Editor’s Note: Charlie Dent is a former Republican congressman from Pennsylvania who served as chair of the House Ethics Committee from 2015 until 2017 and chair of the House Appropriations Subcommittee on Military Construction, Veterans Affairs and Related Agencies from 2015 until 2018. He is a CNN political commentator. The views expressed in this commentary are his own. View more opinion on CNN.
President Joe Biden’s announced student loan forgiveness plan for certain borrowers misses the mark on both a policy and political level. It also represents a near complete capitulation to the progressive wing of the Democratic Party, which wanted even more student debt relief.
Under the Biden executive order, borrowers who individually make under $125,000 a year will receive $10,000 in relief. Additionally, if these borrowers received a Pell Grant, they’ll get another $10,000 in relief for a total of $20,000 in debt cancellation. The measure will benefit 43 million people, according to the White House.
Condemnation of this ill-considered executive action is widespread and bipartisan. Democrat economists Larry Summers, a former Treasury Secretary who served as the director of the National Economic Council under former President Barack Obama, and Jason Furman, the chairman of Obama’s Council of Economic Advisers, objected the proposal’s inflationary impacts.
Summers said, “Student loan debt relief is spending that raises demand and increases inflation… It will tend to be inflationary by raising tuitions.” Furman tweeted, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless.”
Sen. Roy Blunt of Missouri, a former president of the Southwest Baptist University and the current top Republican on the Senate Appropriations Subcommittee on Labor, Health and Human Services that oversees education funding, laid out five thoughtful points about the perils of student loan forgiveness. He cites, among other things, the disproportionate benefits to wealthier Americans, the failure to address the cost of college and Biden’s lack of legal authority to implement such a sweeping spending program. Spot on, Senator.
Moral hazard is written all over Biden’s student loan forgiveness proposal. If progressives truly want to help struggling Americans, why not wipe out mortgage debt? Answer: Renters wouldn’t benefit. How about credit card debt? Answer: People who pay their bills on time wouldn’t benefit.
Transferring the obligations of people who incurred student loan debts to millions of working taxpayers whose own debts or loans were never forgiven is not only unfair but politically perilous.
What’s more, college graduates have much greater earning potential than those who never went to college. Consequently, non-college educated, working taxpayers will help pay the student debts of people who will earn far more than they ever did. Try selling that one to a janitor, construction worker, dishwasher, house cleaner, truck driver, or any other blue-collar worker.
Nothing in the Biden order addresses the cost of college education and high tuition. What incentive will schools have to lower costs if they believe more debt relief is in the offing? Further, this executive action will incentivize students to take on more student loans if there is a reasonable chance for more debt forgiveness in the future.
In 2019, I excoriated former President Donald Trump’s constitutionally offensive diversion of military construction or disaster emergency funds to pay for the southern border wall – without congressional approval. The power of the purse authority rests with Congress under Article I of the US Constitution. The same is true as it applies to student debt forgiveness on the scale proposed by Biden. Congress must reclaim its authority and vote on this proposal.
And there are the budget implications. The misnamed Inflation Reduction Act (IRA) claims to lower budget deficits by $300 billion over 10 years. In one fell swoop, Biden wipes out all deficit reduction from the IRA before most of that law is implemented. The Wharton School of the University of Pennsylvania budget analysis says the more modest initial proposal with $10,000 of student debt relief for those earning under $125,000 would add $300 billion to the deficit. The executive order announced Wednesday by Biden is far more expansive than what Penn Wharton analyzed.
One would think Democrats learned their lesson about going big in an historically unfavorable political environment, notwithstanding GOP stumbles with extreme candidates, cruel abortion bans and Trump’s never ending legal problems and unhelpful interventions.
Last year’s American Rescue Plan – more aptly named The Inflation Acceleration Act – overspent, increased demand and further contributed to inflation. Democrats were compelled by Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona to scale back the Build Back Better plan, an expansive $3.5 trillion social and human services program, to something much smaller and enacted as the Inflation Reduction Act, which raised corporate taxes and addressed climate change, Obamacare subsidies and price controls for some prescription drugs.
One would think Biden would have proposed something more targeted and measured – increasing Pell grants, for example, to the neediest of students or providing more assistance to those who never went to college. That is more palatable than buying the votes of people benefiting from student debt relief. Things might not work out the way Democrats anticipate. Lots of working and retired taxpayers, who are struggling with high prices for food and fuel and paid their debts without any help from Uncle Sam, are noticing.