December 2009

The New York Times released new estimates from the Treasury Department about the extent of the government’s exposure from the TARP programs.

• Treasury Department loans under the TARP program now total $370 billion.
• Of that amount, a net $328 billion is projected to be recovered. That includes profits on TARP investments. The losses are centered on the TARP bailouts to GM, Chrysler and AIG. Bailouts to banks are expected to be net positive (more gains than losses).
• The improved picture lowers the estimated deficit for the fiscal year by $200 billion.
• Most of the exposure comes from the TARP I program from October 2008. Of the additional $500 billion in authority granted in February (TARP II), only $7 billion has had to be expended.

The economy is growing. That’s evidence enough for me that the government’s interventions, TARP included, worked. Even those who reject this notion that the TARP program seems to be succeeding must agree that TARP didn’t destroy our economy, as was predicted by some Republicans. If we’re talking about silencing the critics of TARP or the stimulus plan, or Geithner, then perhaps a $4 Trillion rebound in the S&P 500 is enough to prove success, but for me it’s still too early to be popping the champagne or doing victory laps just yet. That’s not to take anything away from the fact that markets are heading in the exact opposite direction of what many hardline GOP wingnuts had predicted (or in some ways, even hoped for). For the most part I am dismissive of those who see the TARP and the stimulus as socialistic economic disasters. In fact, I think it is remarkable that our government has managed to resolve the credit crisis and turn the tide on job losses and recessionary contraction — all without increasing the rate of federal deficit accumulation.

That being said, our great economic liability is federal debt. People say that lower taxation is the fuel the economic engine needs. I say, if the government weren’t sucking $12 trillion of capital out of the economy in the first place, we wouldn’t need more fuel.
This also is why this isn’t an Obama problem. Deficits have not increased under Obama. Deficits have increased because politicians of both parties — including Republicans beknighted Reagan — have an addiction to government expansion, and occupation of foreign countries, and because Republicans and Democrats can’t put away the Bank of China Credit Card and continue to pay for our government spending through debt rather than real time taxation. The culture of debt means that we borrow the funds needed to add the Americans with Disabilities Act, and No Child Left Behind, and Medicare Part D, and wars in Afghanistan and Iraq, and so on and on.

Simple answer: Demand taxation. Demand an end to deficits and debt accumulation.

You think this is nuts? Fine. Just remember this when federal debt hits $15 trillion… $20 trillion… $30 trillion……….