President Joe Biden had taken a brief interlude from his vacation to sign the so-called Inflation Reduction Act (IRA) into law and now, with his return to the White House, the president is poised to undo any reported economic benefit of that legislation with the announcement of a massive handout.
After a number of extensions, the student loan payment pause that went into effect during the COVID pandemic is once again set to expire on Aug. 31, and reports have indicated that not only is Biden looking to continue the pause, he is also set to make good on a wealth redistribution promise from his campaign.
CNN’s Poppy Harlow spoke with Marc Goldwein, an economics professor at Johns Hopkins University and a senior vice president for the nonpartisan Committee for a Responsible Federal Budget (CRFB), to discuss the anticipated address from Biden believed to be planned for Wednesday when he would forgive up to $10,000 in student loan debt for borrowers with income less than $125,000.
As the Associated Press reported, “If it survives legal challenges that are almost certain to come, Biden’s plan could offer a windfall to a swath of the nation in the run-up to this fall’s midterm elections. More than 43 million owe a combined $1.6 trillion in federal student debt, with almost a third owing less than $10,000 according to federal data.”
The outlet also noted how the proposal is a “political no-win situation” for the president because in part, as Goldwein stated, it would “do more to increase inflation from debt cancelation than any inflation reduction from the Inflation Reduction Act.”
As the CFRB had laid out in a recent analysis “[D]ebt cancellation would boost near-term inflation far more than the IRA will lower it. $10,000 of debt cancellation could add up to 15 basis points up front and create additional inflationary pressure over time.”
The Penn Wharton Budget Model supported that report as it made clear a one-time forgiveness of $10,000 would cost taxpayers $300 billion surpassing the claimed $275 billion in deficit reduction that the IRA would provide over 10 years.
“And you’re saying that’s a burden the American people have to bear,” Harlow asked, “given the other more negative effects in your analysis?”
“Yeah, that’s sort of the Catch-22 of this all. We can send everybody another round of checks to pay for their inflation costs, but that would actually make inflation worse,” Goldwein contended. “What we need to do now is get inflation under control. One of the easiest ways to do that is to ask people to start paying back the debt they already owe, to start making the principal payments that they’re–they already agreed to.”
“And by the way, while not everybody that has student debt is rich, disproportionately student debt is being held by people that have advanced degrees and pretty good income. And they can bear it a lot more than everyday Americans that are seeing the cost of their gasoline and clothing go up.”
Adding to the argument that Biden would be in a no-win scenario by pushing this handout, Goldwein explained that “it actually widens the racial wealth gap overall because disproportionately people that hold student debt that went to college are white and disproportionately people–the 87 percent of Americans that didn’t go to college are disproportionately people of color.”
“So this would actually widen the racial wealth gap overall,” he argued.
NAACP president Derrick Johnson shared in that assessment and said Tuesday, “If the rumors are true, we’ve got a problem.”
“President Biden’s decision on student debt cannot become the latest example of a policy that has left Black people, especially Black women, behind. This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020,” he posted to Twitter.
.@POTUS’s decision on student debt cannot become the latest example of a policy that has left Black people, especially Black women, behind. This is not how you treat Black voters who turned out in record numbers and provided 90% of their vote to once again save democracy in 2020.
— Derrick Johnson (@DerrickNAACP) August 23, 2022
Johnson instead called for the cancelation of a minimum of $50,000 in student debt which Penn Wharton found would cost taxpayers just under $1 trillion.
Of course, all of that still fails to address the reality that any decision on loan forgiveness does not factor in the millions of Americans who made sacrifices of their own to pay off their debt, or those who chose not to go to college, and will now be expected to pay off the debt of those who chose to take on that debt.
#studentloanforgiveness is just a way to reward over-educated useless people.
— Everyman King (@WilkowMajority) August 24, 2022
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