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Paul Krugman rejected claims that President Biden’s student-debt relief plan could fuel inflation.
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The economist noted the program is small and will be more than offset by loan payments restarting.
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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.”
h/t BoatSurfer600