Sen. Elizabeth Warren (D-Mass.) on Tuesday urged President-elect Joe Biden to cancel student debt, calling it the “single biggest stimulus” for the ailing economy, a claim economists dispute.
Speaking at The New York Times’s Dealbook Summit, Warren said that student debt cancellation was part of Biden and Vice President-elect Kamala Harris’s election mandate.
“For me it is a mandate to Joe Biden and Kamala Harris to do the things we can do, to cancel student loan debt for tens of millions of Americans, [the] single biggest stimulus we could add to the economy,” she said.
Senate Minority Leader Charles Schumer (D-N.Y.) said this week that he and Warren have a proposal to cancel $50,000 of debt through executive action.
“We believe that Joe Biden can do that with the pen as opposed to legislation,” he said.
But Biden has yet to endorse that approach. On Monday, he said he favored canceling $10,000 of debt, but cited legislation from House Democrats as the vehicle for advancing the policy. Debt, he said, was a serious problem.
“It’s holding people up. They’re in real trouble. They’re having to make choices between paying their student loan and paying their rent,” he said.
Some economists, however, are skeptical of claims that student debt cancellation is a highly effective form of stimulus, given that the vast majority of those with student debt are educated and thus have access to better-paying jobs and tend to be higher-earning.
“It’s not a great form of stimulus,” said Adam Looney, an economist at Brookings.
Interventions that target the unemployed and poorer members of society tend to be more stimulative, because lower earners tend to spend the money, juicing the economy, as opposed to saving it up.