What do you call a plan that would effectively hand out cash to those who have proven so incompetent in their life plans and finances that they’re drowning in debt despite having had the opportunity to get a college education?
Many words and phrases, most of which you’d be uncomfortably uttering in front of your mother, apply, but perhaps the most usable descriptor is the one that Jason Furman recently used to describe the plan: reckless.
As a reminder, Jason Furman is an American economist who served as the chair of the Council of Economic Advisers under President Obama and is now a professor at Harvard University’s John F. Kennedy School of Government and a Senior Fellow at the Peterson Institute for International Economics.
So bright guy, if a bit of a liberal with a slant toward the sort of policies promoted by the Obama Administration and the elites walking around Harvard.
Well, he just sounded off on Biden’s student loan debt relief plan, saying, in an epic Twitter thread, that the plan was reckless, made no sense, and the economic arguments regarding it put out by Team Biden are absurd.
Beginning, Furman started off by attacking the plan and explaining out how it helps America’s elites despite claims that it’s meant to help the little guy, saying:
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.
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?
Continuing, Furman then noted that the plan will increase inflation, despite the claims of Team Biden, saying:
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.
You can’t use one baseline (interest payments suspended) to argue this will constrain demand & then a different baseline (interest payments restored) to describe the benefits. That is incoherent, inconsistent & indefensible cherry picking–I hope the White House doesn’t do it.
Also need to be careful with all of the distributional numbers because the beneficiaries will tend to have higher lifetime incomes than current incomes. A 24 year-old making $75,000 is likely to be at a relatively high percentile on a lifetime basis.
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.
Oh, and not to be forgotten is that those people who actually pay their debts and bills are the ones who are going to be footed with this as well, as Furman went on to point out, saying:
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. I did a thread on this last night but given the new announcement you need to double everything in it.
Also not to be forgotten is that while the Federal Reserve risks tanking the economy to fight inflation Team Biden is continuing with a policy that will raise inflation, as Furman went on to point out:
The stimulus is relatively small (a multiplier of ~0.1). So the inflation impact is likely to be about 0.2-0.3pp. That is $150-200 in higher costs for a typical household.
If the stimulus matched what advocates used to argue the inflation would be higher.
That is a relatively small inflation number. But would take about 50-75bp on the fed funds rate to extinguish that much inflation. Is the Fed going to try to offset this? Or will it do what it did with the American Rescue Plan and ignore that rapidly changing fiscal landscape?
And, last but not least is the fact that Slow Joe probably doesn’t even have the authority to push this policy, as Furman ended by saying:
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.
A terrific takedown of the Biden student debt forgiveness plan and bad news for Biden, as it shows that even Obama types are turning on him.
This story syndicated with permission from Will, Author at Trending Politics
Notice: This article may contain commentary that reflects the author's opinion.
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