President Joe Biden’s unilateral plot to cancel outstanding student debt will cost the country roughly $400 billion, according to the nonpartisan Congressional Budget Office. Coupled with interest costs, the CBO estimates that the executive order will add $1 trillion to the national debt over the next 30 years.
For any president at any moment, this CBO estimate would only further confirm the recklessness of such an obvious usurpation of Congress’s power of the purse. At this particular time, it’s actively disastrous.
The debt cancellation scheme is regressive, disproportionately benefiting higher-income earners. In the short run, it also keeps the money supply artificially high and drives consumer demand just when the Federal Reserve is pulling in the opposite direction. In fact, Biden’s action here, if it is carried out, will force the Fed to be even more aggressive with its monetary tightening campaign — and, arguably, it already has.
Earlier this month, the Fed passed its third consecutive 75 basis point hike to the federal funds rate, with the central bank now anticipating that rates will remain well above 4% throughout next year. With the zero-interest rate policy experiment a proven failure and most likely done with for the next generation, CBO’s projected interest costs to the student debt cancellation plan, like all future spending, is likely even higher than the estimate.
All in all, the CBO estimate, which follows an earlier claim from the University of Pennsylvania that the plan could amount to at least $1 trillion, renders Biden’s action the single most expensive executive order in the history of the United States. The only silver lining to the scheme is that it’s so blatantly illegal that even Biden appointees in the courts will probably be forced to block it.
In any case, the courts canceling the cancellation could wind up more a gift to Biden than it is to Republicans — the move is an electoral dud. A Cato survey on the proposal found that people love free cash, as usual, until they find out what it really costs. When warned that the payday would encourage the higher education cartel to raise prices further, more than three-quarters of the poll respondents opposed the bailout.
