Final answer:
The Foundation for Economic Education would likely argue against canceling student loan debt, highlighting potential negative consequences such as moral hazard and inflation, and suggest focusing on the root causes of high education costs.
Step-by-step explanation:
In response to the statement made by Cam Jones that canceling student loan debt would increase the U.S. GDP, the Foundation for Economic Education (FEE) might offer a counter-argument. FEE typically promotes free-market principles and might argue that canceling student loan debt could lead to negative consequences such as moral hazard, where individuals take on more risk because they believe they will not have to bear the full cost of that risk. Additionally, FEE could point out that debt forgiveness shifts the burden from borrowers to taxpayers and could disincentivize responsible financial behavior and careful decision-making with regard to the cost and value of higher education.
Moreover, with regard to the economic impact, FEE might assert that canceling student loan debt could potentially lead to increased inflation. This could happen because wiping out the debt would likely result in a short-term consumption boost, as individuals would have more disposable income. However, if the economy is at or near full capacity, this extra spending could lead to higher prices rather than an increase in GDP.
The foundation might also suggest that instead of canceling debt, policy efforts should focus on addressing the underlying causes of high college costs and explore alternative financing models that do not involve heavy borrowing. They might cite the increase in federal subsidies like Pell Grants and the potential role these subsidies have in driving tuition costs higher, as schools may be less incentivized to keep costs down when more federal aid is available.