The Biden administration’s sweeping student loan relief initiative is irresponsible and likely to make decades-high inflation even worse, according to the chief economist to former President Barack Obama.
Jason Furman, who chaired Obama’s Council of Economic Advisers, ripped Biden’s debt forgiveness plan in a lengthy Twitter thread. Inflation hit 8.5% in July and was already expected to remain elevated for the foreseeable future before the announcement.
“Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” Furman tweeted. “Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”
Biden’s program will forgive up to $10,000 in debt for individuals earning $125,000 or less annually, or $250,000 for married couples and households. Individuals who received Pell grants can have up to $20,000 in student debt forgiven. Additionally, the president extended the pause on student loan payments through the end of this year.
Furman noted that the White House’s “sympathetic examples” of individuals who stood to benefit from the plan did not explain why the administration set the income cap for qualification so high.
“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,” Furman said.
“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 added.
Furman’s view matches that of ex-Clinton administration Treasury Secretary Larry Summers, who warned earlier in the week that an overly generous relief plan would be inflationary.
The non-partisan Committee for Responsible Federal Budget calculated that the plan “will likely cost an astronomical $400-$600 billion” over time.
CRFP President Maya MacGuineas described the move as “gallingly reckless.”
“With the stroke of a pen, the President undid a year’s worth of work on the fiscal front,” MacGuineas said.
Biden argued at a press conference that his plan would help millions of Americans “saddled with unsustainable debt” and fulfill his campaign promise to address the situation. More than 40 million Americans stand to benefit in some capacity, according to the White House.
“The burden is so heavy that even if you graduate you may not have access to middle-class life that the college degree once provided,” Biden said.
The student debt relief plan sparked criticism on both sides of the aisle – with Republicans arguing the concept was inflationary and unfair to taxpayers and some progressives ripping Biden for not canceling all outstanding loans.