Biden’s Lawless Move To Cancel Student Debt Will Increase Inflation And Wipe Out Deficit Reduction

According To Economists, Canceling $10,000 Of Student Debt Will Wipe Out The Claimed Deficit Reduction In Democrats’ Reckless Taxing And Spending Spree And ‘Would Boost Near-Term Inflation Far More Than The IRA Will Lower It’

“Democrats say [their reckless taxing and spending spree] can reduce the federal deficit by about $300 billion, but they have yet to furnish a final fiscal analysis.” (“House Passes Inflation Reduction Act, Sending Climate And Health Bill To Biden,” The Washington Post, 8/12/2022)

PENN WHARTON BUDGET MODEL: “We estimate that a one-time maximum debt forgiveness of $10,000 per borrower will cost around $300 billion for borrowers with incomes less than $125,000. This cost increases to $330 billion if the program is continued over the standard 10-year budget window. Eliminating the borrower income limit threshold produces a 10-year cost of $344 billion. Increasing the maximum amount forgiven to $50,000 per borrower increases the total cost to as much as $980 billion. Between 69 and 73 percent of the debt forgiven accrues to households in the top 60 percent of the income distribution.” (“Forgiving Student Loans: Budgetary Costs And Distributional Impact,” Penn Wharton Budget Model, 8/23/2022)

COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: “The recently-passed Inflation Reduction Act (IRA) will reduce budget deficits by roughly $275 billion while pushing fiscal policy in the right direction to assist the Federal Reserve in its fight against inflation. However, a possible announcement from the White House to offer across-the-board student debt cancellation could undermine the bill’s disinflationary gains and deficit reduction. Simply extending the current repayment pause through the end of the year would cost $20 billion – equivalent to the total deficit reduction from the first six years of the IRA, by our rough estimates. Cancelling $10,000 per person of student debt for households making below $300,000 a year would cost roughly $230 billion. Combined, these policies would consume nearly ten years of deficit reduction from the Inflation Reduction Act. … However, debt cancellation would boost near-term inflation far more than the IRA will lower it. We previously estimated that a one-year pause could add up to 20 basis points to the Personal Consumption Expenditure (PCE) inflation rate. Using a similar analytical method, $10,000 of debt cancellation could add up to 15 basis points up front and create additional inflationary pressure over time. … Broad student debt cancellation – whether by extending the pause, forgiving balances, or both – would undermine the benefits of the IRA and demonstrate a lack of seriousness in addressing our nation’s economic challenges.” (“Cancelling Student Debt Would Undermine Inflation Reduction Act,” Committee For A Responsible Federal Budget, 8/16/2022)

 But President Biden And Sen. Manchin Claimed That Their Reckless Taxing And Spending Bill ‘Tackles Inflation By Lowering The Deficit,’ ‘It Will Address Record Inflation By Paying Down Our National Debt’

PRESIDENT BIDEN: “[W]e’re going to cut the deficit — I point out — by another $300 billion with the Inflation Reduction Act over the next decade. We’re cutting deficit to fight inflation...” (President Biden, Remarks, 8/16/2022)

• BIDEN: “This bill tackles inflation by lowering the deficit...” (President Biden, Press Release, 8/7/2022)

SEN. JOE MANCHIN (D-WV): “The Inflation Reduction Act has been signed into law. It will address record inflation by paying down our national debt…” (Sen. Manchin, @Sen_JoeManchin, Twitter, 8/16/2022)

• MANCHIN: “Inflation is the biggest concern I hear about from West Virginians. We cannot continue to add fuel to the inflation fire. The Inflation Reduction Act will bring down the national deficit…”  (Sen. Manchin, @Sen_JoeManchin, Twitter, 8/16/2022)

Larry Summers: ‘Student Loan Debt Relief Is Spending That Raises Demand And Increases Inflation’

LARRY SUMMERS, Former Clinton Administration Treasury Secretary: “I hope the Administration does not contribute to inflation macro economically by offering unreasonably generous student loan relief or micro economically by encouraging college tuition increases. Every dollar spent on student loan relief is a dollar that could have gone to support those who don’t get the opportunity to go to college. 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. The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers. If relief is to be given it should not set any precedent, it should only be given for the first few thousand dollars of debt, and for those with genuinely middle class incomes.” (Larry Summers, @LHSummers, Twitter, 8/22/2022)

Liberal Economist: ‘Almost A Third Of All Student Debt Is Owed By The Wealthiest 20 Percent Of Households,’ ‘Across-The-Board Student Loan Forgiveness Is Regressive’

ADAM LOONEY, Nonresident Senior Fellow at Brookings and former senior economist with President Obama’s Council of Economic Advisers: “Accounting correctly for both human capital and effect of subsidies in student lending plans, almost a third of all student debt is owed by the wealthiest 20 percent of households and only 8 percent by the bottom 20 percent. Across-the-board student loan forgiveness is regressive measured by income, family affluence, educational attainment—and also wealth.” (“Student Loan Forgiveness Is Regressive Whether Measured By Income, Education, Or Wealth,” Brookings, 1/14/2022)

Even Speaker Pelosi Knows President Biden ‘Does Not’ Have The Authority To Cancel Student Loans, ‘That’s Not Even A Discussion’

HOUSE SPEAKER NANCY PELOSI (D-CA): “People think that the President of the United States has the power for debt forgiveness. He does not. He can postpone. He can delay. But he does not have that power. That has to be an act of Congress. And I don’t even like to call it forgiveness because that implies a transgression. It’s not to be forgiven, just freeing people from those obligations. So, the question of who gets forgiven – to use the term of art that is out there – is a debate. Do we use whatever money there is for the broadest base of support of the, those with – more people with even less debt, or fewer people with more debt? That’s a policy discussion. But the difference between the President – the President can’t do it. So that’s not even a discussion. Not everybody realizes that. But the President can only postpone, delay, but not forgive. … But even take it on top of that, suppose your family was not – your child just decided they want to – at this time, not want to go to college, but you’re paying taxes to forgive somebody else’s obligations. You may not be happy about that.” (Speaker Pelosi, Press Conference, 7/28/2021)