Who should we bail out next?
There’s $200 billion dollars of TARP bail out money left in the coffers, roughly the equivalent of 36 billion five dollar footlong sandwiches from Subway (after DC sales tax). Now everyone is wrangling over what to do with it:
Congressional Democrats could be careening toward a head-on collision with the White House over $200 billion in leftover bailout money – money that Republicans think should simply be returned to taxpayers.
The Treasury Department is pushing for fiscal prudence and wants to use the money to pay down the deficit and keep a small rainy-day fund in case of economic catastrophe.
But Democrats are salivating over the possibility of $200 billion in unspent money.
House Democratic Caucus Chairman John Larson of Connecticut wants dough to fund job-creation legislation. Massachusetts Rep. Barney Frank, the powerful chairman of the House Financial Services Committee, wants to direct $2 billion of repaid Troubled Asset Relief Program funds to loans for unemployed homeowners so they can avoid foreclosure. House Speaker Nancy Pelosi of California admits that “there’s a good bit of interest” in spreading the money around to various economic projects.
And Senate Democrats want to put a big chunk – say, $40 billion – toward loans to small businesses.
Who should get the money? Republicans will say that the money belongs to the taxpayers, although that’s not strictly true. The money for TARP has been raised legally, through taxation and otherwise, so it’s not as if the government took out a loan directly from the taxpayers.
This may seem like a trivial or obvious (or technical) distinction, but it’s actually quite important. If I borrow $10 from you under duress and you unwillingly hand it over, there’s a good case to be made that I owe you whatever is unspent, in addition to the principal at a later date. But TARP isn’t like that. Instead, TARP, like all government allocations, is willingly and legally transferred from we, the taxpayers, to the government. In return, they do stuff for us, like preserve our banking system or purchase expensive fighter jets.
This logic would point to putting the leftover money to use doing whatever would be best for us. Maybe that would be giving it back, in the form of a tax rebate. Or it could be through a jobs bill, as some advocate.
What’s important to note, however, is that both the Republican and Democratic positions make the same assumption: the money doesn’t belong to the taxpayers in any more than the abstract sense that we “own” all of government, simply because its grant to rule derives from us.
The argument about what to do with TARP is a live one, but let’s not get confused by rhetoric.
-Sam
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