First man standing: Lawsuit takes aim at Biden's unconstitutional Academia bailout

Hot Air ^ | eptember 27, 2022 | Ed Morrissey

[T Ruth]

If Joe Biden’s unconstitutional appropriation of hundreds of billions of dollars for his bailout of Academia ever gets to trial, it cannot stand. Standing, however, has been the big question. In order to challenge this, a plaintiff has to show real damages. Congress could easily challenge this, but Biden’s party controls both chambers and is far more interested in ceding authoritarian power than defending Congress’ institutional authority.

Pacific Legal Foundation thinks they have unlocked the key to standing, however. They filed a lawsuit this morning on behalf of one Frank Garrison, arguing that Biden’s student-loan debt forgiveness plan will create a new tax liability where none existed for him prior to Biden’s “flagrantly illegal” actions. And, PLF argues, Biden’s action leaves their client — also an employee of PLF — no way to opt out in such a way as to remove that liability:

***

Frank lives in Indiana, which taxes the upcoming cancellation as income but does not tax his future PSLF loan forgiveness. Frank will be stuck with a tax bill that makes him financially worse off than continuing with his repayment program under PSLF. …

***

Will it work? It’s a direct harm (unexpected tax liability), it’s irrevocable if the money goes out, and Garrison has no option to avoid it .... Furthermore, PLF will almost certainly establish that others are similarly situated; perhaps this may turn into a class-action suit at some point. My guess is that a federal judge will likely allow for plenty of room to get this clearly unconstitutional action under judicial scrutiny, and that Garrison will have at least enough standing for a judge to allow the case to proceed — and to issue that first injunction quickly.

***

[T Ruth]

It's a very interesting article. I had to omit the section about the Constitutional challenge to the HEROES Act, but it's worth reading. The legal arguments are formidable.

[FlingWingFlyer]

I’m pretty sure “da Big Guy” and his idiot kid, Hunter, have the bucks to payoff all of these student loans. Fourteenth Row Joe needs to stop trying to throw the freeloaders’ bills off on the backs of hardworking American taxpayers.

[GrumpyOldGuy]

Unconstitutional? People throw that around a lot. Not sure. But it’s definitely illegal.

[GulliverSwift]

This lawsuit could actually win.

Republicans should learn from it and really go after the waste, fraud, and abuse inside colleges. It’s absurd how much money they waste. But for some reason you never hear any Republicans talking about it. Would be a perfect opportunity to go for the young people vote and also their parents who have to pay for it.

[NWFree]

President Retard will offer to pay the extra taxes with more of our money

[TexasFreeper2009]

only the congress has constitutional authority to spend money.

[olivia3boys]

He does have an option to avoid the forgiveness. After it is applied automatically, he can call up his loan servicer and ask them to adjust the account upwards again to reverse it, and they will.

[Sgt_Schultze]

The article mentions the HEROES Act which apparently transfers some legislative authority to the executive branch. That action would certainly be unconstitutional. A current Congress cannot vitiate the stipulated Constitutional authority of a future Congress, which exists separate from the current one. If this was the case, a current Congress would be MORE powerful than a future Congress, which is just a ridiculous concept. If the HEROES Act was legitimate, it would have to sunset at the end of the Congress that authorized the act.

[T Ruth]

That might be a problem for this lawsuit, but I would guess that under state law, such action would not negate forgiveness of indebtedness income. Rather, it would be a gift by the individual to the loan processer. It may also be a gift under federal law, and depending on the amount, may require the borrower to file a federal gift tax return, using up some of his lifetime gift tax exemption. That would also constitute damages that would sustain standing.

Thus, my guess is that under state law, the borrower would have forgiveness of indebtedness income followed by a taxable gift. If the state also has an estate and gift tax, that would be additional damages.

Further, I would think that if such adjustment is discretionary with the loan servicer, then the borrower cannot count on it. I would think the law would not presume the discretionary action of a private actor.

Further, would the loan processor get a windfall double payment, or would the loan processor have a duty to repay the government? If the loan processor has a duty to repay the government, it is not likely that the loan processor would undertake a lot of paperwork and unnecessary additional payment processing for no gain.

[olivia3boys]

if such adjustment is discretionary with the loan servicer

I think what will happen in this case is that the Dept of Education will give guidance to the loan servicer to adjust per borrower request. It won’t be discretionary with the loan servicer. The loan servicers are under contract to the Department and follow guidance given. They might request some kind of contract change request and more $$ but I’m sure the Department of Education will grant all that in order to make the lawsuit go away.

[T Ruth]

Could be, but I suspect the determination of whether the forgiveness is income will be made under the law of the state where the borrower resides.

But I agree that the federal government will undertake any amount of additional lawless acts to try to salvage this one.