The TARP slush fund debate
Paul Krugman and Bruce Bartlett debated on PBS whether President Obama should divert money from the TARP program to a jobs program to combat high unemployment (Hat tip Mark Thoma). Here is the video and a transcript of part of the exchange. I have bolded the parts with which I agree:
JUDY WOODRUFF:Paul Krugman, to you first.
You have been calling on the president for some time to do more to create jobs. What do you think of his proposals today?
PAUL KRUGMAN, columnist, The New York Times: What I have been saying, basically, is, show me the money. Conceptually, it kind of makes sense. It’s a bunch of things that are ideas that I and other people have been advocating.
It is clearly a plan to sort of do job creation on the cheap. They’re trying to leverage a limited amount funds to do a disproportionate amount of job creation. It’s OK stuff, but how big? You know, if we’re talking about $60 billion, this is not going to do it. If it is $200 billion, then we’re talking at least something halfway serious.
JUDY WOODRUFF: So, you’re saying it’s — a little — a little bit is OK, but he should have done still more?
PAUL KRUGMAN: Well, now, we don’t know how much he’s doing, right? I read his speech. I listened to it.
It’s all general, conceptual stuff. We don’t have a number on what this is going to be. And that makes all the difference. It’s the scale of the thing. It’s not something where you can say — you know, the ideas are good. It’s a nice menu of stuff. But are they adequately funded to do what we need to do, to deal with this terrible unemployment problem?
JUDY WOODRUFF: Bruce Bartlett, what do you make of — I mean, I did see the Associated Press said it roughly maybe relates to what Congress is considering, $170 billion. But whatever the price tag is, what do you think of the approach?
BRUCE BARTLETT, former President George H.W. Bush Treasury official: Well, I’m an agnostic as far as the — the details of the proposals the president has put forward. I’m not necessarily opposed to them.
What I’m opposed to, however, is treating the TARP money as a kind of slush fund that we can use for whatever we feel like spending the money on. I think if these proposals the president has put forward are justified, it ought to be handled in the normal appropriations process, and not just rushed in to action simply because we have got some money lying around that we think we can spend.
JUDY WOODRUFF: So, the president’s argument — I mean, he said words to the effect, we ought to take some of this money that would have gone just for the banks that we have still to spend and put it on Main Street.
What’s wrong with that?
BRUCE BARTLETT: Well, I just think it ought to be done through Congress.
I think the problem is that people don’t quite understand where this TARP money came from. The original TARP program was like $700 billion. And Congress estimated that maybe half of that money would be lost permanently. And, so, that was the amount that was actually budgeted, about $350 billion. And now it looks as if the money that is going to be lost is only about $150 billion.
So, you have got money that you appropriated that now is available, and that the original assumption was always that that money would be used to pay down the deficit. And I do — I am concerned about the deficit.
JUDY WOODRUFF: All right, I want to come back to you on some of the specifics that the president was suggesting.
But let me ask Paul Krugman about using the TARP money, the financial rescue money, switching that money over to create jobs.
PAUL KRUGMAN: Well, you know, there is money that wasn’t expected to be there. It’s available. It’s — you know, I understand Bruce’s concern about the appropriations mechanism, but you have to bear in mind that we have an extremely dysfunctional Congress.
And we have what is really an ongoing economic emergency. I mean, this — it’s not just that we’re not creating jobs. The level of unemployment we have got is doing enormous damage. So, I think the president is justified in reaching for whatever mechanism he can.
No, the President is not justified in reaching for whatever mechanism he can. The ends do not justify the means. I want jobs as much as the next person and I understand the dysfunction in Congress. But I recognize that this is not an appropriate use of TARP money and is an unjustifiable end-run around Congress. The legislative process is clear. If President Obama wants money to create jobs, he needs to use that process, however dysfunctional.
Otherwise If I were a congressperson, I would be even more wary of giving this Administration any leeway in the future if they are going to misappropriate funds in this way.