(The Center Square) – President Joe Biden touted the recently passed Inflation Reduction Act during a speech Tuesday, but analysts point to the recent student debt cancellation as an “offset” of any reduced inflation and federal debt reduction.
Biden, joined by Vice President Kamala Harris, praised spending items in the bill, pointing to deficit reductions in the legislation and overall since the COVID-era spike in relief spending.
“So I don’t want to hear it anymore about big-spending Democrats,” he said. “We spend, but we pay.”
A recent analysis from the Committee for a Responsible Federal Budget, however, found that that the cost to taxpayers to cancel $10,000 to $20,000 per borrower in student debt will more than offset the debt and inflationary benefits of the IRA.
The Congressional Budget Office said that the IRA will cut the deficit by $238 billion over the next decade.
But the CRFB estimates Biden’s debt cancellation will cost taxpayers more than double that amount, offsetting those gains twofold.
“The student debt cancellation and relief measures recently announced by the Biden Administration will cost roughly $500 billion over ten years under our estimates, wiping out the $238 billion of ten-year deficit reduction from the Inflation Reduction Act (IRA) more than two times over,” the group said. “In total, we estimate the student debt proposals will cost as much as the first 16 years of IRA deficit reduction on a nominal basis and the first 21 years of deficit reduction on a present value basis.”
The group goes on to say its analysis is likely “generous” in the Biden administration’s favor.
“Our estimates may prove overly generous, as they are based on our central estimate, do not incorporate a likely uptick in loans as a result of the new policies, and assume smooth implementation of the IRA,” the CRFB said. “Under our higher-end estimate of the student loan plan, it will consume roughly 18 years of IRA savings on a nominal basis and roughly 25 years on a present value basis. If expiring Affordable Care Act subsidy expansions were extended without offsets in the IRA, the student loan plan might consume over 25 years of the savings on a nominal basis, and it is not clear whether such a plan would ever generate enough deficit reduction to finance the student debt cancellation on a present value basis.
“In addition, as we have pointed out before, the inflationary effects of the new student debt plan will far outweigh any disinflationary effects from the IRA,” the group added.