This one is odd, and it has a few moving parts I haven’t figured out yet, but you still need to know about it.
In case you hear the Administration start bragging about a sudden reduction in this year’s deficit by about $175 billion, here’s what they’re talking about: they’re going to reduce the amount of the TARP outlays by that much.
No, that doesn’t mean they spent less than $700 billion. (Well, actually, a bit less than $600 billion has been spent so far, but they’ll spend the rest and may need more later.)
It means they won’t add the whole amount to what they say the deficit is.
How are they going to get away with that? By accounting for the TARP outlays on a net present value basis rather than as cash outlays. Think about it like this: the stimulus/porkulus funds are different from TARP. The government either borrows or prints money, and then hands it out to state governors to spend on salaries for unionized teachers, bureaucrats, and hospital administrators, and for things like the John Murtha Airport, bike paths to nowhere, and hamster subsidies for Nancy Pelosi.
Those are pure cash outlays. From our point of view as taxpayers, it’s pure waste, money flushed down the toilet.
But the TARP funds are, and always have been, different. Approximately $17 billion of the TARP was used to buy Christmas presents and holiday bonuses for unionized employees of GM and Chrysler (that money was wasted). The rest was used mostly to buy preferred stock (and in Citigroup’s case, common stock) in something like 200 banks and non-bank financial institutions.
