As President Bush gets set to leave office, President-elect Obama has one more important task for him to complete. Obama and his Midwest Combine are requesting that the outgoing Republican leader send a message to Congress for the remaining $350 billion in TARP funds.
The goal is to have the money allocated to the US Treasury so that incoming Treasury Secretary Tim Geithner can have their plan to spend the money in place sooner rather than later to aid the economy.
“We can regain the confidence of both Congress and the American people in that this is not just money that is being given to banks without any strings attached and nobody knows what happens, but rather that it is targeted very specifically at getting credit flowing again to businesses and families,” the president-elect said in an interview aired Sunday on ABC.
There has been dissatisfaction in Congress and the country over the TARP program. The belief is that the money has disappeared into banks with no perceptible increase in lending coming from the capital injections. Now, Obama wants the money to focus on the home foreclosure situation. They also want to limit executive pay and eliminate corporate jets for banks that participate. No word on limiting ponzi schemes at this point.
It's only slightly ironic that the President-elect is asking the current President to do his bidding. Obama has been highly critical of the US Treasury and the TARP program. Also during the campaign, Obama was highly critical of Bush and the Republican's "trickle down" economics and tax cuts that seemed to embody this strategy. And yet, tax cuts are central to Obama's stimulus program. Of the $400 billion in stimulus for this year, $300 billion will be for tax cuts.
Here's something else I hope Obama and the Combine follow: sunset provisions for the stimulus spending programs. Any new government program of spending money to stimulate the economy needs to have a date attached to either re-up or sunset it. This would provide assurance that someone in the Federal government is aware of the dangers of massive spending and borrowing that is going to occur. There needs to be a vote every year on these new programs.
Why? The Congressional Budge Office projects that the Federal budget deficit will total $1.2 trillion or 8.3% of GDP in 2009. However, this doesn't include the second tranche of TARP money nor the Obama stimulus package. If we add those two, the deficit soars to 12.2% of GDP. Here's the big downside according to the CBO: "Furthermore, foreign lenders, who have been willing to lend to the US government on very advantageous terms, may become less willing to do so in the future, which would tend to raise interest rates in this country and dampen economic activity."
Today, President Bush gives his last press conference of his presidency. His stewardship of the American economy has been less than inspiring, but most of the gains were wiped out since 2008. The true damage from 2008 will be if the country shifts permanently away from the free market, capitalist beliefs that generated the growth in the American economy and power. In the presser, Bush crystallized this when he said, "Who can best spend your money: You or the government?" Although this won't be the central message of the incoming administration, the markets will demand an answer.
- Obama to Refocus TARP On Housing, Small Firms