This week on Facing the Future, we take a look at the fiscal and policy implications of President Biden’s recent controversial announcement that his administration would cancel a significant amount of student loan debt for many Americans. Although very popular with progressives and especially young people within the President’s party, we at The Concord Coalition look at the unprecedented move with some skepticism and real concern. Unresolved questions include: how much will this increase future deficits, will it fuel higher tuition costs and what legal precedents does it set?
Joining us to give his perspective on the debt cancellation is friend of the show, Ben Ritz, director of the Center for Funding America’s Future at the Progressive Policy Institute. Later on in the program, we get an update from journalist David Lerman, editor of Budget Tracker for the publication CQ | Roll Call. David closely follows the Congressional appropriations process that actually funds the government. Congress has not adopted a federal budget for the next fiscal year that starts October 1.a Lawmakers face a crucial deadline of September 30 when the current fiscal year ends and they must decide whether to pass a so-called continuing resolution to temporarily fund the federal government to keep agencies functioning. The alternative is a government shutdown, an outcome no one wants.
Count Ben Ritz among the skeptical when it comes to the massive Biden administration student loan debt cancellation. Among Ben’s concerns: It may actually push college tuition prices higher, it may be an illegal overreach of executive authority, it may contribute to inflation, it adds hundreds of billions of dollars to the federal budget deficit, and it sets a bad budget precedent that may be a watershed moment for fiscal policy, just to name a few.
“I’m not a huge fan of this,” said Ritz, a former Concord Coalition staff member. “One issue is that we don’t actually know how much it’s going to cost, because there are a lot of outstanding questions like what share of the debt being canceled was never going to be repaid to begin with. We don’t know how many people are going to take advantage of the program. But also, the White House just didn’t bother to produce a cost estimate, and the distributional estimates they produced were also somewhat lacking. This will have a relatively small but persistent impact on inflation. It’s probably between a tenth and a quarter of a percentage point increase in inflation. But it’s probably the single most inflationary thing the President could do.”
At its core, Biden’s move cancels up to $10,000 dollars in student loan debt for individuals earning less than $125,000 annually and couples earning up to $250,000 annually. Those who received federal Pell grants towards their higher education are eligible for another $10,000 debt cancellation bringing their total amount forgiven to $20,000. Ritz questions how a President can unilaterally make such an impact on federal spending without any input from Congress.
“This is probably the single most expensive executive action ever,” said Ritz. “It does raise serious issues of power of the purse – it is a big constitutional issue. Even a politically neutral Supreme Court would struggle with it. I would be surprised if a Supreme Court packed with Republican appointees would uphold it. Whether or not the President has the power to do this, Presidents should not have the power to spend close to a trillion dollars without Congressional approval. There is a real risk that people start spending this money thinking they’ve had their debts canceled and then because of the Supreme Court and the law, President Biden then has to go back to them and say ‘sorry actually that was wrong, you actually do owe this money’. ”
Who has standing to bring a legal challenge to Biden’s debt forgiveness is still an open question.
Turning to matters we know that Congress will have a say on, the clock is ticking to the September 30th deadline when the current fiscal year ends. Congress must fund government operations by October 1st, or else most federal agencies will have to shut down. David Lerman says Congressional leaders are nowhere near close on a framework to pass a federal budget for FY 2023, and even getting to a continuing resolution for temporary funding is not a sure thing.
“You’d think just a simple stop-gap measure to extend current funding just to buy them a little more time would not be a heavy lift, you’d think they could just pass that quickly. But no, it’s a heavy lift,” said Lerman. “Both parties try to exert leverage to attach other measures to it that they want to see passed quickly. This year there are at least two things that could trip them up. One relates to the Inflation Reduction Act that just passed, there was that big climate change spending package in there. To get a deal with Joe Manchin (D-WV), the pivotal swing vote in the Senate, he got an agreement with Democratic leaders to have a vote on legislation to overhaul federal permitting, to make some of these energy projects get built more quickly, like pipelines, that he likes. Manchin envisions the CR as the place to get that done.”
Lerman said a separate fight over more COVID pandemic funding to states, local governments, and healthcare providers may also imperil getting a temporary spending measure passed by the end of the fiscal year.
Hear more on Facing the Future. I host the program each week on WKXL in Concord N.H., and it is also available via podcast. Join my guests and me as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.