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Congress to decide on transportation bill, student loan rates

People ride on a New York City transit bus in New York City.

Jeremy Hobson: Well the big news in Washington this week is likely to be the Supreme Court's decision on health care reform. But there's another big story developing in Congress. House lawmakers have until the end of the week to deal with two big economic issues. One is a two year transportation funding bill that puts about three million jobs at stake. The other is how to keep student loan interest rates from doubling for millions of new borrowers.

Julia Coronado is chief economist with the investment bank BNP Paribas. She's with us live as she is every Monday. Good morning, Julia.

Julia Coronado: Good morning.

Hobson: Well, what's at stake in this fight, economically, if Congress can't reach a deal on these two things?

Coronado: Certainly some form of the transportation bill is going to get passed -- so the bulk of the funding will happen. And the student loan interest rate issue just isn't a macroeconomic issue. I mean, certainly it matters for particular borrowers but it's not going to be a tipping point for the U.S. economy.

Hobson: But here we are at another one of these points where both sides can't agree on at least a long-term version of what they want to do -- maybe they'll pass something short-term, as you say. But kind of an image does that give off around the world to markets and investors when they see Washington as a place where things can't get done.

Coronado: Well right now, unfortunately, global investors don't have a lot of choices about where to put their money. So they are looking past the dysfunction in Washington, buying as many treasuries as they can get their hands on. So we're still looking at record low treasury yields despite this behavior in Washington. I think one of the bigger concerns is what this does to confidence amongst U.S. businesses and households -- the fact that we don't really know what policy is going to look like in a few months, let alone a few years. It makes it very hard to make planning decisions or have any kind of stability.

Hobson: Julia Coronado, chief economist with the investment bank BNP Paribas, thanks as always.

Coronado: It's a pleasure.

 

About the author

Julia Coronado is chief economist at BNP Paribas.
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