Wednesday, December 09, 2009

Don't leave any spare money lying around; the Democrats will spend it

It should be good news that we're getting back the money that was spent on TARP. It didn't end up costing as much as originally projected, perhaps because banks weren't as enthusiastic about getting the money when they saw the strings that government attached to it, and the banks were eager to pay the money back. So we should all be happy, right?

Well, no. Instead of doing what they always swore they'd do with the money - use it to either reduce the deficit or pay down the debt, the Democrats are eager to spend it on more of the same ol', same ol' that they spent on the stimulus. In their eyes, this is just a pot of money waiting to be spent, not money that was lawfully dedicated to returning to the Treasury. So you can see what their promises are worth.

President Obama at least included some tax cuts in his proposal. But the rest of it and the plans in the House are remarkably similar to the failed stimulus package that they pushed through last year.
There's also a flood of new spending, with the amount presumably to come later from Congress (oh oh!), on highways and other public works. Perhaps you thought these "shovel-ready" projects had been included as part of Stimulus II. Alas, that was merely the sales pitch. In the event, the bulk of that money was shovel-readied to such transfer payments as Medicaid, welfare, community block grants, and cash for the clunkers who run failing public schools. This time, we're told, roads and bridges really will get the money—and you can bet they'll all be built with higher Davis-Bacon wage rates that will balloon their cost, too.
The whole shovel-ready story was really a canard that the Democrats could use to sell their stimulus package last year. But mostly the money went to the states to help them pay for all the expenses that they had committed for and couldn't pay. They won't be able to pay for it this year and so the national government will be using those repaid and unused TARP funds to help the states out again. And just as that spending didn't help unemployment last year, it won't help out next year.

Even the Associated Press notes how Obama is trying to have his cake and eat it too.
n President Barack Obama's hands, the $700 billion financial rescue fund offers a bit of bookkeeping magic: an opportunity to pay down the deficit while also spending more—thereby adding to it.

Under law, any paybacks to the bailout known as the Troubled Asset Relief Program must be used to reduce the deficit. But in an economic speech on Tuesday, the president sought to have it both ways. Increased repayments from banks to the Treasury will reduce the deficit all right, but it will give Congress the budgetary room to spend more—and the president encouraged just that.

....What's more, even under Obama's rosier expectations the $700 billion TARP would still add $141 billion to the deficit.
I guess we don't have the kind of genius to understand how the brilliant Barack Obama can both spend the TARP funds and use them to pay down the deficit simultaneously. I guess he really is magic.