The American Prospect
On Wednesday, President Biden made history by announcing that $10,000 of federal student loans would be canceled for borrowers earning below $125,000 ($250,000 for families), and up to $20,000 would be forgiven for Pell grant recipients. As the Prospect’s Ryan Cooper wrote, this is a solid first step. While we would have preferred a non-means-tested program without arbitrary limits on the amount canceled, this will be a huge help for millions. Even better than the topline cancellation numbers are the proposed revisions to the income-driven repayment plan that accompanied the announcement, which will cut enrollees’ obligations at least in half.
On the whole, student debt advocates have correctly greeted the announcement with both applause and calls to go further. But not everyone’s happy.
“This announcement is gallingly reckless—with the national debt approaching record levels and inflation surging, it will make both worse,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB). She was echoing her senior vice president and senior policy director Marc Goldwein, the public face of CRFB, who has led most of its work on student debt. Goldwein opined on the issue to Vox, the Financial Times, The Hill, and more this week alone.
Goldwein is emblematic of the kinds of self-described wonks who have “well, actually”-ed student debtors to the political margins for years. He talks fast, spouts misleading statistics offhandedly in interviews, and is bemusedly dismissive of anyone with a different view. He acts like what much of the news media assumes a smart economics guy acts like. So is he right that student debt forgiveness is a mistake?
Perhaps the better question is: What does Marc Goldwein actually believe about student debt?
Wind the clocks back to November 2020. With the economy in a COVID-19-induced slump, some activists began arguing for student debt cancellation as a form of economic stimulus. Goldwein sprang into action with an analysis arguing that debt cancellation simply offers poor bang for the buck. “If you cancel a trillion and a half dollars of student debt, it doesn’t change people’s cash flow very much. It’s not the same as sending people $1.5 trillion worth of checks,” Goldwein explained on a podcast, because debtors’ loan payments come out of their paychecks over the course of years. “For every dollar that we spend on student loan cancellation, we’re maybe going to get back less than a dime in economic output,” he warned.
In short, student debt cancellation just wouldn’t stimulate the then-catatonic economy, and other policy interventions would do a better job. This argument was always a bit of a misdirection, since student debt cancellation is an executive-branch policy, meaning the president could do it at any time without needing approval from Congress. There were not many other executive action options out there with the same kind of direct impact on millions of people.
Had he wanted to, Biden could have canceled loans right after passing the American Rescue Plan without blowing any big political opportunity. Even if the stimulative effects were weak, so what? The ARP plus debt cancellation would still have provided more stimulus than just the ARP.
Economically speaking, we’re not in the COVID slump anymore. Unemployment is low, GDP is high, and the issue of the hour is inflation, which is traditionally a symptom of too much money circulation, instead of not enough. Since debt cancellation barely adds any new money to the economy, it should be a great time to cancel those loans, right?
Hang on, here comes Marc again. “Cancelling Student Debt Would Add to Inflation,” a CRFB blog post blared, arguing that “cancelling all $1.6 trillion of student debt would increase the inflation rate by between 10 and 50 basis points (0.1 to 0.5 percentage points) in the 12 months after repayment is scheduled to begin.” Goldwein opined for Inside Sources that canceling debt “will be at the cost of higher prices for everyone, higher interest rates on loans, higher tuition costs for future students, and a higher national debt left to future generations to address.”
So according to Goldwein, we couldn’t cancel student loans in 2020 because the boost to the economy would be a paltry $115–$360 billion. But we also can’t cancel student loans in 2022 because the boost to the economy would be a whopping, inflationary (gasp!) $70–$95 billion!
And that was the estimate for total debt cancellation, not the limited policy Biden has actually enacted. By CRFB’s own estimates, the $10,000 cancellation should only lead to $36 billion in new consumption. That’s the same as the GDP of Vermont, the lowest-GDP state in the union. Even if our current inflation was driven by too much demand (it isn’t), this is simply not an amount of spending worth worrying over.
I’m far from the first person to notice Goldwein’s hypocrisy. Economist Heidi Shierholz, the president of the Economic Policy Institute, tweeted back in May, citing a CRFB paper, “If student debt cancellation is not good stimulus, that means it is also not very inflationary.” She also pointed out that the current debt payment moratorium, which has been going on for two and a half years—in other words, the entire inflationary cycle—meant that “even if somebody’s debt is entirely cancelled under a new policy, their monthly costs won’t decrease relative to what they currently are. This will dramatically limit any impact on new spending and hence provide no upward inflation pressure relative to the status quo.”
CNN’s Poppy Harlow raised Shierholz’s point to Goldwein in an interview the night before Biden’s announcement, and asked if he was concerned that restarting payments could hurt Americans already struggling with inflation. “Yeah, that’s exactly what it’s going to do,” Goldwein replied. “And it’s not as if this is going to lift inflation from 8 percent to 9 percent. What this is going to do is it’s going to make it more difficult for us to get inflation down to 2 or 3 percent.” How the same policy can be too modest to increase inflation but also somehow slow disinflation is never explained.
Shierholz is the former chief economist of the Department of Labor and now runs a think tank dedicated to promoting policies that benefit the working class. If Shierholz supports a policy, that probably means that it’s good for working people. And she supports student debt cancellation.
Goldwein, however, has consistently claimed that student debt cancellation would mostly benefit “lawyers, doctors, and MBAs”—a particular trio of professions he repeats constantly instead of just saying “the rich.” That’s probably because truly rich families don’t take out student loans, for self-evident reasons; they’re rich.
The history behind this argument is also instructive. In the 1960s and 1970s, America invented a student loan system instead of guaranteeing higher education for all, both to maintain de facto segregation and entrench the arch-libertarian “economic individualism” ideology that many segregationists latched onto after Brown v. Board of Education. Demonizing highly educated people who don’t take high-wage jobs—for instance, a law student who becomes a public defender, a doctor who opens a nonprofit clinic, or an MBA who tries to revitalize a downtrodden neighborhood—is part and parcel of this. Nixon education adviser Roger Freeman warned in the San Francisco Chronicle in 1970 that the country could be “in danger of producing an educated proletariat.” Forcing the most educated into corporate jobs as the only way out of their debt burdens helps the rich to neutralize that threat.
To be clear, I do not think Goldwein is a neo-segregationist. But he is defending a system set up with those goals partly in mind.
In his CNN interview, Goldwein scoffed that “if it’s a permanent pause, it’s not student loans. It’s student grants.” And what would be so wrong with that? “Student grants” would also be a step toward more full-scale education reform. Goldwein loves to sneer that his opponents have no proposal for long-term restructuring of higher-education costs—except plenty of student debt cancellation supporters have wider-scale proposals, and CRFB does not. All they’ve got is a bunch of blogs saying debt cancellation is bad because it’ll cost the government money.
The implication that it’s unfair for the entire population, including the less educated, to make up for government revenues lost from canceling student debt also fails on multiple fronts. As tax law professor John Brooks wrote for the Prospect, that’s not how the government actually treats student loan revenues. As philosopher Olúfẹ́mi Táíwò pointed out, citizens constantly pay for government services they don’t personally use, and the anti-cancellation crowd doesn’t consider that unfair. And as polling has shown consistently for years, the public, including Republicans, supports debt cancellation. There isn’t a populist case against this policy, because debt cancellation is the populist policy. That’s why CRFB opposes it.
This leads us back to Goldwein’s deepest reason for resenting student debt cancellation: It adds to the deficit. He’s claimed repeatedly in the last few days that student debt cancellation will eliminate any deficit reduction from the Inflation Reduction Act, a bill CRFB effusively praised and which Goldwein calls “the first real deficit reduction legislation in over a decade.”
First, Goldwein is playing games with his claim. Mike Konczal and Alí Bustamante at the Roosevelt Institute expertly skewer this: It’s an accounting trick to treat all of the lost government revenue as occurring right now instead of over years of debt payments, and on that longer timeline, the IRA whips any deficit increase from canceling loans. But the broader point is more philosophical: Is it worth increasing the federal deficit to improve the lives of student debtors?
CRFB’s whole raison d’ȇtre is answering “no.” It is America’s foremost pro-austerity think tank, single-mindedly focused on keeping the federal government’s leaders, Democrats or Republicans, from ever spending money to improve people’s economic lives.
In the early 2010s, CRFB aggressively pushed the Obama administration away from aiding families hurt by the Great Recession, to the detriment of working people everywhere. MacGuineas, the CRFB president and Goldwein’s boss, played a key part in the disastrous invention of budget sequestration, better known as the “fiscal cliff.” This work was directly funded by Aetna, Honeywell, and JPMorgan Chase, one of the financial firms that caused the Great Recession and got off scot-free.
CRFB may be able to credibly claim it is beholden to neither political party if its only consistent argument is that all spending is bad. But “all spending is bad” is simply not a useful principle for assessing all policy. What we spend money on speaks to what our leaders want society to value.
For generations, our leaders didn’t value average people enjoying economic dignity, due in large part to the austerian philosophy CRFB champions. They destroyed the social safety net, shipped jobs overseas, told people to go into debt for a degree, and refused to renegotiate when all of that still didn’t grant most people economic security. Now, when debtors want to renegotiate that arrangement, Goldwein and CRFB chide that all spending is bad.
Pretending any and all spending is equally intolerable is an easy-to-universalize principle that lets you keep powerful friends in Washington, but it’s obviously a crappy moral philosophy. Is butter the same as guns? Is education the same as policing?
Goldwein’s economic arguments for preserving the status quo don’t hold water, but there’s a bigger issue: whether student debtors deserve some reparation for the rigged game they were forced into, often before they were old enough to understand it. That’s a moral question, the kind that our politics should be able to ask openly and bravely. Anyone this desperate to deflect away from it deserves a much smaller place in our body politic.