Welcome to Bidenomics, where the president’s plans to fix the student debt crisis could drive up both inflation and the overall cost of college, while doing nothing to fix the root of the problem, and cost taxpayers as much as $1 trillion.
According to the Wharton School, the plan is going to cost a bit more than the marketed $300 billion price tag. Biden’s “debt cancellation alone will cost up to $519 billion, with about 75% of the benefit accruing to households making $88,000 or less,” Wharton announced in a new study.
“Loan forbearance will cost another $16 billion” and “the new income-driven repayment (IDR) program would cost another $70 billion, increasing the total plan cost to $605 billion” at a minimum based on Wharton’s model.
“Depending on future IDR program details to be released and potential behavioral (i.e., ‘non-static’) changes, total plan costs could exceed $1 trillion,” the school warned.
For his part, Biden doesn’t believe that massive government spending contributes to inflation. In the spring, the president barked that he was “sick” of criticism against his administration’s spending plans.
“We have to talk about it because the American people think the reason for inflation is government spending more money. It’s simply not true,” he claimed. Even the Associated Press dinged Biden for that false statement, explaining to the president that high spending does indeed contribute to rising prices.
Yet even before Wharton’s astronomical pricetag was released, folks like former President Barack Obama’s top economic advisor Larry Summers were blasting Biden’s bailout. Summers argued this week that the plan will add to inflation woes.
“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,” Summers explained.
“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,” he added. “It will also tend to be inflationary by raising tuitions.”
Richard Vedder, a senior fellow at the Independent Institute and an economics professor, also recently explained for Fox News that the debt cancellation could lead to students taking out more student loans while colleges hike up prices even more.
“Forgiving student loans increases incentives for colleges to raise tuition and fees more aggressively,” Vedder argued. “Students will be emboldened to borrow more, thinking ‘I will not ever have to pay the loans back.’”
Vedder noted that the empirical data show that “most new federal student loan money ends up being absorbed by higher tuition fees; universities and their staffs benefit much more than students.”
Furthermore, Biden’s debt plan does nothing to stop the actual problem — government-backed loans giving cover for colleges to raise prices. The students taking out loans today will find themselves in a similar situation 10 years down the road, albeit with different payback options.
In short, the preliminary data suggests Biden’s debt amnesty will do zilch to fix the crisis or help the economy. In the words of attorney Mark Meuser, “It’s like putting a bandaid on gangrene.” That’s Bidenomics in action, folks.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.