The Penn Wharton Budget Model released its cost estimate for a few different iterations of student-debt forgiveness today. It estimates that over the ten-year budget window:
- Forgiving $10,000 for each borrower with income below $125,000 would add $330 billion to the deficit.
- Forgiving $10,000 for each borrower with no income cap would add $344 billion to the deficit.
- Forgiving $50,000 for each borrower with income below $125,000 would add $933 billion to the deficit.
- Forgiving $50,000 for each borrower with no income cap would add $979 billion to the deficit.
Even the cheapest of those options would wipe out the purported deficit reduction from the Democrats’ reconciliation bill, the so-called Inflation Reduction Act. The Congressional Budget Office estimated that law would reduce the deficit by $305 billion over the next ten years.
That deficit reduction was based on some gimmicks to begin with. First, 93 percent of the reduction was scheduled to happen in the last five years of the deal, with spending largely holding steady over the first five years. Congress has a funny way of never doing spending cuts in the future when it gets spending in the present. Second, the law contains an Obamacare expansion that is funded for only three years, but lawmakers fully intend to keep it around after that, which would add hundreds of billions to the cost of the legislation.
But the CBO’s job is to evaluate what Congress gives it in accordance with transparent scoring rules. According to those rules, and according to what Congress wrote, the savings were $305 billion over ten years.
Which makes the student-loan scores from the Penn Wharton Budget Model all the more stunning. Even a relatively limited form of student-loan forgiveness would likely fully wipe out the savings from the cost estimate that gives full credit to the Democrats’ gimmicks.
The idea that Democrats somehow turned into deficit hawks was always ridiculous, but to fully undo the supposed deficit reduction just over a week after the reconciliation bill was signed into law shows true shamelessness.