Top economists who worked for former President Barack Obama (D) slammed President Joe Biden (D) for his plan to bail out a large number of Americans from having to pay back a substantial portion of their student loans or Pell Grants.
Biden announced his plan Wednesday to make U.S. taxpayers pay off thousands of dollars in student loans and Pell Grant recipients for those making less than $125,000 a year.
The nixing of $10,000 of debt per borrower would cost $298 billion in 2022 and a total of $329 billion by 2031 if the policy is renewed each year, according to a nonpartisan analysis from the University of Pennsylvania’s Wharton School. Less than 32% of the funding would benefit Americans in the two lowest income quintiles, while 42% would benefit those earning more than $82,400 per year.
Jason Furman, President Barack Obama’s chairman of the Council of Economic Advisers, responded to the plan by writing on social media, “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,” he continued. “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.”
BTW, those examples also contradict the baseline some have concocted to claim that this won’t raise inflation. The claim it won’t raise inflation is based on the construction worker going from permanently paying $0 interest to paying $31 a month at an annual cost of $372.
— Jason Furman (@jasonfurman) August 24, 2022
“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,” he later added. “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.”
Larry Summers, Secretary of the Treasury for President Clinton and Director of NEC for President Obama, slammed the idea of canceling student loan debt.
“Student loan debt relief is spending that raises demand and increases inflation,” he wrote. “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,” Summers continued.
The worst idea would be a continuation of the current moratorium that benefits among others highly paid surgeons, lawyers and investment bankers.
— Lawrence H. Summers (@LHSummers) August 22, 2022
Ben Zeisloft contributed to this report.