Is Biden’s student debt handout worth it? Nobody knows

Sept. 7, Michael L. Davis, economics professor at the Cox School of Business at SMU Dallas,  for an op-ed questioning the math and rationale behind President Biden’s student loan forgiveness initiative. Published in FoxNews online under the heading Is Biden’s student debt handout worth it? Nobody knows: https://fxn.ws/3TQYEHR

President Joe Biden’s proposal to forgive a huge chunk of student debt isn’t a done deal. There’s a serious question about whether this is the sort of thing a president can do on his own. Those of us who endured elementary school civics classes (or, even better, learned about such things from watching “School House Rock”) might have the quaint idea that such epic levels of spending — and make no mistake, this is epic spending — require more than the whim of the president. Doesn’t all that stuff they taught us about checks and balances, Article I of the Constitution, and the need for revenue bills to originate in the House of Representatives mean anything at all?

The data on Biden’s student debt handout is a hot mess

Yeah, maybe. But put all that aside for a moment and ask a slightly different question: who has “standing” to bring a lawsuit challenging the president’s authority?

Courts aren’t there to hear you complain about the government. To get a judge to say that the government can’t do something, you’ve got to show exactly how that something will cause you harm. If the government wants to send you to jail or impose a big fine, you’ve got the standing to get into court.

But what if you’re part of the gobsmacked majority — one of the 330 million Americans who still have to pay your debts — how do you show what this will do to you? Yes, of course, this is going to cost you money. But in what form will the bill come due? Who can prove they have standing to sue?

Nobody knows.

Of course, small armies of lawyers are mustering to do battle over the question. But let’s leave them to their briefs and billable hours and ask a more important issue: If we can’t figure out what something this big is going to do to us, how can we know whether it’s worth doing?

Politicians know, they can’t quite get away with saying “Don’t worry about the price tag, this is going to be great! Trust me.” And so this president, as they all do, has teams of credentialed people whose job it is to — let’s try to be kind — make stuff up.

Team Biden puts the cost of debt forgiveness at about $240 billion over the next 10 years. However, the independent research group at the University of Pennsylvania who runs the highly respected “Penn-Wharton Model” put the cost at somewhere between $519 billion and $605 billion. The Wharton group also points out that what happens in the future — for example, how many people take out more loans that will also be forgiven — could drive the cost up to over $1 trillion. What’s the right number?

Nobody knows.

What’s worse, we’re not going to get a nice orderly bill for all of this spending. We know spending billions for debt relief means combination of reduced spending for other things, higher taxes and more borrowing. But how much of each?

Nobody knows.

As if that weren’t bad enough, we have only the vaguest idea of who will benefit from debt relief. At least 30 million people may be eligible — or maybe 45 million, nobody knows. They all have their own story. Some debt relief will go to people who live below the poverty line, some relief will go to people — say medical students just finishing up residency — whose education will soon put them in the economic elite. But how many of each?

The data is a hot mess. The Biden administration, citing some sketchy “Department of Education Analysis,” wants you to believe that 87% of the debt relief will go to people making less than $75,000. The much more believable Wharton analysis indicates that only about one-third of the debt relief will go to people earning less than $50,000.

A team of researchers at the University of Chicago published a study last year that took a slightly different approach. They looked at how debt relief would impact people in different income groups. Their results showed that in the bottom 10% of all earners, the $10,000 in debt relief would actually amount out to about $400 per person. People in the top 10% would benefit an average of about $1,400 per person. That’s not surprising when you remember that people who don’t make much money don’t have as much student debt in the first place and what debt they do have is often forgiven by programs already in place.

Different studies, different results. I think the Chicago study is more believable (they have better data and more finely tuned models) but when you ask the question of who really benefits, we get the same answer: Nobody knows.

Of course, there are people seriously burdened by student debt. And there are serious people who think government should help them out. But before we look to Big Government to solve a problem, can’t we ask Big Government to answer our questions with something other than “Nobody Knows”?