President Joe Biden recently indicated that he would seriously consider student loan forgiveness. But according to former White House economic adviser Stephen Moore, this gesture is not only bad politics but “worse economics” and would make the record-high inflation even worse.
“It’s not forgiveness … It’s shifting the burden from the people who borrowed the money to you and I and all the taxpayers,” Moore told NTD Business on April 28.
Moore is a co-founder of the Committee to Unleash Prosperity and a distinguished visiting fellow at the Heritage Foundation.
“And by the way, if they were to do this plan, would anybody ever in the rest of history pay their student loans when the government’s just going to forgive you for them? So we’re going to have problems in the short term and long term if we do this,” said Moore.
According to Education Data Initiative, student loan debt in the United States totals $1.747 trillion with 43.4 million borrowers. The average federal student loan debt balance is a little over $37,000.
Biden said he would cancel $10,000 in student loan debt per borrower during his presidential campaign. That amounts to canceling about $321 billion in federally backed loans, according to an analysis published by the Federal Reserve Bank of New York last week.
Early this month, Biden again extended the pause on federal student debt repayments through Aug. 31.
CBS News reported that on April 25, when Biden was told that the Congressional Hispanic Caucus would support forgiveness for at least $10,000 in college debt, Biden responded, “You’re going to like what I do on that.”
On April 28, Biden said he was considering “some debt reduction.”
“I am not considering $50,000 debt reduction,” Biden told reporters at a press conference. “But I’m in the process of taking a hard look at whether or not there are going to—there will be additional debt forgiveness, and I’ll have an answer on that in the next couple of weeks.”
On the same day, the Education Department announced a discharge of $238 million in student loans for a beauty school’s students based on borrower defense findings. The department also said it had canceled more than $18.5 billion in student loan debt for more than 750,000 borrowers under the Biden administration.
Moore said the debt and the government overspending had already caused economic problems in the first place.
“We’ve been spending way more money, trillions of dollars more money than we’re taking in. That floods the economy with cheap dollars,” said Moore. “The definition of inflation is too many dollars in the economy chasing too few goods. That’s exactly what we have right now.”
The latest Bureau of Labor Statistics data showed that the U.S. annual inflation rate surged to 8.5 percent in March, the biggest spike since December 1981.
“We got a really disappointing number for the first-quarter GDP, which was negative 1.4 percent. We should be growing at about 5 or 6 percent, given that COVID is basically over; we’ve got businesses reopened; people going back to jobs; restaurants, hotels open again,” said Moore.
“I think our economics is upside down right now in Washington.”
Other economists are also critical of student debt cancellation.
“Full debt cancellation would be a massive hand-out to rich doctors and lawyers, would worsen our inflation crisis, and would cost almost as much as the entire 2017 tax cuts,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a recent statement. “Even partial debt cancellation would be costly, regressive, and inflationary.”
Moore said Biden’s gesture was to please voters for the coming midterm elections. However, Biden and the Democrats might get hurt by the high inflation.
“Voters love when politicians play Santa Claus. That’s why politicians love to play Santa Claus. But I’ll tell you this, people are very angry about the inflation problem right now,” said Moore.
“I am old enough to remember 1980 when Ronald Reagan beat an incumbent Democratic president, Jimmy Carter, and the main reason that Reagan won that landslide election was people were so fed up with the high inflation.”