Plus Inflationary Effects

Penn Wharton has updated its estimate of the cost to us average Americans of President Joe Biden’s (D) bailout of student loans, expanding its estimate to more than $1 trillion.

The largest potential cost-driver Penn Wharton identified is the Biden administration’s new income-driven repayment plan, which includes capping monthly student loan payments at 5% of a borrower’s discretionary income and reforming the repayment guidelines to guarantee that no borrower who makes “about the annual equivalent of a $15 minimum wage” will have to make monthly loan payments.

Others are touting the boon to our economy from all that freed-up spending those winners will be able to do, now that they don’t have to worry about paying debts.

In speaking from their Newspeak dictionary, though, the Progressive-Democratic Party politicians and their acolytes on the Left claim that that increased spending won’t add to the already burgeoning inflation our economy is afflicted with from supply disruptions and profligate spending (even for a Party administration) the Biden administration is throwing around.

Ignore what’s behind the curtain: the…intersection…of limited supply and increased spending that is inherently inflationary, especially in today’s economic environment, as anyone who’s had high school economics or who can understand a supply/demand graph knows.

Some on the Left piously intone that the bailed out students will use the opportunity to pay down the rest of their debts. Ignore what’s behind that other curtain, too, that the resulting increase in loanable funds held by financial institutions represents additional debt creation for the purchase of big-ticket items in the near- to intermediate-term supply-limited environment, which is inflationary in tomorrow’s and next week’s economic environment.

One thought on “Plus Inflationary Effects

  1. And all that elides the moral hazard – to these deadbeats (no lessons learned, either by them or by others observing their example). And government bailouts encourages lending to dodgy borrowers – the other moral hazard.

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