Upon Biden’s controversial announcement to bail out those who own student loans, economists were quick to point out how this will substantially impact taxpayers for years to come.
According to the University of Pennsylvania’s Wharton School, it is expected that this decision, if renewed every year, will cost the US government $329 billion by 2031.
Upon further analysis, 42% of those who would benefit yearn for more than $82,000 a year. While 32% of the money would benefit low-income households.
Former chairman of Obama’s Council of Economic Advisers, Jason Furman, said, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
He went on to say, “Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse. 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.”
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
He went on to add, “Most importantly, everyone else will pay for this either in the form of higher inflation or in higher taxes or lower benefits in the future. 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.”
Democrat economist Larry Summers, who served under both Clinton and Obama, heavily criticized the decision to cancel student debt. He said, “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.”
He went on to say, “The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers.”
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