Friday, November 13, 2009

No, this isn't The Onion: Obama wants to use TARP to...reduce the deficit

Lost in the major headlines is something Mark Levin mentioned on his show tonight. Are we in an Orwellian nightmare, that government is now saying with a straight face that borrowed money, which already added to existing debt, can be used to reduce total debt?
White House Aims to Cut Deficit With TARP Cash
By DEBORAH SOLOMON and JONATHAN WEISMAN

WASHINGTON -- The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program -- the amount it expects to lose -- to as little as $200 billion from $341 billion estimated in August.

A $210 billion surplus in TARP funding could be used to reduced the U.S.'s towering national deficit. WSJ's Deborah Solomon says the move follows criticism of the Obama administration's approach to debt.

The idea is still a matter of debate within the administration and it is unclear how much impact it would have on the nation's mounting deficit levels. Still, the potential move illustrates how the Obama administration is trying to find any way it can to bring down the deficit, which is turning into a political as well as an economic liability.
This is all borrowed money, whether from foreign nations or the Fed creating money out of thin air. The federal government did not cut from any other spending to compensate for TARP expenditures, therefore TARP was using all newly borrowed money. The claim is that the money won't be spent, but who really believes that will happen? It will be quietly paid back to the lenders, giving Congress a mere several of weeks before they again approach that farce called a "debt ceiling"?

Let's look at the numbers. Last month, Reuters reported $138 billion left in TARP. The latest numbers I can find are from Scripps News, which agrees with the WSJ's figure of $210 billion. However, that's inflated: it's counting the expected $50 billion in repayments over the next 12 to 18 months. Sure, sure. And when you apply to a bank, hedge fund or other entity that asks for your net worth, do you think you can factor in the next year and a half of "expected income"?

The higher figure doesn't cover much past the October deficit alone ($176 billion), anyway. The national debt as of tonight is $11.99 trillion. That's 11,995.7 billion dollars. Even if this money had come from Santa Claus, it still wouldn't make a dent.

If a private company told its stockholders anything like reducing its debt via borrowed money that's part of the overall debt, any executives putting their names to those documents would be going to jail for accounting fraud. Why aren't we holding federal officials, and yes I'm including Obama, to the same standard?

The Scripps article concludes, "The whole $210 billion would probably not even cover the deficit we've run in the last six weeks but even a symbolic gesture is at least a start."

Symbolic? That's like Brad DeLong making a token gesture of dieting by ordering a burger without cheese...then adding a slice he bought elsewhere.

Finally, note that the Treasury expects that taxpayers will lose "as little as $200 billion" from TARP. So much for Bush's claims of taxpayers making a profit, and Barney Frank's own lies. Tim Cavanaugh debunked the Obama administration spin of last September, and on the flip side are absurd profit projections by the New York Times that that fool Yglesias gobbled right up.

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