Following the Biden announcement that student loan debt up to $10,000 will be waived for individuals making up to $125,000, and double that for those less well off, Republicans and even Democrats slammed the move, with one Obama administration economist labelling it as ‘reckless’.
Jason Furman, who chaired Obama’s Council of Economic Advisers, tweeted of the student debt forgiveness “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
“Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse,” Furman further noted.
The economist added that “The White House fact sheet has sympathetic examples about a construction worker making $38K and a married nurse making $77,000 a year. But then why design a policy that would provide up to $40,000 to a married couple making $249,000? Why include law and business school students?”
Furman also estimated that cancelling about $20,000 in student loans per student would increase inflation by 0.2% to 0.3%.
The White House fact sheet has sympathetic examples about a construction worker making $38K and a married nurse making $77,000 a year.
But then why design a policy that would provide up to $40,000 to a married couple making $249,000? Why include law and business school students? pic.twitter.com/463YMmCT9g— Jason Furman (@jasonfurman) August 24, 2022
You can’t use one baseline (interest payments suspended) to argue this will constrain demand & then a different baseline (interest payments restored) to describe the benefits. That is incoherent, inconsistent & indefensible cherry picking–I hope the White House doesn’t do it.— Jason Furman (@jasonfurman) August 24, 2022
There are a number of other highly problematic impacts including encouraging higher tuition in the future, encouraging more borrowing, creating expectations of future debt forgiveness, and more.
— Jason Furman (@jasonfurman) August 24, 2022
The stimulus is relatively small (a multiplier of ~0.1). So the inflation impact is likely to be about 0.2-0.3pp. That is $150-200 in higher costs for a typical household.
If the stimulus matched what advocates used to argue the inflation would be higher. https://t.co/8MrZ1G1FUM— Jason Furman (@jasonfurman) August 24, 2022
Finally, it’s not obvious to me that this is reasonable for a President to do unilaterally. A number of lawyers (and political leaders) have argued inconsistent with the law. Even if technically legal I don’t like this amount of unilateral Presidential power.— Jason Furman (@jasonfurman) August 24, 2022
When asked about Furman’s warnings, Biden’s Education Secretary Miguel Cardona, who is not an economist, claimed that Furman was wrong:
REPORTER: Former Obama economic advisor Jason Furman said your student loan bailout plan will encourage higher tuition, encourage more borrowing, and create expectations of future debt being canceled. Is he wrong?
Biden Education Secretary (not an economist): “Oh, definitely.” pic.twitter.com/6uIA7ZYZRH— RNC Research (@RNCResearch) August 24, 2022
Cardona also admitted that borrowers who have already repaid their student loans will get absolutely no benefit from this deal:
When a reporter asked Biden if the move was unfair to people who have already paid back their loans, he snapped back “Is it fair to people who, in fact, do not own multibillion dollar businesses, to see one of these guys give them all the tax breaks? Is that fair?”
When he was again asked the question he wandered off without answering:
The nonpartisan Committee for a Responsible Federal Budget (CFRB) has predicted that even $10,000 of forgiveness would cost roughly $230 billion, eating up most of the estimated $275 billion in deficit reduction from the first 10 years of the so called ‘Inflation Reduction Act.’
Other economists warned that the move will send tuition costs through the roof:
Student loan debt relief is spending that raises demand and increases inflation. It consumes resources that could be better used helping those who did not, for whatever reason, have the chance to attend college. It will also tend to be inflationary by raising tuitions.— Lawrence H. Summers (@LHSummers) August 22, 2022
Brian Riedl of the Manhattan Institute told Fox Business Network “This is pretty similar to the fact that historically, 60% of all student aid increases have been captured with tuition hikes, and this will be treated like an increase in student aid moving forward, which suggests that 60% will be countered by tuition hikes.”
Republican Senator Tom Cotton reacted to the move, stating that “Of all the dumb things Joe Biden has done, this may be the dumbest yet.”
WATCH: @TomCottonAR blasts Biden’s student debt bailout:
“Of all the dumb things Joe Biden has done, this may be the dumbest yet.” pic.twitter.com/p8yX63JnM7— RNC Research (@RNCResearch) August 24, 2022
Biden owes Americans an explanation on why a truck driver who didn’t go to college is now responsible for the student loans of a rich lawyer.— Tom Cotton (@TomCottonAR) August 24, 2022
Even Democrats panned the move:
First elected Democrat I’ve seen panning Biden’s student debt relief plan: Rep. Chris Pappas, facing a tough reelect in New Hampshire.
“This announcement by President Biden is no way to make policy and sidesteps Congress and our oversight and fiscal responsibilities.’ pic.twitter.com/rcEf5SPvl0— Kevin Robillard 🇺🇸 (@Robillard) August 24, 2022
As usual, the White House either has no answers or just directly contradicts what the economists are warning will happen:
Q: “Is that a tacit acknowledgement that yes, these policies could cause [college] tuition rates to rise in the near future?”
KARINE JEAN-PIERRE: Unclear pic.twitter.com/dNh0rw4HSj— RNC Research (@RNCResearch) August 24, 2022
Q: “How much will this cost? How much will Americans have to pay?”
Top Biden advisor Susan Rice: “Well, that remains to be determined.” pic.twitter.com/7T6ic9EFOh— RNC Research (@RNCResearch) August 24, 2022
Top Biden advisor Susan Rice is asked if Biden’s student loan debt bailout leaves behind Americans who already paid off their loans or chose not to attend college at all.
She has absolutely no answer. pic.twitter.com/Tjsry3FvBr— RNC Research (@RNCResearch) August 24, 2022
Top Biden advisor Susan Rice says Biden’s student loan debt bailout will “not have any meaningful effect on inflation.”
That is false. Even former Obama economists say it will WORSEN inflation. pic.twitter.com/twNSAcfp9F— RNC Research (@RNCResearch) August 24, 2022
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