First, let me take us back, to a dark time just over a year ago, when the financial markets were collapsing, and Treasury Secretary Hank Paulson went hat in hand to Congress, begging $700 billion for a program called TARP. On September 24, 2008, Paulson described the program this way:
The $700 billion program we have proposed is not a spending program. It is an asset purchase program, and the assets which are bought and held will ultimately be resold with the proceeds coming back to the government. Depending on the rate at which our housing market and economy recover, the loss to the taxpayers should be much less than the purchase price of the assets. And those purchases will be spread out over time, occurring as warranted by market conditions.
Flash forward fourteen months and that same program is being described by another administration as something a lot more like a spending program, from which unspent or returned funds can be counted as savings. Here is what a senior Obama administration official said this morning to explain how Obama plans to pay for his new stimulus efforts, which he announced today at the Brookings Institution. “Because the cost of TARP is going down so far, we can do these proposals and have more fiscal room,” the official said. “We have space to do a set of jobs proposals and have a lower deficit than we were expected [to have].”
Under the law authorizing TARP, Obama cannot just take money out of the program and spend it on the things he thinks will help create more jobs, like more money to weatherize homes, build roads and bridges, and give tax cuts to small business. (One part of the president’s new plan, an effort to expand credit for small businesses, can be paid for through TARP, though the Treasury has yet to release any details of that plan or a cost estimate.) But the White House is seeking to use the unspent TARP money as political cover for more government spending to stem the unemployment rate.
So the answer to the question I posed in the title of this post is somewhat in the eye of the beholder.
If you focus on what Paulson said last year–TARP “is not a spending program”–then Obama is proposing something that sure looks like new spending. If you focus on what Obama’s aides are saying now, then Obama is simply shifting old spending from one program to another, in service of the same goal. Obama explained it all this way at Brookings, according to his prepared remarks:
In fact, because of our stewardship of this program, and the transparency and accountability we put in place, TARP is expected to cost the taxpayer at least $200 billion less than what was anticipated just this summer. And the assistance to banks, once thought to cost the taxpayers untold billions, is on track to actually reap billions in profit for the taxpaying public. This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.
So what do you think?