Dan O’Donnell takes on President Biden’s student loan forgiveness plan
Aug. 24, 2022
Perspective by Dan O’Donnell
Pity poor President Biden, who can’t even seem to get the redistribution of wealth right. His plan to cancel $10,000 in student loan debt for borrowers earning up to $125,000 per year is very possibly the single biggest transfer from poor to rich in American history.
Somewhere, Bernie Sanders is weeping.
The average college graduate earns more than $1.2 million more over a lifetime than his or her non-college peer. The unemployment rate for college graduates is 2.9 percent and hasn’t risen above five percent in nearly two years, compared with an unemployment rate of 4.6 percent for high school graduates.
Those income earners, however, will be helping to foot the bill for their more affluent peers. Researchers at the University of Chicago determined that President Biden’s plan will shift an estimated $192 billion in earned income to the top 20 percent of wage earners. Just $29 billion would go to the bottom 20 percent.
The Federal Reserve estimates that across the income spectrum, President Biden’s plan will lead to more than 31 percent of all borrowers (approximately 12 million in total) having their entire student loan debt eliminated; roughly $321 billion forgiven in an instant.
With inflation already at a year-over-year rate of 8.5 percent, this would be disastrous.
“Student loan debt relief is spending that raises demand and increases inflation,” said liberal economist Larry Summers. “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.”
Summers, who correctly predicted that Biden’s $1.9 trillion stimulus package would bring about out-of-control inflation (which it did), understands that a sudden injection of hundreds of dollars per month in the average borrower’s budget will necessarily lead to greater consumer demand and even further strain on an already overstressed supply chain.
The sudden influx of more than $700 billion in new federal spending from the ironically titled Inflation Reduction Act combined with more than $300 billion more in student loan forgiveness will create $1 trillion of new inflationary pressure at the exact moment the nation’s economy can least accept it.
Moreover, President Biden simply does not have the power to forgive student loan debt. House Speaker Nancy Pelosi has said so multiple times in the past year.
“People think that the President of the United States has the power of debt forgiveness,” she said this Spring. “He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress.”
The Department of Education agreed, declaring earlier this year that Biden “does not have the statutory authority to cancel, compromise, discharge, or forgive, on a blanket or mass basis, principal balances of student loans, and/or to materially modify the repayment amounts or terms thereof.”
Both Pelosi and the Department of Education are correct. Biden’s plan is as patently unlawful as it is politically reckless. It would subsidize the affluent at the expense of the very people that good ol’ working class Joe promised to represent.
Not only will their taxes pay for the elimination of debt for six-figure earners, but they will also pay a greater share of their income toward the increase in inflation that this sudden injection of money will bring about.
If President Biden is a socialist, he is a terrible one since he is robbing the poor to pay the rich.