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How President Biden’s plan for student loan forgiveness will make student debt worse

The president's plan to forgive $10,000 in student debt per borrower has several negative consequences.

By Jude SchwalbachReason Foundation

How President Biden’s plan for student loan forgiveness will make student debt worse
Allison Bailey/ZUMAPRESS/Newscom

Many of the 43.3 million Americans with federal student loan debt totaling $1.61 trillion have anxiously anticipated President Joe Biden’s decision about student loan forgiveness. 

Last week, The Washington Post reported that the president’s plan, which sources say is nearing a formal announcement, will resemble his 2020 campaign promise to forgive $10,000 in federal student loans per borrower. The Committee for a Responsible Budget estimates this will cost taxpayers $230 billion.

While political firebrands such as Sen. Bernie Sanders have long supported substantially increasing federal higher education spending, including offering things like free college, President Biden’s proposal would represent a significant change in policy from previous presidential administrations, including Democrats.

President Barack Obama’s 2008 campaign promises were modest by comparison. President Obama sought to expand Pell Grant access to low-income students and eliminate government subsidies to private student lenders. Even Obama’s 2014 executive order that sought to forgive some federal student loans only did so after 20 years and required borrowers to make regular payments via the Pay As You Earn Initiative.

By comparison, the Biden administration’s plan is a major departure from Obama’s more modest and measured approach to student debt. While it would certainly be popular with many of the people who have $10,000 of their student debt forgiven, public opinion is quite divided over how to handle college student debt.

CNBC national poll conducted in January of 2022 found that 34% of respondents supported loan forgiveness for all student loans. Only 27% of respondents opposed student loan forgiveness entirely. However, 35% of respondents supported a middling approach, preferring loan forgiveness only for those “in need.” 

Supporters of student loan forgiveness for those in need may be pleased to hear that President Biden’s proposal is reportedly going to be means-tested, with individuals eligible for student loan forgiveness if they have an income of less than $150,000 ($300,000 for couples).

The Washington Post editorial board notes some of the problems with that cut-off:

These provisions, while welcome, would not stop the policy from becoming yet another taxpayer-funded subsidy for the upper middle class. The president’s means test would be almost useless, as some 97 percent of borrowers would still qualify for forgiveness. The Committee for a Responsible Federal Budget, a nonpartisan watchdog, estimates that such a plan would cost at least $230 billion, that 71 percent of the benefits would flow to those in the top half of the income scale — and that a quarter of the benefits would go to the top 20 percent. Even this does not express fully how regressive the policy would be, because many recent graduates from medical, law and business schools would qualify for forgiveness even though their lifetime income trajectories don’t justify it.

Similarly, The Wall Street Journal has reported that more than 40% of all student loan debt is held by individuals with advanced and lucrative degrees, such as doctors and lawyers. 

Only one-third of Americans have bachelor’s degrees. These individuals are statistically likely to earn more than the two-thirds of Americans who don’t have those credentials.

This means that many taxpayers nationwide, 85% of whom do not have student loan debt, would now be paying off the student debt of their college-educated peers who, in many cases, enjoy greater affluence because of their college degrees. 

Importantly, this loan forgiveness proposal does not actually address the major problem of rising college costs. Biden’s plan would likely only exacerbate what many have labeled the student debt crisis. 

The American Enterprise Institute’s Beth Akers points out that there will definitely be a change in borrower behavior after any sort of debt reduction. She wrote

“Economically rational people will respond to that dynamic by choosing more expensive programs of study and borrowing more than they would have otherwise. The result: a pool of outstanding student debt growing even more quickly than before.”

This means that Biden’s proposal would incentivize future students to invest in riskier loans under the hope or assumption that their loans could later be forgiven. Such a plan is a disaster in the making that, over the long-term, could significantly expand Americans’ already ballooning student loan debt.

In fact, even if President Biden does reduce student loan debt by $10,000 per borrower, the Committee for a Responsible Budget reported that the total student loan debt would return to its current level in just three years, assuming no change in borrower behavior.

Instead of debt reduction, policymakers should consider reforms that have a lasting effect and address the rising cost of college. Extricating the federal government from the student loan business altogether or placing strict annual and lifetime caps on federal student loans could help encourage universities to stop hiking their costs.

At the end of the day, any sort of student loan forgiveness is a bad policy since it does not hold individuals accountable for their financial decisions. In fact, it would represent a massive betrayal of public trust. Many people worked to pay off their student loans. Others chose less expensive colleges to avoid student debt. Some people didn’t go to college at all because they decided they couldn’t afford it.

It may be well-intentioned, but President Biden’s student loan forgiveness plan is a recipe for disaster. It would potentially encourage bad borrowing behavior going forward. It would disadvantage those who made significant sacrifices to avoid or minimize their student debt. And, perhaps worst of all, it would force American taxpayers who didn’t go to college to pay for student debt they chose to not accrue and from which they will not benefit.


Biden Is Clueless About Inflation

The president's $5.8 trillion budget shows he wants more of the same government spending that is already sending prices through the roof.

By NICK GILLESPIE AND REGAN TAYLORReason

“My dad had an expression,” said President Joe Biden as he announced his budget plan for FY 2023. “Don’t tell me what you value, show me your budget, and I’ll tell you what you value.”

So at the very moment that we’re experiencing the highest inflation in 40 years, what does Biden value? The same sort of government spending that is already sending prices through the roof.

You’d figure that with Covid receding, debt rising, and a tidal wave of unfunded liabilities staring us right in the kisser, Biden would take the opportunity to radically reset the federal government’s balance sheet. Instead, his budget plan could be titled Rearranging Deck Chairs on the Titanic.

The president wants to spend $5.8 trillion, which would include jacking spending on defense, education, and police. He talks about levying a controversial—and probably unconstitutional—wealth tax on billionaires to help pay for it all but still expects a budget deficit of $1.2 trillion (see Table S1 in Summary Tables)! If you’re going to tax unrealized capital gains, President Biden, at least spend it on something pretty!

It’s debt-financed spending that helps spur inflation in the first place. Rather than cutting spending and reforming entitlements, the government borrows and prints money so it can keep giving more goodies to its favored citizens. You get more dollars chasing the same amount of goods, and that leads to price hikes.

Meanwhile, at least a dozen states—including such far-flung places as California, Georgia, Hawaii, and Maine—are thinking about giving residents money to spend on things like gas, the price of which has gone through the roof. “Direct relief will address the issue that we all are struggling to address,” says California Gov. Gavin Newsom. “That’s the issue of gas prices, not only here in our state, but of course, all across this country.”

Is he serious? Doling out tax dollars to alleviate the pain of inflation is like drinking a beer in the morning to ease your hangover. It’s only setting up the next binge.

Federal Reserve Chairman Jerome Powell has announced a series of interest rate hikes to help tame inflation, but in a recent speech, he made no mention of the increase in the money supply measured by M2, which has risen by a record 41 percent in two years, or of the Federal Reserve’s holding of U.S. debt, which has jumped $3.5 trillion over the same time period.

Powell’s interest rate hikes will be small enough that it’s unclear whether they will have much impact. Back in the 1980s, Fed Chairman Paul Volcker allowed the fed funds rate to more than double in less than two years’ time to over 20 percent, which helped kill inflation but also caused the most severe recession since the Great Depression.

According to recent conservative estimates from the Congressional Budget Office, as the federal budget grows, the cost of paying interest on the debt will keep increasing until it accounts for about 24 cents of every dollar spent by 2050. And that’s assuming interest rates will remain historically low.

So even moderate increases in the fed funds rate would push the cost of servicing the debt much higher, causing the government to borrow more money and kicking us into a vicious cycle of economic despair.

Biden can talk a good game about “returning our fiscal house to order,” but it’s clear he doesn’t understand why prices are going up—and that his policies will keep them high for the foreseeable future. That might cost Democrats control of the House and the Senate in the fall and perhaps Biden the White House in 2024.

That will be too bad for him and his party. But his unwillingness to confront massive spending and debt is going to cost all of us a lot more than that.


Biden doubles down on Title I funding increase in 2023 budget proposal despite program’s poor record

The administration wants to double the funding for a federal program that has failed in its aim to close achievement gaps between low-income and higher-income students.

By Aaron Garth SmithReason Foundation

Biden doubles down on Title I funding increase in 2023 budget proposal despite program’s poor record
Oliver Contreras/picture alliance / Consolidated News Photos/Newscom

This week, President Joe Biden released his $5.8 trillion budget proposal for 2023 which included a plan to more than double Title I education funds for low-income students. Biden’s 2022 budget proposal included the same plan to double federal Title I spending, but in the end, Congress only approved a 6% increase, about $19 billion less than what the administration requested. 

While Congress is equally unlikely to pursue the president’s proposal this year, it’s important to note why doubling down on Title I funding would be such a flawed strategy. Research consistently shows the program, intended to provide federal funding for schools with higher percentages of children from low-income homes, has failed in its aim to close achievement gaps between low-income and higher-income students since its inception in 1965 as part of the Elementary and Secondary Education Act. For example, a study by researchers at George Mason University concluded: 

“Given the modest evidence on academic gains and gaps closure attributable to Title I, and considering that the program costs about $15 billion per year, we conclude that Title I compensatory program has been largely ineffective in accomplishing its goal of closing the achievement gaps between disadvantaged and non-disadvantaged students.”

The ineffectiveness should come as no surprise to those familiar with how Title I works. After Biden proposed the 2022 Title I windfall last year, my colleague Christian Barnard and I highlighted just a few of the program’s faults in National Review:

“The current formulas are riddled with complexity, including political provisions that have nothing to do with students’ needs. For example, states are guaranteed a minimum amount of funding even if their share of Title I–eligible students doesn’t warrant it. As a result, Title I dollars are delivered like buckshot, ranging from Idaho getting $984 per eligible student in 2020 to Vermont getting $2,590 per eligible student — 163 percent more per pupil than Idaho. Title I spending needs to be fixed, not increased.”

Keep in mind that President Biden’s Title I proposal comes at a time when many public schools are already flush with cash, thanks to $190 billion in federal COVID-19 relief funding that is supposed to prioritize students in high-poverty school districts. Not only that, but public schools are also facing sharp enrollment declines, meaning the budget proposal calls for spending more money on fewer kids when K-12 spending is already at record levels. 

Policymakers should be skeptical of continuing to pour more money into a broken federal program. Instead, they should pursue reforms that make Title I dollars flexible, so they support giving families more opportunities and the ability to customize their education. For example, Congress could update the program’s allocation rules and ensure the aid follows students to their public or private school of choice.

Lawmakers could also overhaul the program’s complex web of formulas and non-transparent compliance rules that contribute to school districts’ ineffective spending of the federal funding.

There are a lot of needed reforms to reduce achievement gaps and improve outcomes for low-income students, but pouring more money into Title I isn’t one of them.


New Budget Reconciliation Resolution Portends Dangerous Debt Trends

The resolution predicts the national debt will reach $41 trillion in 2030.

By Marc Joffereason foundation

Congressional Democrats are currently using the budget reconciliation process to advance President Joe Biden’s $1.9 trillion COVID-19 relief and stimulus measure, the American Rescue Plan. The budget reconciliation process can be used to move federal spending, debt, and budget bills more quickly through the legislative process.

Friday, Senate Democrats used this process to approve a concurrent resolution that calls for a $3.8 trillion federal deficit this fiscal year followed by a $1.5 trillion deficit in 2022. Committees in the House and Senate still need to draft the actual coronavirus stimulus legislation but the resolution, which also includes 10 years of projected federal budget data, forecasts the national debt reaching a total of $41 trillion in the 2030 fiscal year. The national debt is currently over $27 trillion.

Because the national debt includes intragovernmental borrowing—money that the federal government owes to itself—it is a less useful measure of overall federal indebtedness than debt held by the public. Debt held by the public consists of all Treasury securities held by individuals and organizations that are not part of the federal government. Much of the debt held by the public has been purchased by the Federal Reserve, which is technically not part of the federal government. The budget anticipates this debt will rise to $36.5 trillion in 2030.

It is possible to compute projected debt-to-gross domestic product (GDP) ratios by dividing the publicly held debt projections from the Senate resolution by the Congressional Budget Office’s new GDP forecasts, which were released on Feb. 1.

The results of such a comparison are worrying. As shown in Figure 1, by the end of the current fiscal year, publicly-held debt as a percentage of GDP is forecast to eclipse its previous peak of 106 percent reached just after World War II. The ratio continues to rise gradually through 2030 when it is expected to reach 115 percent.

Figure 1: Federal Debt Held by the Public As a Percent of GDP

As the chart shows, there was a large uptick in recent years, with President Donald Trump adding nearly $8 trillion to it during his four-year presidency.  And these projections for future budgets through the 2030 fiscal year could be underestimating the debt, as the report assumes the federal government will make an unlikely return to budgets with sub-trillion-dollar deficits in 2024, 2026, and 2027.

The debt forecast also does not include the impact of potential new spending, like the infrastructure package President Biden has called for, which Congress may attempt to pass through a second budget reconciliation.

While debt-to-GDP ratios in excess of 100 percent may be manageable in an environment with low interest rates, if interest rates spike upward then debt service costs could quickly crowd out other federal spending and economic activity. In the most extreme cases, spiraling debt could eventually help cause a sovereign debt crisis like those seen in Argentina and Greece in recent years.


Upgrading Our Military’s Heavy Vertical Lift Capability

By George Landrith

By George Landrith • RealClear Defense

It is time to upgrade our military’s heavy-lift helicopter capabilities. The current workhorse, the CH-47 Chinook, has served our country since 1962. Despite its age, the Chinook is still the most capable heavy lift helicopter on the planet — flying at almost 200 miles per hour which is roughly the speed that the Army wants its next-generation Scout aircraft to fly. Our allies use the Chinook as well — precisely because of its utility and capability. 

Over the years, the Chinook has been upgraded and new technology built in.  As a result, our allies use the Chinook because it is a highly capable platform, and it is the world class heavy lift helicopter. However, the military’s needs have grown, and additional capabilities are needed. The question is how to most effectively and efficiently meet those needs. 

Given the Chinook’s inherent strengths and capabilities, the wisest approach is to update and upgrade the Chinook so that it can increase payload, range, and other vital capabilities. With the right upgrades to the drivetrain, rotors, and other systems, this capable and proven aircraft will continue to be the world class heavy lift helicopter platform for decades to come. Following this approach means our heavy lift needs are amply met and at a much lower cost — which means we also have available resources for other crucial national security needs. That’s a win-win.

However, recently, Army Secretary Mark Esper made remarks that suggested he wasn’t interested in upgrades, but would instead start over from scratch. Sometimes starting over from scratch makes sense. But often it doesn’t. This is one of those times where starting from scratch will waste taxpayer dollars and leave our military in a lurch while a brand new helicopter is developed and produced at a much higher initial cost and increased sustainment costs.

If the Pentagon starts over from scratch, the new helicopter fleet will not be available to our warfighters for another 30 to 40 years or longer. In contrast, an updated and upgraded Chinook is already in the works and can be rolled out relatively rapidly and at a much lower cost. This approach would give our military the world-class heavy lift helicopter it needs going well into the future, and it would save money so that other critical military needs are not neglected.

The Chinook can carry dozens of fully equipped infantry or special operators. It can transport 10 tons of supplies and equipment.  It can even carry the new Joint Light Tactical Vehicle (which replaces the older up-armored Humvee and provides a more capable and survivable vehicle) or a 155m howitzer in a sling below the aircraft. Cost effective upgrades and updates can increase payload, range, and other important capabilities. All of these upgrades can be done at a fraction of the cost of simply starting over. 

Special operators who fly the most dangerous and demanding missions in the Army swear by the Chinook and trust their lives in it. Even Espers, while signaling he wants to move on, admits that the Chinook  “is a very good aircraft” and that it should continue to be used by our special operations forces. He even admits that perhaps the future is simply “a version of the [Chinook]. I don’t know.” Clearly, there’s nothing fundamentally wrong with the Chinook as a platform. It is battle tested and battle proven. 

The wise choice would be to update and upgrade the Chinook — that would give our warfighters the capability they need and do so in the most efficient way possible. That means other mission-critical tools required by our warfighters can also be afforded. 

The truth is that the Chinook can continue to serve American warfighters with the right updates and upgrades.  And these updates are already in the works. It would be foolish to shut that down and waste money by starting over. This doesn’t require much imagination. With a new drivetrain, upgraded and redesigned rotors, and other new or upgraded systems, the lift capability, range and speed, can all be increased — even beyond its current world-class capability. This makes sense for the warfighter and the taxpayer. Esper would be wise to pursue the truth that even he admitted — our future heavy-lift helicopters “may be a version of [the Chinook.]”

In a world where the government needs to do more with less, upgrading the Chinook makes a lot of sense. This will give our warfighters the greater range, speed, and payload capacity that will be needed in the future.  And while achieving all of these milestones, it will keep both production costs and sustainment costs lower. Ditching the Chinook and starting from scratch makes no sense at all — either for the warfighter or the taxpayer.


It’s A Shutdown, Not Armageddon

Investor’s Business Daily

The media and the left are playing up the economic damage from the shutdown. No doubt, there will be some disruption. But it won’t be economic armageddon, not by a long shot.

Fears of shutdowns at airports and national parks have been prominent in media coverage. No doubt, some will be inconvenienced.

But will it lead to an economic meltdown, as some have suggested? Not likely.

Let’s start with a few facts. Shutdowns have occurred before, most recently in 1995 and 1996, and in 2013. In each case, these relatively short shutdowns had minimal economic impacts. Continue reading


Case for continuing the ISS

By Peter RoffNews Herald

The highly successful International Space Station (ISS) is in danger of going dark thanks to budget cutters who don’t see the value in maintaining a continually operating, orbital research platform operated in the interests of the public good.

Since the dawn of creation, mankind has been driven by the urge to explore the world around him. The quest for knowledge consumes us. We have to know if we are alone in the universe or if life exists somewhere beyond the big blue marble we call home.

We’ve looked to the heavens for ages, but only recently did we acquire the means to get there. Take the history of man, compress it into a year’s time and you’ll find that everything from the Wright Brothers to Neil Armstrong happened in a relative blink of an eye.

It really is miraculous but somehow, someway the wonder went out of it. The Space Shuttle program, while never living up to the expectations NASA and Congress had for it, nonetheless made space travel seem routine and hardly worth comment unless Continue reading


Will Conservatives Fix 1970s Budget Rules Next?

By Michael Barone • National Review

The Republicans have passed their tax bill, without a single Democratic vote, despite low to dismal poll ratings. It’s reminiscent of the passage by Democrats, without a single Republican vote, of Obamacare in March 2010.

Democrats lost 63 seats and their House majority that fall. Republicans hope they won’t follow suit. They argue, accurately, that their bill will lower taxes for almost all taxpayers and that it will stimulate economic growth, which already has risen above the growth in the Obama years.

The effects of Obamacare, in contrast, were harder to model, and some backers’ claims — if you like your insurance, you can keep it — soon were revealed as glaringly untrue. We’ll see whether the greater simplicity of the tax bill makes a difference in political fallout.

One thing in common between the two bills is that voters have seemed congenitally skeptical about the claims of the party in power. Obamacare continued to be unpopular until, presto, Donald Trump took office and Republicans threatened repeal.

Continue reading


CBO: Repealing Obamacare’s Individual Mandate Would Reduce Deficit By $338 Billion

By Ali Meyer • Washington Free Beacon

Repealing the Affordable Care Act’s individual mandate would reduce the federal deficit by $338 billion in the next decade, according to a projection from the Congressional Budget Office.

The individual mandate requires that Americans purchase health insurance or pay a penalty to the Internal Revenue Service for not having coverage. A recent Taxpayer Advocate Service report found that roughly 4 million Americans paid an average penalty of about $708 this year for a total of $2.8 billion.

The budget office predicts that eliminating the mandate would reduce the deficit by $338 billion from 2018 to 2027 and would decrease the number of those with health insurance by 4 million in 2019 and by 13 million in 2027. Even with this loss, the report says that markets would remain stable in almost all areas of the United States over the next decade. Continue reading


Take Tax Reform to the People

By Peter Roff • USNews

Serious people are starting to wonder if tax reform can pass, largely because they’re only talking to people inside Washington.

Instead they should talk to the American people. Most of them are hungry for it. A quarter of small business owners surveyed by CNBC/Survey Money said taxes were the most critical issue they currently face. Overall it’s their No. 1 concern and, since small business is the engine of growth in the U.S. economy, that’s an important consideration.

Things have improved since Election Day 2016, but the economy is still not growing like it needs to if we are to have hope of ever paying down the national debt, now equal to about one year’s U.S. GDP. Continue reading


Trump’s Drain-The-Swamp Budget Puts Lawmakers To The Test

Investor’s Business Daily

President Trump has clearly brought his business acumen to bear when crafting his first budget proposal, producing the most gimmick-free, strategic, focused — and deeply conservative — spending plan we’ve ever seen.

The White House had already revealed the basic outline of Trump’s budget plan: He intended to cut domestic program by $54 billion so he could fund a much-needed boost in military spending.

The “skinny budget” he released on Thursday provides details as to where those spending cuts will come from. Every agency except Defense, Homeland Security and Veterans Affairs is targeted for reductions that range up to 31%. Continue reading


What Real, Honest Tax Reform Will Look Like

How Congress, Trump rework the tax code without abandoning conservative principles

By George LandrithLifezette

Imagine going to your boss with your personal budget. The list would include things you want to spend money on, such as: your home, car, groceries, dining and entertainment projections, vacation plans, charitable giving goals, etc.

Now picture telling your boss he must fund your planned budget. You don’t bother to discuss your value to the company, but rather demand he fully fund your personal budget.

This is a difficult conversation to imagine because the real world doesn’t work that way. We don’t get paid based on what we want our personal budget to be, but rather the value we provide. Then based on what we receive, we budget accordingly. Yet, big government demands that it play by a different set of rules. Continue reading


CBO: Federal Debt to Hit $28.2 Trillion Over Next Decade

by Ali Meyer • Washington Free Beacon

Outstanding federal debt is projected to hit $28.2 trillion over the next decade, according to a report from the Congressional Budget Office.

At the end of this year, outstanding federal debt is expected to climb to $19.4 trillion and to rise by $8.8 trillion in the next ten years.

The federal government’s budget deficit, which is the difference between how much money the government spends and how much money it takes in through tax collection, will be $590 billion by the end of 2016, $152 billion more than the previous year. Continue reading


Feds Spent $100 Billion on Food Assistance Last Year

109,930,090 Americans participated in overlapping programs

by Elizabeth Harrington     •     Washington Free Beacon

The federal government spent $100 billion providing food assistance to Americans last year, according to the Government Accountability Office (GAO).

The lion’s share of spending comes from the food stamp program, which gave benefits to an average 46 million Americans in 2014, at a cost of $74.6 billion, according to a testimony from the GAO’s Director of Education, Workforce, and Income Security Kay E. Brown before the House Subcommittee on Nutrition Wednesday.

The national school lunch program was second, costing $11.3 billion, followed by the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) at $7.1 billion. Continue reading


The Budget Caps and America’s Security Needs

by Peter Huessy

Income inequality cash moneyThe President’s Fiscal Year 2016 Budget makes a defense spending request that exceeds the Budget Control Act (BCA) spending cap for FY16 by $35 billion with a “base” defense spending request of $534 billion, while also asking Congress for an additional $51 billion for what is known as Overseas Contingency Operations(OCO) that are, under law, not subject to the spending caps.

Of the amount requested by the President, for what is known as the “base” defense budget, $209.8 billion is for operations and maintenance (O&M), $107.7 billion is for procurement, and $69.8 billion for research, development, test, and evaluation (RDT&E).The remaining costs (largely personnel) are exempt from any cuts.

For the OCO accounts, $40.2 billion is for O&M, and $7.3 billion is requested for procurement with half of that for the US Army. Continue reading


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