On Wednesday’s broadcast of CNBC’s “Squawk Box,” Professor of the Practice of Economic Policy at Harvard University and the Harvard Kennedy School Jason Furman, who served as Chairman of the Council of Economic Advisers under President Barack Obama and on the Council of Economic Advisers and the National Economic Council under President Bill Clinton stated that President Joe Biden’s student loan plan will put “upward pressure on interest rates, upward pressure on inflation,” and upward pressure on mortgage rates and that the goal of the plan is to increase consumption, which will result in those things happening.
Furman said, “Look, we have unsustainable debt, we have high mortgage rates, we have an economy that has not landed softly. This is a plan that we’ve only heard estimates for part of the cost of it, but when you take the plan as a whole, it’s likely to be 250 to $750 billion. Is that a quantitatively huge contributor to the problems I cited? No. Is it moving in the wrong direction on all of them? Yes, it is, and we shouldn’t be doing that right now.”
Co-host Becky Quick then said, “I have seen arguments out there that say, hey, what are you talking about that this costs anybody any money? All it is is we just say, poof, it goes away, nobody has to pay this, and it doesn’t result in anything.”
Furman responded, “Yeah, there [are], all sorts of magic fairy dust, pixy dust arguments out there. They’re not arguments that would get anyone a passing grade in my classroom. The goal of this is to raise consumption, and in fact, I’ve seen analysis [from] proponents of it saying this will increase consumption. Well, consumption right now is really, really strong, you make it stronger, and that’s what puts upward pressure on interest rates, upward pressure on inflation, and, of course, this gets recorded as an increase in spending, and ultimately, a higher path for the debt.”
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