President Biden and his spokesfolks have done their best to blame our runaway inflation on factors outside their aegis such as the pandemic, Putin’s War and the supply chain snafu. And, to a point, they are correct that those events are at least partly to blame in sparking the onset of the problem. What they fail to admit is that their relentless advocacy of high-priced, often misdirected “relief” programs in the midst of the worst inflation in forty years has seriously exacerbated an already deteriorating situation.
Most puzzling of these programs is his executive order mandating student debt relief; one man, our President, has decided to throw several billion dollars at mostly young, mostly self-sufficient former student borrowers. Does he actually have the authority to authorize this level of spending? Shouldn’t Congress weigh in? Can this President, elected by just a little more than half of his constituency and whose performance is approved by less than half of them behave as though he has carte blanche…..Apparently. But his action in this matter is so wrong in so many ways.
First, it suggests to young, often first-time borrowers, that loan contracts are meaningless and that debt is not an obligation to be taken seriously. How many of these people will eventually have to learn the hard way that in the real world of car loans, credit cards and mortgages that there is no amnesty and that credit scores matter.
Second, it violates a moral precept and sets a terrible precedent by painting those borrowers who have diligently paid off their loans as “suckers”. And it encourages future student borrowers to game the system, expecting their debt to be eventually forgiven by presidential fiat or some other beneficent magic.
Third, most of the benefits will go to people of means who need no help making payments; 65% of student debt is owed by those earning more than the national average income; only 12% of the debt is owed by the lowest quartile of earners and, for those who struggle to make payments, there is already a program in place to relieve their obligations. It’s called the Income Driven Repayment Plan (IDR). There are more plan details than can be described here but, basically, it forgives all future interest if the borrower can’t keep up with scheduled payments so the balance never increases. Any remaining loan balance is completely forgiven after 20 years; 10 years if the balance is $12,000 or below. Of course, borrowers must apply for the benefit….how cruel! Does it seem reasonable that a family of two borrowers earning $250,000 annually should get this $20,000 taxpayer largesse; $40,000 if they were both on Pell grants? Whose crazy idea was that?
Fourth, and clearly the greatest threat to the US economy, is the inflationary impact of a sudden windfall in the pockets of borrower/consumers without a corresponding increase in the supply of stuff to buy. This, of course is the same fault found in all the President’s aggressive giveaway programs. His tone-deafness to the serious consequences of his inflationary actions suggests that he never understood Econ 101 or, more likely, that he is simply pandering to voters in advance of the mid-terms; everyone loves free stuff.
At the bottom of this issue is the steady, lethal rise in tuition and board faced by students at nearly every college and university in the country. That rise has propelled concern over student debt to the front of the line and no doubt instigated the president’s executive order. Perhaps Congress should consider a non-partisan examination of those secondary education institutions that receive taxpayer money in any form to understand the architecture that causes costs to rise so much more sharply than consumer prices. I’m not sure that a solution would arise from such a study but it would be useful to know where the pathogens are.
A single court has ruled against implementation of the President’s order; not very comforting. Electing a Republican House now will slow the liberal rush to enact even more poorly-conceived give-away legislation. But I’m deeply concerned that regardless of the outcome of November elections, we’re in for at two more years of economic chaos as this president continues to polish his “legacy” with even more clumsy executive actions.