I hope you enjoy the 31st “This Week’s Economy” episode! Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours. I would appreciate it if you would also rate and review my podcast!

Today, I cover:

• National: Economic uncertainty from dysfunction in Congress: home sales slide to the slowest since 2010, and Fed Chairman Jerome Powell indicates extended pause in interest rate hikes (click on graphic below to watch my interview on Fox Business)
  
• States: Texas continues to debate passing Universal School Choice, and data on California and New York's spending shows that increased state spending: does not necessarily decrease poverty or improve schools, and;
  

• Other: Recap of last week's excellent podcast with guest Ben Murrey from Independence Institute discussing the importance of maintaining Colorado's Taxpayer's Bill of Rights; and a sneak peek of my upcoming podcast episode with special guest Texas State Representative Brian Harrison.
  

​A year after the Supreme Court struck down President Biden’s student loan forgiveness plan, he presented a new scheme to the Department of Education on Tuesday. While it is less aggressive than the prior plan, this proposal would cost hundreds of billions of taxpayer dollars, doing more harm than good. 

As the legendary economist Milton Friedman noted, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” 

Higher education in America is costly, and this “forgiveness” would make it worse. 

Signing up for potentially life-long student loans at a young age is too normalized. At the same time, not enough borrowers can secure jobs that offer adequate financial support to pay off these massive loans upon graduation or leaving college. These issues demand serious attention. But “erasing” student loans, as well-intentioned as it may be, is not the panacea Americans have been led to believe.

Upon closer examination, the President’s forgiveness plan creates winners and losers, ultimately benefiting higher-income earners the most. In reality, this plan amounts to wealth redistribution. To quote another top economist, Thomas Sowell described this clearly: “There are no solutions, only trade-offs.” 

Forgiving student loans is not the end of the road but the beginning of a trade-off for a rising federal fiscal crisis and soaring college tuition. 

When the federal government uses taxpayer funds to give student loans, it charges an interest rate to account for the cost of the loan. To say that all borrowers no longer have to pay would mean taxpayers lose along with those who pay for it and those who have been paying or have paid off their student loans.

According to the Committee for a Responsible Federal Budget, student debt forgiveness could cost at least $360 billion. 
Let’s consider that there will be 168 million tax returns filed this year. A simple calculation suggests that student loan forgiveness could add around $2,000 yearly in taxes per taxpayer, based on the CRFB’s central estimate. 

Clearly, nothing is free, and the burden of student loan forgiveness will be shifted to taxpayers.

One notable feature of this plan is that forgiveness is unavailable to individuals earning over $125,000 annually. In practice, this means that six-figure earners could have their debts partially paid off by lower-income tax filers who might not have even pursued higher education. This skewed allocation of resources is a sharp departure from progressive policy.
Data show that half of Americans are already frustrated with “Bidenomics.” 

Inflation remains high, affordable housing is a distant dream, and wages fail to keep up with soaring inflation. Introducing the potential of an additional $2,000 annual tax burden at least for those already struggling, mainly to subsidize high-income earners, adds insult to injury.

Furthermore, it’s vital to recognize that the burden of unpaid student loans should not fall on low-income earners or Americans who did not attend college. Incentives play a crucial role in influencing markets. 

By removing the incentive for student loan borrowers to repay their debts, we may encourage more individuals to pursue higher education and accumulate debt without the intention of paying it back. After all, why would they when it can be written off through higher taxes for everyone?

The ripple effect of this plan could be far-reaching. 

It may make college more accessible for some, opening the floodgates for students and the need for universities to expand and hire more staff, leading to even higher college tuition. This perverse incentive will set a precedent that will create a cycle of soaring tuition, which would counteract the original goal of making higher education more affordable.

While the intention behind President Biden’s student loan forgiveness may appear noble (in likelihood, it is a rent-seeking move), the results may prove detrimental to our nation’s economic stability and fairness. And if the debt is monetized, more inflation will result.

Forgiving student loans will exacerbate existing problems, with the brunt of the burden falling on lower-income Americans. Instead of improving the situation, it will likely create an intricate web of financial consequences, indirectly affecting the very people it aims to help. But that is the result of most government programs with good intentions.

Originally published at Econlib. 

Check out the highlights from my recent segment on Fox Business.

Former Office of Management and Budget chief economist Vance Ginn and Slatestone Wealth chief market strategist Kenny Polcari analyze how the Middle East conflict and House speaker standstill impact markets.

Full segment on Fox Business here. 

​Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours.
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You can find direct links to follow my work at the buttons at the end of this post. I would appreciate it if you would also rate and review my podcast!

​Ben (bio) and I discuss:

• What he learned about the transactional nature of relationships on Capitol Hill during his seven years working in D.C. alongside U.S. Sen. Ted Cruz (R-TX).
  
• What Republicans can learn from Democrats about collaborating together for the greater good.
  
• How Colorado's Proposition HH is on the ballot now would reduce tax refunds, further weaken the Taxpayer's Bill of Rights (TABOR), and do little to reduce property taxes.
  
• Why legislators should instead pass Sustainable Colorado Budgets and use surpluses to reduce and eliminate total income taxes.
  

​Please subscribe to my newsletter if you haven’t already, and subscribe to my podcast wherever you get yours.

You can find direct links to follow my work at the buttons at the end of this post. I would appreciate it if you would also rate and review my podcast!

​Today, I cover:

• National: The unfortunate human and economic costs of the Hamas-Israel war, Republicans nominate new US House speaker, latest CPI report shows that inflation remains high:
  • And will until the Fed cuts its balance sheet and Congress spends less, and real average weekly earnings decline:
• States: Texas began a special session this week in efforts to tackle School Choice, vaccine mandates by businesses, and border security, and the Legislature is considering a large education funding increase which should be rejected and just pass Universal School Choice
  
• Other: I appreciated the opportunity to speak as a keynote speaker at East Texans for Liberty meeting. Please reach out to me if you’d like for me to speak at your event.
  • Don't miss my other latest outreach efforts with an interview on the Cato Daily Podcast, new commentary published by American Institute for Economic Research on Hong Kong's declining economic freedom, and recent essay at Online Library of Liberty on what Homer taught us about the perils of big government.