Team Biden: Deficit reduction to pay for loan cancellation

Team Biden is claiming that the debt cancellation, cancelling from $10,000 to $20,000 in student debt, will be paid for via deficit reduction. According to the director of the National Economic Council, the deficit reduction that we’re already experiencing is paying for the loan cancellation. He even hinted that more than the loan cancellation is being paid for.

From Fox News:

“We’re on track for $1.7 trillion in deficit reduction this year. That means, practically speaking, compared to the previous year, 1.7 trillion more dollars are coming into the Treasury than are going out. And we’re using a portion of that — a very small portion of it — to provide relief to middle-class families, consistent with the president’s plan.”

Economists say the White House’s comments and unwillingness to outline offsets for the student debt handout, like tax increases or budget cuts, signals it plans to just pile the money onto the $726 billion federal deficit.

“They’re just looking for any story they can tell that lets them get away from the fact that they’re making the nation’s finances worse,” said Marc Goldwein, senior policy director at the nonpartisan Committee for a Responsible Federal Budget. “This is going to worsen the deficit. There is no way to dance around it.”

Under Biden, the deficit has shrunk mainly because Congress has opted not to appropriate trillions in temporary coronavirus spending as it did at the start of the pandemic in 2020. Economists say the White House is arguing that the shrinking deficit gives the administration more money to spend on programs, like the student loan handout. But this means it won’t go to debt reduction instead, forcing future taxpayers to pick up the tab.

“The analogy is a family going into debt for a $100,000 medical emergency, and the next year buying a $50,000 sports car and claiming that it’s ‘free’ because they are no longer spending $100,000 per year on the medical emergency,” said Brian Riedl, a senior fellow in economics at the center-right Manhattan Institute.

Biden last week announced plans to forgive $10,000 in student debt for borrowers making less than $125,000 annually. Pell Grant recipients will receive $20,000 in debt handouts, provided their income is below the $125,000 threshold. Administration officials claim that no individual or household in the top 5% of earners will benefit from the decision.

Fox News has a lot more on this topic.

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