Columbia University professor and chief economist at the Roosevelt Institute Joseph E. Stiglitz suggested in The Atlantic that President Biden's student loan handouts will "actually" be good for the economy.
"We want to fight inflation and we want to keep the labor market strong. One of the most important ways to achieve both goals is to forgive a portion of student-loan debt," Stiglitz began.
"Whatever your view of student-debt cancellation, the inflation argument is a red herring and should not influence policy. Taking that logic to the extreme, canceling food stamps would do far more to reduce inflation—but that would be cruel and inhumane, and fortunately, no one has suggested doing so," he said.
He suggested the possibility that rather than worsening inflation, student loan handouts could possibly reduce that issue which has become a hallmark of the Biden economy.
U.S. President Joe Biden holds a meeting on infrastructure with labor and business leaders at the White House in Washington, U.S. July 22, 2021. (REUTERS/Jonathan Ernst )
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"A closer look at the student-debt-cancellation program suggests that the new student-loan policy may even reduce inflation; at most, its inflationary impact will be minuscule, and the long-term benefits to the economy are likely to be significant," he suggested.
Part of his argument consisted of appeals to racial identity politics.
"Given that the rapid increase in the number of small businesses—especially ones founded by Black and brown entrepreneurs—that we saw in 2021 may already be slowing down, we should be looking for ways to support that growth, not undercut it," the Columbia University professor urged.
U.S. President Joe Biden delivers remarks on the grounds of Morehouse College and Clark Atlanta University in Atlanta, Georgia, U.S., January 11, 2022. (REUTERS/Jonathan Ernst)
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He also pitched a broader "valuable economic upside" of Biden’s student loan handout.
"Studies of those student debtors who have had the good fortune to get their debt canceled by courts have found that the freedom from loan payments allows people to borrow anew and move around the country to take better jobs," Stiglitz claimed. "Because continuing to build up our labor force and help people find jobs better matched to their skills is so important, a comprehensive student-loan debt-cancellation program will have a valuable economic upside."
The professor acknowledged that "The entire system of supporting and financing higher education needs an overhaul," but suggested the quick fix for the problem at hand is Biden’s plan for a handout.
Many defenders of the handout claim it will help young adults entering the labor market, especially those looking to raise families or saving up for houses. (RapidEye)
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"[I]n the interim, we need to understand and address the immediate problem—and the Biden administration yesterday took a crucial first step by reducing the debt burden on many struggling American families," he concluded.
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