Biden official concedes student loan handout plan is not financially sustainable

President Biden canceling another $7.7 billion in student debt this week. That brings the total debt canceled by the administration to $167 billion. Now CBO Director Philip Swaggel is joining me now. Thank you. First of all, thank you for being here. But secondly, how is this being paid for? Yeah, thanks so much for having me. The student loan cancellation policies announced by the administration are adding to the deficit. So they're being financed in the same way that the rest of the deficit is, you know, some mix of tax revenues and then increased debt. You know, we're selling debt both to Americans and to global investors. So taxpayers will shoulder the $167 billion in student forgiveness. That's three times the budget of the U.S. Marine Corps, by the way, and the Penn Wharton budget model is putting the cost at this for a student forgiveness at $559 billion over 10 years. Is that what we're looking at, half a trillion dollars to forgive debt for some? Yeah, that's about right in the ballpark and Penn Wharton does good work. Maybe I'll just go through some of our analysis. Well, the administration had first had one plan and since it's canceled by the Supreme Court, then they've announced two other plans. One is an income driven repayment plan and that we estimated that as costing around $260 billion. And that's for both the outstanding loans and future loans. Then they had another cancellation policy that they've announced. They haven't implemented yet, but the president has said that will in some sense replace what the Supreme Court canceled. We have that at just over $130 billion. And then they announced recently that they're going to have another $74 billion of costs from previous loans, such as the loans they've forgiven in the past were more costly than they had expected. And that's 74. So those together, 260, 130, 74, that gets close to the $500 billion figure. So he's piecemealing this together. Take a step back. Is this financially sustainable? Yeah, as you said, it's a bunch of pieces that come together and there's lots of dollars involved. There's lots of student debt still outstanding. We face a really challenging budgetary situation. It's sustainable for now. We know that at some point it's not sustainable, the trajectory we're on. And these deficit increases contribute to that. But it's not, you know, it's not like we have a crisis immediately at our doorstep. It's just a mounting crisis that over time needs to be addressed. So could there be a scenario then where we need to raise taxes to pay for student debt forgiveness? You know, at some point, the two lines of revenues and outlays, you know, spending and tax revenue, those lines have to come closer together. Right now, they're really far apart, like six percent of GDP apart. That can be done with more taxes, with more revenue. It can be done with lower outlays, stronger economic growth would help. So there's lots of ways to do it. It's just a really big challenge because the trajectory is so unsustainable. So on this vein of sustainability for the budget, you know, I've seen an analysis, your analysis that proposed the budget proposed by President Biden could save something like $1.7 trillion in deficit spending over 10 years. But that's not lowering the debt itself. At what point does the spending become a crushing weight for Americans? Yeah, that really is the challenge that, you know, it's not at any one moment, right? We as a nation have the ability to undertake more policies, even if they're financed by more deficits and more debt. We did that recently with the security supplemental, those nearly $100 billion for Ukraine, Israel and Taiwan. So we can do that. But it just makes the problem bigger and more challenging. So at some point in the future, we have to address it as a nation. I don't know exactly when, and that's part of the challenge. So paying or paying as much as we are on interest on the federal debt, the interest payment itself is more than we spend on national defense is more than we spend on Medicare. It's more than we spend on Medicaid. It's more than we spend on kids. How critical is it to get that interest payment down going forward? What kind of drag is that on the economy? Yeah, it's really it's a drag, as you said, and it's something that's rising and both because we have more debt and we have higher interest rates than we had, you know, say several years ago. And the combination of those two things means that our interest payments are up. It also means we're more vulnerable. So if interest rates were to go up for whatever reason, that means that the interest payments would it would accelerate and pose even more of a challenge. In the last 30 seconds. I want to get this in both Republicans and Democrats have passed spending bills going forward. You've testified in front of Congress, in front of both Republicans and Democrats. Is anyone listening? You know, policymakers are aware of the challenging fiscal situation. So that's the good news. There's proposals for commissions, for legislation. We at CBO are here to support the Congress. But I think policymakers recognize the challenge and we're here to support them as they address it. Philip, director of CBO. I appreciate it. Thank you for your time on all this and we'll be watching for the next time you testify.