Obama Economist Instructs Biden to Forgive His Student Loans

An ex-Obama administration economist Jason Furman used Twitter to critique President Joe Biden’s proposal for forgiveness of student loans.

The White House released an announcement Wednesday declaring that individual borrowers who earned less than $125,000 per year (or $250,000 for married couples) could expect $20,000 dollars of debt relief if they were Pell Grant recipients, or $10,000 if they were not. Furman, former Chairman of the Council of Economic Advisers under President Obama, argued in a Twitter thread that the policy would lead to a small increase in inflation, but also criticized the plan for encouraging further increases in the cost of education, further borrowing and for future students to expect debt forgiveness. (RELATED: Americans Think Student Loan Forgiveness Will Make Inflation Worse: POLL)

“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,” said Furman, “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? You should also include students from law or business schools

. Be aware that beneficiaries are likely to earn more in their lifetimes than they do now. A 24 year-old making $75,000 is likely to be at a relatively high percentile on a lifetime basis.

— Jason Furman (@jasonfurman) August 24, 2022

Furman went on to argue that the estimated impact of cancelling about $20,000 in student loans per student would increase inflation by 0.2% to 0.3%, nearly doubling an estimate he made Tuesday evening on Twitter, which in turn cited an estimate by the Committee For A Responsible Federal Budget (CFRB) based on a $10,000 debt cancellation. Furman claimed that both his original estimate and the CFRB’s needed to be adjusted to account for the expected increase in loan forgiveness.

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The CFRB predicted that $10,000 of forgiveness would cost roughly $230 billion, consuming an overwhelming majority of the estimated $275 billion in deficit reduction from the first 10 years of the Inflation Reduction Act.

Furman stated Tuesday that although he described the effect of the policy on inflation as “small”, the taxpayers would still have to bear the costs. This would eat up $75 billion in deficit reduction from the Inflation Reduction Act’s first years. It does not say you should ignore macroeconomic consequences and intertemporal constraints. This is not free money.”

Furman’s analysis comes just two days after a Monday poll by CNBC/Momentive, which showed that 59% of Americans had concerns that inflation would be worsened by the forgiveness of student loans. Needs-based loan forgiveness was very popular, however, with 66% of respondents supporting either complete loan forgiveness for all borrowers, or needs-based forgiveness for some borrowers, according to the CNBC poll.

“P.S. I like the reforms to income-driven repayment,” Furman concluded, in reference to the new policy’s plan to cut monthly payments to income-based repayment plans from 10% of the borrower’s discretionary income to 5%. But I’d prefer to see them pass Congress in a bill that paid them all. This would have been better than putting them on their own and not being part of any extremely costly package

The White House didn’t immediately reply to Daily Caller News Foundation’s request for comment.

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