Jason Furman is a senior fellow at the Peterson Institute for International Economics and a professor at Harvard University’s John F. Kennedy School of Government. He was the chair of the Council of Economic Advisers under President Obama.
So he’s a smart person, albeit a little left with a bias toward the things that the Obama Administration and the wealthy Harvard elites support.
Furman began by criticizing the proposal and outlining how, despite assertions to the contrary, it benefits America’s elites, saying, “Pouring roughly half trillion dollars of gasoline on the inflationary fire that is already burning is reckless. Doing it while going well beyond one campaign promise ($10K of student loan relief) and breaking another (all proposals paid for) is even worse. The White House fact sheet has sympathetic examples about a construction worker making $38K and a married nurse making $77,000 a year. BTW, those examples also contradict the baseline some have concocted to claim that this won’t raise inflation. The claim it won’t raise inflation is based on the construction worker going from permanently paying $0 interest to paying $31 a month at an annual cost of $372.”
You cannot argue that this will restrain demand using one baseline (interest payments halted) and then use a different baseline (interest payments restored) to discuss the advantages. That is illogical, contradictory, and unjustifiable cherry-picking, and I hope the White House refrains from doing it.
The recipients will often have greater lifetime earnings than present incomes, thus it is important to use caution when calculating all of the distributional statistics. A 24 year old making $75,000 is probably in the upper percentile for their lifetime.
The stimulus is just a 0.1 multiplier, which is rather tiny. Therefore, the impact of inflation is probably between 0.2 and 0.3pp. For a normal household, such extra expenses amount to $150–200.
The inflation rate would be greater if the boost were to meet what supporters had previously said.
That represents a very low level of inflation. However, to stop that much inflation, the fed funds rate would need to increase by 50 to 75 basis points. Will the Fed make an effort to counteract this? Or will it overlook the fast shifting financial world, as it did with the American Rescue Plan?
Finally, I don’t see how doing this unilaterally is an acceptable thing for a President to do. Many attorneys (as well as political figures) have made arguments that are illegal. I object to the President having this much unilateral power, even if it is legally lawful.
A great critique of the Biden idea to cancel student loans and terrible news for Biden since it demonstrates how even Obama supporters are turning against him.
