Paul Krugman rejected claims that President Biden’s student-debt relief plan could fuel inflation.
The economist noted the program is small and will be more than offset by loan payments restarting.
The Nobel laureate also questioned how the plan could trump the Fed’s efforts to curb inflation.
President Biden’s plan to forgive a portion of the student debt owed by millions of Americans has sparked claims that it will fuel inflation, which has already surged to a 40-year high this year. Paul Krugman dismissed that criticism this week, and laid out why he expects the policy to have a negligible effect on prices.
The entire student-loan program only generated $70 billion in 2019, so the debt-forgiveness plan is unlikely to have a material impact on household spending or inflation, Krugman pointed out in a New York Times column on Thursday.
“We’re talking about tens of billions a year in a $25 trillion economy,” Krugman wrote. “That’s basically a rounding error.”
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