Former Barack Obama economic adviser Jason Furman went on a lengthy Twitter rant Wednesday afternoon ripping President Biden’s student loan handout as “inflationary,” “reckless,” and government overreach.
“Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless,” tweeted Furman, who served as chairman of the president’s Council of Economic Advisers during the Obama-Biden administration. “Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse.”
Furman made his comments shortly after Biden announced Wednesday an executive order to cancel $10,000 for each student loan borrower, $20,000 for borrowers who received Pell Grants, and extend a repayment pause through Dec. 31, 2022.
The handout only applies to borrowers earning less than $125,000 a year – $250,000 for married couples – and undergraduate loan borrowers can cap repayment at 5% of their monthly income, Biden said.
BIDEN ANNOUNCES STUDENT LOAN HANDOUT AS NATIONAL DEBT SOARS
The White House released a fact sheet explaining how the program will benefit lower- and middle-income graduates. Furman pointed out, however, that married couples earning $249,000 are also eligible for the handout.
“The White House fact sheet has sympathetic examples about a construction worker making $38K and a married nurse making $77,000 a year,” he wrote. “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?
“BTW, those examples also contradict the baseline some have concocted to claim that this won’t raise inflation,” he continued. “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,” he added. “That is incoherent, inconsistent & indefensible cherry picking – I hope the White House doesn’t do it.”
Furman then echoed what many experts have been saying, that the handout will incentivize colleges to raise tuition prices and cause students to overborrow.
“Also need to be careful with all of the distributional numbers because the beneficiaries will tend to have higher lifetime incomes than current incomes,” Furman tweeted. “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,” he 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.”
Furman added that he’s troubled by the unilateral power Biden is wielding with his order, and that it would be more appropriate for Congress to pass legislation.
“Finally, it’s not obvious to me that this is reasonable for a President to do unilaterally,” he said. “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.
“P.S. I like the reforms to income-driven repayment,” he concluded. “But I would much rather have seen them passed by Congress as part of a law that fully paid for them rather than done unilaterally and unpaid for in the context of an already extremely expensive package.”
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