TARP may pay down debt

November 12, 2009

From Deborah Solomon and Jonathan Weisman at WSJ:

The administration wants to keep some of the unspent [TARP] 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.

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.

Borrowing money over here to pay down debt over there doesn’t sound to me like real “debt reduction.” Sounds more like giving back an appropriation to avoid debt expansion.

It would better to retire the program entirely while letting outstanding loans run off.

But the administration does seem to be getting a bit more serious about making cuts:

The Office of Management and Budget has asked all cabinet agencies, except defense and veterans affairs, to prepare two budget proposals for fiscal 2011, which begins Oct 1, 2010. One would freeze spending at current levels. The other would cut spending by 5%.

OMB is also reviewing a host of tax changes. The President’s Economic Recovery Advisory Board will submit tax-policy options by Dec. 5, including simplifying the tax code and revamping the corporate tax code.

White House Chief of Staff Rahm Emanuel is pressing for substantial spending cuts to go with any tax increases to try to avoid the “tax and spend” label that has bedeviled Democrats, according to administration and congressional officials.

Forget the freeze Rahm. Go for the 5% cut.

Comments

Good luck getting a 5% reduction in pay through the AFGE fed employee union. Any cuts will come from funding used for science, R&D, hardware, anywhere but govt salaries & benefits.

 

“but is considering setting aside a chunk for debt reduction” — really? The funds won’t even be enough to pay the interest on the debt.

Posted by Rick | Report as abusive
 

Instead of a 5% cut, make it a 10% spending cut, across the board, paired with a 5% tax cut, again across the board. Do this again over the next few years, until the debt is paid off, at which time have one more across the board tax cut that brings the incoming tax revenue down to the current budget level and freeze the budget and tax levels at that point.

This simultaneously deals with the high debt and need for economic stimulus.

Posted by Jim | Report as abusive
 

We borrow money for all federal spending.

The right would argue that buying military programs on credit is a symbol of our strength and might. No taxes are good taxes, and we can borrow ad infinitum to pay for things, and future generations will pay for them.

The left would argue that using that credit to buy a social program is a better use of credit and we can keep creating new social programs and future generations will pay for them.

The far right, and the far left believe we can continue to make minimum monthly payments and we’ll be ok whether we buy guns or social programs.

Someone in the middle might say, isn’t real economic might and strength the ability to pay for it yourself upfront without resorting to expensive and costly credit that future generations have to pay for?

Someone in the middle might say, hmmm…I like living in a country that can protect itself and that has a strong military, and I like social programs that help others, and that increase the quality of life for all of us, we need both.

This idea that you can simply keep cutting taxes gets you in the position of not being able to pay for the things our society needs.

It’s a simple equation, keep lowering taxes, and we have less money to pay for things our society needs for the purchases of the left or the right.

If we have to rely on credit to get the things we need, somebody in the future has to pay for it.

Eventually, they are so busy paying off someone else’s debts that they don’t have the money for the things people on the left or the right of their generation need to provide a good standard of living.

Then, they have to make hard choices about what they going to buy on limited credit, one or the other. That is where we are now… Arguing about what we are going to use our credit cards for, rather than paying for everything we actually need to have a good standard of living.

America is now simply printing money to pay even the minimum payments and has limited credit to pay for the necessities of living in a great society.

Someone in the middle might think “You can’t keep lowering taxes and having all these spending programs on both sides of the isle, because then you aren’t taking in enough revenue to pay your debts without resorting to long term credit.

Could it possibly be that we should fix our tax system so we can pay for things we need now, rather than buying things we can’t afford on expensive long term credit.

Could it possibly be that the ideologies of the far left and the far right are false arguments that only empower the politicians on both sides of the isle to continue spending money we don’t have?

Someone in the middle might think: Face the problem. We aren’t taking in enough revenue at the federal level to pay our bills.

Fix the tax structure and make it fair. Remove the lobbyist’s power over politicians by removing the politicians’ ability to create tax loopholes for corporations and individuals. Set a flat tax with no loopholes high enough so that we could pay off our national debt in a few years, and then because we know what we are taking in, we know what we can afford to spend as a country on programs for the left and the right.

Then when the debt is paid off, we would have positive revenues coming into the treasury which we could then use to rebuild our military and our social programs, and create jobs, and increase our standard of living.

If America keeps buying things on long term credit and continues to pay the minimum payments by simply printing more money like we are doing now, eventually, we won’t be able to pay the minimum payments for the programs of the left or the right, and our standard of living and economic might and power will be truly gone,
unfortunately, so will our ability to do anything about it.

The America I am so proud of consists of both the left, the right, and everyone in between, and standing together, we can address the problems of our country, and we can continue to believe in things like “Freedom, with Liberty and Justice for All,” rather than just the far left, or the far right.

Posted by Michael Shircliff | Report as abusive
 

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