TARP may pay down debt
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.