The Biden administration has aggressively defended its economic record by telling the American people to ignore their lying eyes – the economy is strong, so they should stop complaining. Reality continues to fight back against the White House narrative as gas prices surge above $5 a gallon and inflation jumps 8.6 percent. The situation has gotten so bad that even progressives like Rep. Ilhan Omar (D., Minn.) have noticed “soaring consumer prices,” as she put it in a letter to Secretary of Education Miguel Cardona. That letter must have resonated with the president, as he agreed to forgive $6 billion in student loan debt on Thursday.
Unfortunately for Americans, Democrats only acknowledge inflation when they try to push through massive government interventions – the kinds of policies that helped produce such price hikes to begin with. Omar and 56 other Democratic lawmakers told Cardona that “soaring consumer prices” justify the decision to force taxpayers to pay student loans for 200,000 borrowers.
Democrats consistently downplay inflationary concerns as they seek gimmicks to appease their pet interest groups, while doing nothing to address the root causes of our most pressing problems. The White House, for example, invokes national security to release oil reserves or subsidize solar energy, but it offers no solution to increase household energy production. Now, the White House’s unilateral election-year student debt cancellation attempt perfectly sums up our current economic situation: pouring taxpayers’ money into a failing system under the guise of helping people but inevitably making things.
After signing into law the $1.9 trillion ‘US bailout’ last spring — with zero Republican votes — Biden, Vice President Kamala Harris and other members of their party stormed the country proclaim “Help is on the way.” But we now know that was wrong; it did not add to the recovery and contributed up to 3 percentage points to inflation at the end of 2021, according at the San Francisco Federal Reserve. Throughout this time, the administration has done nothing to ameliorate supply chain issues, address labor shortages, roll back cost-raising tariffs, or reform any of the regulations that are holding it back. render more expensive and difficult to live and work in the United States.
The administration, encouraged by Omar and other progressives, is using the same logic to pay off student debt without demanding any essential reforms to the higher education system. The only difference this time is that Biden is acting unilaterally through executive action, because even this Congress seems to know better. A plurality of Americans oppose this idea with reason.
Thursday’s announcement could be a preview of even more sweeping action to come. The administration is still considering plans to cancel $10,000 per borrower, which would cost more than $320 billion and worsen inflation by increasing consumer demand that the economy is already unable to satisfy. It would also be unfair and regressiveforcing low-income people to pay a government high-income subsidy.
This is all unfair, but the most toxic part of the plan is that it would entrench the flawed status quo of higher education, which has burdened 40 million people with $1.6 trillion in student debt. It is no coincidence that tuition fees have skyrocketed as the government’s role in paying tuition fees has expanded. Higher education institutions have no reason to limit costs as long as they see the government as a guaranteed payer. Moreover, there is little accountability for how these taxpayer-funded tuition fees are spent and whether these expenditures benefit student outcomes.
Debt forgiveness undermines any incentive for students to borrow responsibly or choose a major that will adequately prepare them for the job market and equip them to repay their loans.
Just as the US bailout exacerbated inflation by spurring consumption without reform, canceling student debt would increase the incentive to borrow and spend irresponsibly on higher education and continue to inflate costs without no improvement in what schools provide.
Industries that do not benefit from such generous government subsidies have experienced the greatest cost reductions and improvements in quality and innovation, as shown by Mark Perry of the American Enterprise Institute in “map of the century.” The title may sound like hyperbole until you see what has happened to higher education over the past four decades, where tuition fees and government subsidies have reached record highs, as have rates of education. abandonment, indebtedness and poor school results.
Canceling all student loan debt would cost the government $1.6 trillion and could push inflation above 9%, according to the Committee for a Responsible Federal Budget. Thankfully, full forgiveness is probably not an option because the administration knows it lacks the authority and Congress lacks the appetite outside of Omar and a few dozen other progressives. .
But even a partial forgiveness of student debt will encourage college administrators to double down on the broken status quo at the expense of taxpayers and teenagers. And it will make it painfully clear that the White House still doesn’t realize that the dumping of taxpayers’ money into the economy has made things worse, not helped, and that they have failed to change course. versus the short-term gimmicks, politics, and reckless spending that got us here.