Happy Friday, Show Mo Facts supporters! In today’s blog post, we’ll evaluate and fact-check a tweet posted on Twitter by a current U.S. representative for Missouri, Jason Smith. Smith is running for re-election in Missouri’s Eighth Congressional District, representing around 719,043 Southeast Missourians. Check out the map below to see if you live in Smith’s district and if he will be on your ballot on November 8! To prepare for the election, you can also find your polling location here!
In this tweet, Smith claims that President Biden is increasing the deficit through his student loan cancellation program which only benefits wealthy Americans.
For three reasons, Missourians must understand the real impacts of Biden’s student loan cancellation. First, Smith’s claims about the deficit are misleading. It misconstrues how the deficit functions per fiscal year. Second, student loan cancellations will directly affect low and middle-class households in Missouri. Finally, Smith is focusing on the effects of student loans on the deficit while ignoring that the Inflation Reduction Act (IRA) has caused a greater reduction in the deficit. This is important to Missourians because we all pay for bad fiscal policy. It is important that our politicians don’t mislead voters on fiscal policies simply to advance their own agendas.
Claim: President Biden’s student loan forgiveness program increased the deficit and primarily benefits the wealthy.
Fact: President Biden’s official student loan forgiveness program benefits the borrowers who need it most. While student loan forgiveness could increase the deficit, Biden’s other policies counteract it.
First, student loan cancellation, approved in 2022, cannot be blamed for last year’s deficit. The federal deficit represents the amount of government money spent minus the revenue the government made that year. Student loan cancellation cannot have caused the 2021 deficit because it was not even passed back then. The 2021 deficit was high due to pandemic-related spending. With the expiration of many COVID-19 programs, increased revenues, and reduced outlays, the deficit in 2022 stands at $1.4 trillion which is roughly half of the 2021 deficit. The graph below shows how deficit spending has increased from 2019-2021 including the tail end of the Trump presidency, while drastically decreasing by 2022. The statistics Smith used are outdated and unrelated to student loan forgiveness. So far, Biden’s policies have reduced the deficit this year.
Second, Biden’s student loan forgiveness program is targeted to assist low and middle-class income borrowers. To target low and middle-income borrowers, the program differentiates between Pell grant and non-Pell grant borrowers. Pell grant recipients with federal loans will receive up to $20,000 in debt cancellation while non-Pell grant recipients with loans will receive up to $10,000 in debt cancellation if they make less than $125,000 ($250,000 for married couples). Most students receiving the Pell grant come from households that make $60,000 or less annually. Furthermore, 87 percent of debt cancellation benefits go to borrowers earning less than $75,000.
While the accuracy of Smith’s claims regarding the effects of student loan forgiveness on the deficit is yet to be seen, it is clear that he is ignoring larger factors at play. Smith is focusing on Biden’s debt cancellation policy priced at $400 billion but is ignoring that this is paying for debt spanning over 20 years. Over the same amount of time, the IRA is projected to reduce the deficit by up to $2 trillion. Therefore, Biden’s policies overall have a net reduction in the deficit.
Let’s not forget that Republican policies can also increase the deficit. For example, Trump’s 2018 tax cuts were estimated to have increased the deficit by $1.9 trillion over 11 years. Furthermore, the Missouri GOP recently passed a $ 1 billion tax cut that drastically benefited the top 1 percent of Missourians, while only saving $10-$50 for the average Missouri family. If you want to learn more about how the Missouri tax cut affected you, check out our previous post here!
Because Smith uses information that does not properly contextualize our current situation, we rate this ad MODERATE on our Pants on Fire O-Meter. Smith is cherry-picking information to advance his claims. While he may be correct that debt forgiveness would add to the deficit, he does not give a holistic evaluation of how Biden’s policies interact with one another. The student loan forgiveness program, combined with the IRA, should reduce the deficit. As we have discussed earlier, the deficit this year is already lower than it has been over the past few years.
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