That Makes Me Stabby: TARP Redistribution

Just when I thought we were finally making progress on that whole TARP debacle. Another bank paid back the money, and taxpayers were informed that we really hadn’t lost all the much money on the bailouts. I thought “Yay, we finally catch a break.”

Enter Congress, stage left. The audience heaves a great sigh. I get stabby again.

TARP Redistribution Is Not a Good Plan
Call me cynical, but I wonder how much of this plan is designed to shore up Democrats running for re-election in 2011. And I say that as a Democrat and a supporter of Barack Obama.

I don’t disagree that Main Street is ailing. I don’t disagree that small businesses are suffering. I don’t disagree that we need to create jobs.

I do disagree that redistributing excess or repaid TARP funds are the way to do that. Mostly because I never supported TARP in the first place. The only portion of the stimulus I supported was infrastructure improvements, which creates jobs, which enlarges the tax base. Even with the TARP redistribution only includes a puny portion for infrastructure.

Small businesses do need help. They need it in the form of the small business loans that banks still aren’t issuing. I don’t know how the government can force banks to start lending again, but loans are what businesses need. Loans and customers. Customers will come when they have jobs, but the businesses need the loans so they can hire people in order to produce the things that the customers will want. It’s a vicious cycle, and none of the current initiatives will fix it.

Let’s Pay Down the Debt
My first thought was that we should pay back the loans that the TARP money came from, but it turns out the money came from Treasury Bills. Those have a fixed maturity date, so we can’t just repay them now. We can, however, pay other debts. So why don’t we do that? No, it won’t affect Main Street, but it will be good for the economy and good for our grandchildren, who will be stuck paying the bill for our sins through their higher taxes.

So, rather than borrowing more money to pay this year’s interest on our debt, why don’t we use the TARP money? The interest on our debt is $383 billion. The TARP money is just over two years’ of interest. That’s $700 billion less that we have to borrow to cover our debt. The debt is currently $12 trillion. Not borrowing $700 billion wouldn’t make a huge dent, but it’s still 5%. I think many people would be happy to reduce their debt by 5% without doing anything.

Am I crazy for thinking this way? Am I not seeing something? I just don’t see how spending more money on tax credits is better than paying down debt that will saddle all of us with higher taxes down the road. We can’t just keep kicking this can down the road. It’s time to pick it up and put it in the trash.

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