Why is there such a backlash against such a (previously) very popular policy? Biden did, in fact, run for president on the promise of such debt relief. The elephant in the room is... inflation!
The US and the rest of the world have been dealing with the worst inflation in something like 40 years, and a lot of people see this move as being inflationary.
Leading economists like Paul Krugman weighed in on the inflationary impact of this move.
"The argument 'but it will be inflationary' seems so obviously wrong, so
inconsistent with the math, that, as I said, it's baffling," Krugman wrote. "Maybe people who oppose this move on other grounds are just going for
the cheap shot?"
Who's Getting The Debt Relief?
President Joe Biden made the following comments earlier today regarding the unprecedented debt relief package.
"Using the authority Congress granted the Department of Education, we
will forgive $10,000 in outstanding federal student loans. In addition,
students who come from low income families, which allowed them to
qualify to receive a Pell Grant, will have their debt reduced to
$20,000.
Both of these targeted actions are for families who need
it the most, working and middle class people hit especially hard during
the pandemic making under $125,000 a year. You make more than that, you
don't qualify.
No high income individual or high income household
on top of the 5% in the top 5% of incomes, by the way, will benefit from
this action, period. In fact, about 90% of the eligible beneficiaries
make under $75,000 a family."
Deflation Not Inflation
In recent months demand has been falling off a cliff. The real worry going into 2023 will be deflation not inflation. This debt relief package will help to mitigate the coming deflation.
The debt relief package is a small portion of the total student loan debt so the inflationary impact will be small.
And the people who receive it are more likely to spend it so it will be more stimulating for the economy as it begins to slow next year.