Forbes gets what Goldman Sachs said wrong to prop up student loan forgiveness

August 25, 2022

By Tim Worstall

Forbes fails its readers, and what makes it painful is that it’s on the economic issues that Forbes is supposed to be informing them about.

This is Forbes’ area of specialist knowledge. The claim is that the student loan forgiveness program won’t increase inflation. They quote Goldman Sachs as saying that – except the actual Goldman Sachs quote says that student loan forgiveness will increase inflation.

The Forbes claim is, according to the headline, “Student Loan Forgiveness Plan Won’t Make Inflation Worse—Even If It Adds $400 Billion To Deficit, Goldman Says” — but that’s not what Goldman says at all.

Rather, Goldman says that the loan forgiveness will increase inflation by about 0.1%. We all agree that’s not very much but it is something. What Goldman then goes on to say is that:

As a result, the forgiveness would have a “similarly small” effect on inflation—one that would be “more than fully offset” by a separate provision that would end the pause on payments that has been in place since the start of the pandemic in January, the team led by chief economist Jan Hatzius said, noting that the overall effect would help lower inflation “slightly.”

Now those are two different things. Restarting payments – well, did anyone think that there would never again be any collection of Federal student loan debts? Of course not – so lumping in the effect of those repayments starting again with the inflation effect of the loan forgiveness isn’t right.

Note that this is true whether we agree, or don’t, with what Goldman thinks will happen. This is what Goldman is saying. Something that was obviously going to happen at some point – repayments restarting – will lower inflation. That’s likely true by the way. But to use that to say, as Forbes does, that this means the loan forgiveness will lead to no inflation is wrong. Loan forgiveness will, as it increases the deficit and provides stimulus to the economy, produce inflation in the current economy. As Goldman says it will.

Forbes describes itself as “the capitalist tool” and ranks No. 19 in U.S. news and media publishers. It gains some 98 million visits a month as a result. The importance of it is that it’s one of the very few supposedly pro-business outlets – therefore what it says about matters economic and business matters. For what better response than a “But look, Forbes says so!” if there is some argument to be had?

That’s why Forbes has to be as Caesar’s wife, beyond reproach. Student loan forgiveness will increase inflation. This still leaves open the idea that it’s a good idea, a bad one – opinions there will differ – but the reporting of the effects has to be straight, especially from outlets like Forbes.


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