In yet another blow for the Biden administration, the second quarter gross domestic product (GDP) for 2022 came in negative at 0.9% annualized. That means economic growth has contracted in back-to-back quarters, giving us a technical recession, and providing us with six straight months of negative growth. It’s the story of a failing economy unless you’re listening to the White House.
Biden said in a statement, “we are on the right path and we will come through this transition stronger and more secure.” That would be news to everyone else. American consumers, small businesses, large businesses, and economists believe a recession is here or upon us.
But there’s another clue that the economy isn’t doing well, which comes from Democrats.
Democrats think the economy is bad too.
We’re about to enter the month of August, which means there’s one month left until all student loan payments start coming due again. The federal government under Donald Trump paused all student loan payments and interest accrual at the outset of the COVID-19 pandemic. Those loans have yet to restart repayments. After punting the issue multiple times, Biden set September as the next date to consider the next steps.
Here’s the issue: if the economy were as strong as Biden claims, there would be no issue in bringing back student loan repayments. Those who have to repay those loans wouldn’t like that policy, but it would be a sign we were returning to total normalcy.
Instead, Democrats are demanding, at a minimum, that Biden extend the pause on student loan repayments. In a letter to President Biden and Education Secretary Miguel Cardona, Democrats said, “Resuming student loan payments would force millions of borrowers to choose between paying their federal student loans or putting a roof over their heads, food on the table, or paying for childcare and health care—while costs continue to rise and while yet another COVID-19 variant increases hospitalizations nationwide.”
Describing Americans as having to choose between student loans and a roof over the head is evocative. Still, it’s not the language of a strong economy.
Student loan forgiveness is the end goal.
The letter doesn’t end there, though. The Democrats add, “Moreover, resuming student loan payments at this moment would further complicate administrative actions already underway or contemplated by the Department—which could contribute to unnecessary confusion for borrowers in the upcoming months.”
“Further complicate administrative actions already underway or contemplated by the Department” is code for student loan forgiveness. Continuing the pause on student loans gives Democrats more time to push the White House to take the action they all want: forgiving most or all student loans.
Reporters for Politico got their hands on internal documents from the Education Department, which back up that assertion. According to Politico, “The documents sketch out the mechanics of how the agency expects to manage and operate a possible mass debt cancellation program on a scale that would be unprecedented in the history of the federal student loan program — if the White House were to give it the green light.”
The full scope is enormous in these documents:
Education Department officials, the documents show, are prepared to provide debt relief automatically, within several months, to several million borrowers for whom the agency already has income information. Most other borrowers, according to the documents, would apply through a form on StudentAid.gov by self-certifying they qualify for relief.
The department’s plan contemplates that all types of federal student loans would be eligible for loan forgiveness, including Grad and Parent PLUS loans as well as federal loans owned by private entities. And it also suggests that borrowers who ever received a Pell grant, financial assistance for low-income families, could receive an additional amount of loan forgiveness.
Unpopular policy by an unpopular President.
Democrats have turned into lobbyists. They are lobbying the White House to forgive billions upon billions of student loan debt. Yet these same Democrats do not want to bring that concept to a vote on the floor before the midterms.
That gives you two tells here. First, not even Democrats believe the economy is doing well. Polling supports this notion, with Democrats wanting a new Presidential candidate on the ballot in 2024. Second, this policy, which they assure us is favored, is one they don’t have the guts to vote on and try to pass with Congressional backing.
Democrats claim to care about inflation, even renaming their signature legislation from Build Back Better to the Inflation Reduction Act of 2022. But dumping trillions in new spending on top of massive student loan forgiveness is pouring more money into an economy already running hot with inflation. Even if the next inflation report cools because gas prices are lower, spewing more government spending on the issue encourages prices to go higher.
Democrats can spin the recession story all they want. Inflation is still real, negative growth is real, and forgiving all that student debt will have a real impact on inflation.