Thread by @paulkrugman

There are arguments against Biden's student loan forgiveness plan — is this the best use of ~$200 billion? Is it fair to those without such debt? Also arguments for, which I'll have more to say about. But all the talk about inflation is fairly baffling, for two reasons 1/

First, the US is a very big economy. Any impact of this forgiveness on spending will be small relative to GDP. If you want to compare with the Rescue Plan, this is roughly 1/10 the size, with effects likely to be spread over multiple years. Just not big in macro terms 2/

Second, to the extent that deficit spending was inflationary in 2021, it was because the Fed was accommodative — complacent about inflation (yes, like me) and unwilling to raise rates. These days, any expansionary impact, if there is one, will be offset by monetary tightening 3/

The argument "but it will be inflationary" seems so obviously wrong, so inconsistent with the math, that, as I said, it's baffling. Maybe people who oppose this move on other grounds are just going for the cheap shot? 4/

Again, I can see reasons to oppose this move, although you want to compare it not with what we should do ideally but with *what Biden can actually do*. But spare us the inflation scare talk 5/