White House Should Produce Debt Cancellation Cost Estimates - Comm. for a Responsible Federal Budget

Sunday, August 28, 2022

Committee for a Responsible Federal Budget

 

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Graphic: Committee for a Responsible Federal Budget

Two days after announcing executive action to cancel large amounts of student debt, the White House has failed to produce either a cost estimate or a proposal for how it would be paid for. The White House has said it is unable to provide a cost estimate due to uncertainty, and has suggested it could be paid for by restarting student loan payments in January, even though loan payments were previously scheduled to restart next month. 

 
The Committee for a Responsible Federal Budget estimates that the student debt policies announced on Wednesday by President Biden will cost between $440 billion and $600 billion, with a central estimate of roughly $500 billion, with the cancellation component alone costing roughly $360 billion. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:

This certainly could be one of the most expensive executive actions in history, and yet the White House can’t tell us what it will cost. Either the White House doesn’t know the cost of their debt cancellation proposal, or they know and won’t share it with the public—it is hard to say which is worse.
 
While the Administration says it can’t fully estimate the cost, it has no problem estimating how many borrowers would benefit, who they are, or how the plan will affect inflation. Even as it can’t tell us what the plan costs, the White House and its allies are relying on word games and budget tricks to mislead the public about the inflationary and budgetary consequences.
 
Yesterday the White House suggested the plan would be fully paid for in part by restarting existing loan payments. That claim defies logic, as payments were supposed to restart next week. No one, not even the President’s own budget, assumed we would extend the temporary emergency pause for the next decade. The last two Administrations and Congresses have already spent roughly $300 billion to pause repayments for 29 months and enact a variety of other changes to the student loan system - further actions add to those costs, they don’t subtract from them. The White House Press Secretary also stated that one part of the plan might reduce government cash flow by $24 billion per year, but that tells us very little about the overall cost of the plan.
 
The White House also suggested its plan is fiscally responsible because it should be put in the context of the “historic” deficit reduction it has already achieved as deficits fell between 2021 and 2022. That fall is of course driven mainly by huge deficit increases the Administration enacted in 2021, and to a lesser extent from surging inflation.  
 
The one truly meaningful action the White House has taken to reduce deficits, the Inflation Reduction Act, would see its reduction wiped out twice over by the student debt policies that were just announced. 
 
If the Administration truly has no idea how much this plan costs, they are acting with extreme reckless abandon. At worst, the White House is not being honest with the American people about just how expensive and inflationary this executive action will be. Before we charge half a trillion dollars to our children and raise prices on our parents, the American public has a right to know exactly how much this plan will cost. 

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ABOUT: 

The Committee for a Responsible Federal Budget is a nonpartisan, non-profit organization committed to educating the public on issues with significant fiscal policy impact.

Our bipartisan leadership comprises some of the nation's leading budget experts, including many past heads of the House and Senate Budget Committees, the Congressional Budget Office, the Office of Management and Budget, and the Government Accountability Office.

In 1980, Robert Giaimo (D-CT) and Henry Bellmon (R-OK) both left Congress. Mr. Giaimo had served in the House of Representatives for 20 years, including four as Chairman of the House Budget Committee. Mr. Bellmon had served 12 years as a Senator and was the ranking Republican on the Senate Budget Committee from its inception in 1975.

These two fiscal policy leaders convened a group of other former Budget Committee Chairmen, former Directors of the Office of Management and Budget, leading economists, and business leaders. The group concluded that the country needed an organization outside government that was committed to a sound budget process. They formed the Committee for a Responsible Federal Budget, and it was incorporated on June 10, 1981.

 

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