Former President Barack Obama once said of then-candidate Joe Biden, “Don’t underestimate Joe’s ability to f**k things up,” and after the nonpartisan Congressional Budget Office (CBO) analyzed the legally questionable plan to cancel $10,000 in student loan debt for many, it looks as though that prescient warning may apply to the already troubled economy.
Late in August, in a flagrant attempt to curry favor ahead of the midterm elections by following through on a campaign promise, Biden announced his intention to cancel up to $10,000 in student loans and as much as $20,000 for those with Pell grants under certain criteria such as their current income levels. At the time, the plan was said to cost around $240 billion over 10 years, but the CBO says the White House missed the mark by as much as half.
In a letter sent to Sen. Richard Burr (R-NC), ranking member of the Senate Committee on Health, Education, Labor, and Pensions, and Rep. Virginia Foxx (R-NC), ranking member of the House Education and Labor Committee, responding to questions, they wrote, “CBO estimates that the cost of student loans will increase by about an additional $400 billion in present value as a result of the action canceling up to $10,000 of debt issued on or before June 30, 2022, for borrowers with income below specified limits and an additional $10,000 for such borrowers who also received at least one Pell grant.”
CBO estimates that the cost of outstanding student loans to the federal government will increase by about $400 billion because of an executive action canceling some debt. https://t.co/FgEHBn2XP6
— U.S. CBO (@USCBO) September 26, 2022
“The cost of outstanding student loans will increase by $20 billion because an action suspended payments, interest accrual, and involuntary collections from September 2022 to December 2022,” they also explained.
The news prompted Foxx to respond, “CBO’s $400 billion cost estimate shows this administration has lost all sense of fiscal responsibility. Rather than working with Congress to bring down college costs, President Biden has opted to bury the American people under our unsustainable debt.”
Naturally, Democratic Senate Leader Chuck Schumer (NY) and progressive Sen. Elizabeth Warren (MA) saw the report as validation in a joint statement, “Today’s CBO estimate makes clear that millions of middle class Americans have more breathing room thanks to President Biden’s historic decision to cancel student debt. In contrast to President Trump and Republicans who gave giant corporations $2 trillion in tax breaks, President Biden delivered transformative middle class relief by cancelling student debt for working people who need it most–nearly 90% of relief dollars will go to those earning less than $75,000 a year.”
— Elizabeth Warren (@SenWarren) September 26, 2022
“We don’t agree with all of CBO’s assumptions that underlie this analysis, but it is clear the pandemic payment pause and student debt cancellation are policies that demonstrate how government can and should invest in working people,” she went on, “not the wealthy and billionaire corporations.”
The Democrats’ claim failed to identify the fact that the intended debt has not been canceled and faces serious legal challenges. In early September, several GOP attorneys general reportedly met to discuss a strategy to challenge measures considered an unprecedented overreach.
“We’re going through that analysis right now,” Arizona Attorney General Mark Brnovich said at the time, “not only in Arizona but other states. You have a dangerous precedent. Any time any president thinks they can unilaterally dismiss debt or transfer wealth from one group to another group, it’s a huge power grab. The ends can’t justify the means.”
Republicans mull legal ways to stop Biden’s ‘Robin Hood in reverse’ student loan scheme in its tracks https://t.co/oaVRsI10SO
— American Wire News (@americanwire_) September 2, 2022
The $400 billion estimate from the CBO is considered a modest approximation as it left out the executive order’s “income-driven repayment plans” which the Committee for a Responsible Federal Budget had estimated would add an additional $120 billion in costs, bringing the total over $500 billion. The CBO also left out “changes in loan terms, or effects on loans issued after June 30, 2022.”
Former Secretary of Education Betsy DeVos had said of the plan, “It is fundamentally unfair. It is wrong. And not only that, but it doesn’t solve any problem. All it does is mean a political payoff to voters that Biden and his administration hope to attract in November.”
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