest increase of subsidized student loan interest rates in more than 40 years. In the last 40 years, the interest rates on subsidized student loans have never doubled from one year to the next. Yet that is what is happening unless we act before July 1--just 52 days from now. Unless my colleagues on the other side of the aisle relent and allow legislation to fix this problem to come to a vote, we will see a doubling of the student loan interest rate from 3.4 percent to 6.8 percent for all borrowing going forward for education in the United States related to the subsidized Stafford loan program. I know the Presiding Officer of the Senate, Senator Brown of Ohio, has been taking an active leadership role on this front, along with Senator Harkin, to ensure we can move effectively to prevent this doubling of the interest rate. We are now in a time where, if you look across the financial industry, borrowing rates are at historical lows. We are essentially providing banks, through the Federal Reserve, with near zero percent interest loans. So it is incomprehensible that at this time, we would actually double the loan rates we would charge students who are going to college. Students and families cannot absorb these increases. It is a tough economy, and they are facing rising tuition and dwindling State support for higher education, making it more difficult and more complicated. To add to their burden by doubling this loan rate is bad public policy. This will not only directly affect middle-income Americans, but in the longer run, it will affect the competitiveness, the productivity, and the success of our economy in a very competitive global economy. We have to ensure also that we are not piling more and more debt on students. We have reached a point where student debt is becoming so extraordinarily difficult to bear that it inhibits people from going to school and it inhibits them from pursuing various professions after they graduate from college. If we add to this mountain of debt, we will create a huge financial problem going forward not just for the individual borrowers, the student borrowers, but for our economy. According to Georgetown University's Center on Education and the Workforce, over 60 percent of jobs going forward will require some postsecondary education by 2018. That underscores the essential need to go to college. In 2010, only 38.3 percent of working-age adults had a 2-year or 4-year degree. So we are looking at a gap of the prepared individuals with a college education versus those jobs in the not-too-distant future that will require a college education. In order to fill that gap, we have to get more and more young people into school, into higher education and beyond, and by doubling the rate we will not be achieving that goal and that objective. That is why I introduced the Student Loan Affordability Act in January to permanently keep the interest rate low, and that is why I was joined by Senator Brown of Ohio and Senator Harkin and many others, to step up and to make it quite clear that we cannot afford--for our country's sake and for the sake of many working-class families across the country--to double this rate. We should be debating today the Stop the Student Loan Interest Rate Hike Act. This is a fully paid-for 1-year extension of the current rate, to extend it for a year so we can look for a more permanent fix. My colleagues on the other side of the aisle insist they agree that we have to do this, yet they continue to filibuster this legislation. They continue to prevent us from bringing it to a vote. It is clear they have an alternative view in terms of how we pay for it. Well, let's put that to a vote, but let's not stop dead in its tracks a policy that both sides claim has to be fixed and that we have to avoid the doubling of this interest rate. What we have done is propose to fix this problem and pay for it in a fiscally responsible manner by closing a glaring, egregious loophole in the Tax Code that enables certain wealthy individuals to shirk their responsibility to pay payroll taxes. This loophole predominantly benefits professional service providers such as accountants, lobbyists, and lawyers who derive all of their income from their professional labor. But because they choose to mischaracterize their income as a distribution from a subchapter S corporation instead of wages, they avoid paying payroll taxes. In 2005, the Treasury Inspector General for Tax Administration issued an audit report calling for action on this loophole which was described as a ``multibillion dollar tax shelter.'' The report also described a disturbing trend of businesses changing their status to the subchapter S corporation for the purpose of avoiding payroll taxes--not for the purposes of expanding employment, not for the purposes of a new or more efficient way to use capital, but essentially a tax dodge to avoid payroll taxes. The inspector general reported: In fact, advising small businesses to shelter earnings from self-employment taxes through the formation of S corporations has become a cottage industry. A search of the Internet yields multiple sites that offer advice, assistance, and encouragement to sole proprietors to convince them to become S corporations. The sole proprietors are advised that they can save thousands of dollars a year in employment taxes simply by incorporating. It is also possible on the Internet to gauge the size of the savings using computer-generated savings amounts based on the user's entries for anticipated profits and chosen salary levels. Not surprisingly, the lower the salary chosen, the higher the savings become, reaching maximum savings at a salary level of $0. Essentially what is being done in these professional corporations--or at least professional partnerships, these professional associations--is that they have glommed onto a very clever tax shelter. You incorporate as a subchapter S; you have your employer pay the subchapter S corporation; that subchapter S corporation pays you a modest minimal salary, and the rest is dividends taxed at a different rate and not subject to the payroll tax. We are trying to close the tax loophole. Following the indications of the inspector general, a simple Internet search confirms this finding. For example, one Web site has a section entitled ``How to Reduce Your FICA Taxes If You Own an S-Corporation.'' That section provides a step- by-step instruction on how to use this loophole and even provides advice on how to avoid being caught up in an audit. The Web site advises owners of S corporations to pay themselves the lowest possible salary to reduce their FICA taxes--even if the distributions they take are a product of their labor. Here is how the Web site explains how to take advantage of this loophole: It explains that as an employee of your S corporation, your salary is subject to Social Security and Medicare taxes, but the net profit of the S corporation is not subject to payroll taxes. The Web site goes on to explain: . . . the idea is to pay yourself the lowest possible salary to minimize social security and Medicare taxes. Then you take the remaining net profit as a distribution, which is not subject to payroll tax. This is a loophole we are trying to fix. This loophole should be fixed regardless of how we use the proceeds; but, frankly, we have a situation now where we have a pressing need to help families across this country avoid a doubling of the interest rate on student loans, and we have an egregious loophole that will allow us to responsibly pay for the maintenance of the lower interest rates. This seems to be an issue where public policy is well balanced. We are told by our colleagues they agree with us you can't double the interest rate. They should also agree with us you can't continue to tolerate this loophole; and this is not only an appropriate way, but, indeed, it seems to me the best way to achieve our objective of preventing the increase to doubling of the student interest rate. We are working very hard to try to get this bill up for a vote. If there are other proposals with respect to tax loopholes or the ways in which we can pay for this other than the proposal the House has suggested--which is go into the prevention funds for health care reform, which to me is adding to and compounding not only our fiscal problems but also going forward to our health care problems we are open to discussing them. We are right now recognizing that unless we aggressively have prevention programs, our health care costs will explode going forward. Every day, people talk about the increasing cost of obesity in this society. Well, how do you get essentially a handle on that? You have to have resources for prevention, for counseling, for education, for nutritional programs. When we take those funds away, we run up the bill for health care. That bill ultimately is being paid, in many cases, by the same families who are struggling to find a way to send their children to college. I urge all of my colleagues to move to get this bill on the floor. If we want to debate about different methods about payment, that is fine; let's take votes, and let's move on to passage. I think we understand that time is running out. On July 1, the interest rate will double. We have seen progress going back a few months. Our colleagues on the other side were proposing budgets that recognized--indeed, supported--the doubling of this interest rate. In March and throughout the spring, they were assuming and they were supporting measures to double the interest rate. The good news now is they have said, no, you can't do that, we have got to keep the rate at 3.4 percent at least for the next year. We are one step closer to a solution, but the final step is going to have to be responsibly paying for this proposal. And we have--Senator Brown, Senator Harkin, myself, Senator Harry Reid, and so many others-- not only a responsible way to pay for it, but we have underscored and highlighted what is an egregious loophole, a tax shelter, a very clever ploy to avoid paying taxes on your wages through the mechanism of a subchapter S corporation magically converting them into dividends. I think we can accomplish two important public policy goals in this legislation: keeping interest rates on student loans at the current level, helping families send their children to school; and closing a glaring loophole for tax dodgers in our tax system. Mr. President, I yield the floor, and I suggest the absence of a quorum.

Mr. REED

Mr. REED. I have the utmost respect for the Senator from Tennessee. No one is as knowledgeable in education programs as he, the former Secretary of Education, and someone who has a deep commitment to education, not only with respect to his remarks on charter schools but on education in all ways. But he refers to what the House has done. The House, in the Ryan budget, maintains this increase, this doubling of the interest rate. They foresaw, anticipated, and supported the increase to 6.8 percent. Only recently have they apparently had a change of heart and decided that is not appropriate. The other aspect I think is interesting to note about the House is they have proposed significant reductions in tax rates and they have said they would pay for them by closing loopholes. This is one of the most egregious loopholes that you can find and yet, of course, they will not use this to pay for something which makes a great deal of sense--which they now agree there should be no doubling of the student interest rate. The Senator is absolutely right, this doubling will not apply to loans that are outstanding. It applies to loans going forward. But if we establish the principle which was embedded in the Ryan House budget, which I think was supported by most, if not all, of my colleagues on the other side, that this rate is going to be doubled to 6.8 percent going forward, that is going to have a significant impact on students who have years to go in college and on people who are contemplating going to college. So the $6 or $7 it may be per month becomes significant overall. Again, we can get into a discussion about where does this money come from ultimately in terms of was it part of funds for health care, et cetera. But we are facing the choice today of helping students and closing an egregious loophole--one that benefits the wealthiest Americans; it has been criticized by the Wall Street Journal, criticized by Robert Novak, the late columnist--or practically going in and targeting prevention programs. I think we conceptually agree if we don't get a handle on prevention of diabetes, of cancer, of diseases that are costing us billions of dollars, then our task to deal with health care will be immensely more difficult. It is very clear. What is also very clear is, I think, procedurally the answer is quite straightforward. Let's get on to the bill. Let us go ahead and put these two different proposals on the floor and take a vote. I hope the proposal to close the loophole would pass. But if it did not, at least we would be in a position of preventing the doubling of interest rates on student loans. With great respect to the Senator from Tennessee, I hope we can move forward, have a vote on the different proposals to pay for it, and then move forward and let people know that their rates will not be doubled.

Mr. REED. Madam President, in less than 2 months--53 days--the interest rate on subsidized student loans will double to 6.8 percent unless Congress acts. If the rate on subsidized Stafford loans is allowed to rise, as many as 7.4 million students across the Nation, including approximately 43,000 students in Rhode Island, will pay about $1,000 more for each year that they borrow, and that is on top of already significant debt. Some have argued, even while claiming to support keeping interest rates low, that the increase would not be a significant financial burden. Students and families beg to disagree. This would be a significant impediment to completing their education. For younger students starting their education, for those seeking educational opportunities for job transition in midlife, those opportunities would be frustrated also. Right now students and their families are sitting around the kitchen table making tough decisions about next year and whether they can afford to go to school if interest rates double. One Rhode Island mother wrote me: Please do not raise the interest rates on student loans. My son will be in his last year . . . I cannot afford to pay any more and fear that he will not be able to graduate and still have all the loans to pay back. So in addition to frustrating educational advancement, it could leave many students across the country with lots of debt and no degree. Hundreds of thousands of young people, parents, educators, and members of the faith community and other community leaders have come to us with one simple request: Don't double the rate. Some on the other side have argued that low-cost Federal loans have contributed to rising college costs and increased student debt. This does not make sense. The maximum amount undergraduate students can borrow in subsidized loans has remained unchanged at $23,000 for the last 20 years. There are many causes that are accelerating tuition, but the amount of available, accessible subsidized Federal loans for students has remained unchanged for 20 years. But increasing the cost of these loans by doubling the interest rate will certainly make college more expensive for families and for students. We need to address college costs, but having the Federal Government double the interest it charges for students, particularly the low- and moderate-income students, is not the solution. In fact, it complicates the problem dramatically. My colleagues on the other side of the aisle say they want to stop this from happening. Governor Romney, the presumptive Presidential nominee, says he wants to stop this from happening. Yet they are blocking us from even moving forward procedurally so we can debate these things, so they could offer their proposals to pay for what we agree needs to be done, to stop the interest rate from doubling. They are blocking debate because they refuse as much on an ideological as on a practical basis to change the Tax Code and to close a loophole that is egregious and should be closed in order to allow us to help middle- income families. I think they have taken this pledge with respect to no new taxes to a degree that defeats a practical, pragmatic solution to a problem that they know has to be solved. It has to be solved before July 1. This decision is fairly clear. It is a choice between allowing young people to get a college degree or fealty, to a pledge to never, ever raise anything that Grover Norquist says is remotely connected to a tax. It is that simple. Unfortunately, that simplicity is undercutting the hopes and dreams of thousands of American students, and that is what it is coming down to. One of the other ironies in this debate is what we propose to do. Closing the subchapter S loophole for high-wage earners in professional endeavors is also something that has long been criticized by conservatives. In the 2004 Presidential campaign, the late conservative columnist Robert Novak described the subchapter S loophole as ``one of the last loopholes left in the Internal Revenue Service Code, and it is a big one.'' I don't think anyone would accuse the late Robert Novak as being anything but staunchly conservative in all his views. The Wall Street Journal, calling out former Senator John Edwards for his use of this loophole in 2004, called it ``a clever tax dodge.'' Again we have a clever tax dodge pitted against helping students go to college. I think helping students go to college should win. In fact, the Wall Street Journal editorial points out how in practice this loophole is used. In their words: While making his fortune as a trial lawyer [referring to Senator Edwards] in 1995, he formed what is known as a `subchapter S,' corporation with himself as the sole shareholder. Instead of taking his $26.9 million as earnings directly in the following four years, he paid himself a salary of $360,000 a year and took the rest as corporate dividends. Obviously at a much lower tax rate but also avoiding payroll taxes. That is what we are trying to close here. I think it ought to be closed in fairness anyway, but the added benefit is that we are able, by closing this loophole, to prevent the doubling of the interest rate on student loans. This is a loophole that should be closed. Again, this money will require people to pay directly to the Social Security trust fund and Medicare trust fund these funds which otherwise were avoided through subchapter S, so it doesn't weaken Social Security but it allows us, through the scoring mechanism, to prevent doubling of the interest rate on subsidized loans. It is a win-win proposition. What they propose is going after the preventive care fund that was part of health reform. It seems to me it is sort of an unfortunate pitting of one program that benefits middle-income families versus another program that potentially benefits all, but particularly middle- class families. Frankly, I think there is another concept here which we all agree about in theory--if we do not enhance prevention opportunities, the cost of health care will be going up and up. What is unsustainable now will become more unsustainable. It is not an appropriate way to deal with this issue. At a minimum, I hope we can at least get to a serious debate about this. If that is the proposal that Republicans have, let's get it on the table, let's take a vote. Let's take a vote whether you want to close loopholes for very specialized, very wealthy lobbyists and lawyers and professionals, or do you want to impact potential savings on health care through prevention. I think and hope we can come to a bipartisan agreement. The clock is ticking. The time to act is now. Students and families are counting on us to do the right thing and fix this problem. I yield the floor.

Mr. REED

Mr. REED. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. REED. Mr. President, the vote we will take today will affect millions of Americans. If we do not enact legislation before July 1 of this year, approximately 7.4 million students will see the interest rate on their student loans double. Nearly 200 student government leaders, representing more than 2.5 million college students across the Nation, have asked us to come up with a bipartisan solution to keep the interest rate from doubling this July. Hundreds of thousands of students, parents, educators, and concerned citizens have called and written to their Senators and Representatives with a simple message: Don't double the rate. For them, student loan debt is not a trivial matter. It is a matter of going to school, and it is a matter, ultimately, of the jobs they take and their ability to pay off those loans during their working life. Without action, students will pay, on average, an additional $1,000 for every year they have to take student loans, if we let this rate double. Two-thirds of the class of 2010 graduated owing student loans, with an average debt of over $25,000. They are walking out of school with a degree and a huge debt. If we do not fix this problem, beginning today, that debt will be larger for their successes in the years ahead. Student loan debt collectively has passed the $1 trillion mark-- exceeding credit card debt. In fact, there are some who speculate this is the new bubble that is coming upon our economy. This is a serious issue. The good news is that there seems to be for at least the principle of preventing this increase--an emerging bipartisan consensus that we should not allow the rate to double. The bad news is that my colleagues on the other side have chosen to use the student loan interest rate as another opportunity to attack health care. They have proposed to pay for the extension by cutting funds to the Prevention and Public Health Fund, reducing access to immunizations and services that seek to prevent cancer, diabetes, heart disease, to name a few. The President has already said he would veto this attempt to pit health care against education--health care, which benefits all, but particularly benefits those low-income and middle-income American families and, of course, these education programs that are a lifeline and a mainstay for middle-income Americans. The other aspect of attacking this prevention fund is, in the long term, if we are ever going to get our hands around the cost of health care in this country--and both sides recognize this is one of the critical obstacles we face in the future--we have to have better prevention. It is difficult to understand how people can say: Let's not do prevention, but we have to cut health care costs. If we could have an effective prevention program, we could, indeed, over years, and with increasing success, reduce or at least begin to flatten that proverbial health care cost curve. It is interesting to note, the other side is proposing to use health care to pay for this proposal to help middle-income families, but they do not always insist on paying for everything they want to do. They will, frankly--and, I think, eagerly--extend the Bush tax cuts without any pay-for. The House recently passed the so-called Small Business Tax Cut Act with no offsets. And that costs $46 billion--nearly enough to pay for the student loan interest rate at 3.4 percent permanently. Following this logic, students and their families across the country are probably wondering: Well, why isn't the risk of doubling their interest rate treated the same way as benefiting the wealthiest Americans through tax cuts and businesses through tax cuts? Don't they count as much? Shouldn't they count as much? We propose to pay for this 1-year extension by closing an egregious loophole in the Tax Code that has enabled certain high-wage earners to avoid paying their fair share into Social Security and Medicare by misclassifying their wages as profits through subchapter S corporations. It is a very small subset of corporations that are doing this, and our proposal is targeted. This is not the small manufacturing plant that is organized as a subchapter S corporation or the pharmacy or the lumber dealer. These are consultants, these are high-paid attorneys, these are professionals who have chosen to put between themselves and their company or their partnership in another entity purely for the purpose of minimizing their payroll tax exposure. That is a loophole that should be cut regardless of other measures we are considering. Essentially, this is a very small group of people, as I said. In order to be subject to this proposal, you would have to have 75 percent or more of your gross revenues from professional services. This does not apply to the manufacturer or the merchant. It is lawyers, accountants, lobbyists, and similarly positioned individuals. And it is further restricted to only those who earn more than $250,000 filing jointly. So this is not the struggling underpaid professional. These are people who are doing reasonably well in this very complicated and competitive society. According to the Joint Committee on Taxation, in 2009 about 15 percent of all S corporations were service businesses as defined in this bill. Yet this small subset is responsible for billions of dollars in lost revenue to Medicare and Social Security. In a 2009 report, the Government Accountability Office found that in the 2003 and 2004 tax years, individuals used this loophole to underreport over $23 billion in wage income. This is a loophole that should be closed. I hope my colleagues on the other side of the aisle will take a serious look at it and join us in supporting this bill. We have 54 days to prevent the interest rate from doubling on subsidized student loans. We have no time to waste. Mr. President, with that, I yield the floor.

Mr. REED

Mr. REED. Mr. President, after months of working to ensure that the subsidized student loan interest rate does not double this summer, I think we finally have reached a consensus--middle-income families in America cannot afford a huge increase, a doubling in the interest rate on student loans. Those who were previously opposed or indifferent to our proposal now are in favor of stopping the doubling of the rate. The most prominent, of course, is the former Governor of Massachusetts, Mitt Romney, who said: ``I fully support the effort to extend the low interest rate on student loans.'' I think that is the consensus. It was hard fought. I submitted the legislation to keep the rate at 3.4 percent originally in January. Now we have reached that consensus. But the debate has now shifted to how do we pay for it. What I have proposed, and am joined by many colleagues, is to close a loophole that has allowed a self-selected few to avoid paying their fair share of payroll taxes. The alternative proposed on the other side goes to critical health care benefits for lower and middle-income families. It seems to me entirely unfair to try to provide help to middle-income families by taking away their access to health care. For families who are struggling, education and health care are not something that can be traded one for the other. Congress should not raise the interest rate on these loans. We have reached that agreement. It is a de facto tax on middle-income families. We have put forward a plan that will avoid the doubling of the interest rate on student loans and will pay for it in a responsible way. We are offering a short-term solution to a long-term problem. But we have to begin. We have to do it quickly. If we do not act before July 1, the interest rate on these loans will double for every loan granted thereafter. Our proposal is to close a loophole that the General Accounting Service has identified as glaring and, frankly, not substantiated by any need. This loophole involves Subchapter S corporations or S-corps. Immediately, when we say S-corps, we think it must be the local manufacturer or the hardware store and how can we go ahead and impose any further taxes, any further costs on these job creators. This is not the situation. What is happening is that a very clever and bright group of people have figured out a way to use the S-corp to avoid payroll taxes. It is a small subset of corporations that are doing this, and our proposal is targeted. It is targeted only to those S-corps that derive 75 percent or more of their gross revenue from the services of three or fewer shareholders or where the S-corp is a partner in a professional service business. Essentially, this is a small group of people who derive 75 percent or more of their gross revenues from providing professional services. It is lawyers, accountants, lobbyists, and folks such as that. The proposal only applies to S-corps or partnerships in the field, where virtually all the earnings are attributable to the performance of services. This is not the local manufacturer, not the local hardware store, not the local dry cleaner or gas station. These are people who perform essentially professional services. They are avoiding their payroll taxes, and we do not think that should be the case. Furthermore, this proposal exempts S-corp shareholders, partners, and partnerships with modified adjusted gross incomes below $250,000 for joint filers and $200,000 for individuals. So it is targeted within this small subgroup of S-corps to an even smaller group, those who are making $250,000 and above as joint filers or $200,000 and above as sole filers. This proposal prevents professional service income from being mis- char-acterized to avoid employment taxes. However, legitimate passive income--if the S-corp is earning income from rents, from dividends, from interest, and certain other gains, those will be essentially treated as such and will continue to be exempt from payroll taxes. All we have done is close a glaring loophole, done it in a way in which we do not impact anyone making under $200,000, anyone, frankly, who is involved in a corporation whose principal activities are not professional services. I think this is a responsible way to do it. This is a way that can, in fact, respond to the need to responsibly fund this provision for maintaining the student loan interest rate. The GAO found that in 2003 and 2004 tax years, individuals used this loophole to underreport over $23 billion in wage income. The median unreported amount was $20,127. For most students, that would cover tuition. Let me say this again. What the GAO found was that using this device as an S-corp, people were able to transform what normally would be $20,000 in payroll wages or salaries that would be subject to payroll taxes into a distribution of an S-corp, avoiding payroll taxes. This is a loophole. There is no other word for it. We are closing it, and we are closing it in a way that is responsible and that will have virtually no impact on the businesses on Main Street USA. In fact, I think if we tried to explain to anyone running the local store that there are some folks out there who were using S-corps to avoid their payroll taxes, they would be, if not shocked, they would, at least, raise objections to that practice, frankly. So closing this loophole will fully offset the $5.9 billion cost of this 1-year extension on the interest rate and would make the Tax Code more fair. It is a win-win proposition. In fact, according to Citizens for Tax Justice, in their words, closing this loophole will actually help most small businesses, which are currently subsidizing the minority who abuse it to avoid payroll taxes. So I think this is not only the right thing to do in terms of the policy of not doubling the interest rate on student loans, this is an appropriate way to do it, an appropriate way to pay for it. Even Governor Romney recognizes that at times S-corps have to pay their fair share. This is a quote from the Boston Herald of January 6, 2008. ``When Mitt Romney became Governor in 2003, Subchapter S corporations that were owned by Massachusetts business trusts were taxed at 5.3 percent. By the time Romney left office, the tax rate on these corporations had climbed to 9.8 percent, with Romney declaring the tax increase to be merely `closing loopholes.' '' We are urging that the Governor be consistent both in support for avoiding the increase in the student interest rate and closing loopholes in Subchapter S corporations. Both parties must work to find a way to do this. The good news is there is now consensus that it must be done. I am prepared, and I hope my colleagues are prepared to work for a way to pay for it which is fair, which does not take from one middle-class program to offset another middle-class program. We should work together to get this done as soon as we return. I yield the floor.

Mr. REED

Mr. REED. Mr. President, I ask unanimous consent that S. 2366, introduced earlier today by Senator Alexander, be considered read twice and placed on the calendar.