The Obama Administration is now poised to "save" some of the money from TARP funds and use it for deficit reduction.
The administration wants to keep some of the unspent 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.It is nearly impossible to even wrap your head around this kind of thinking. TARP funds, most of which are being borrowed, being used to pay down debt? Isn't that a little like taking money from one pocket and putting it with money in your other pocket, then declaring that you now have more money?
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.
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.Using borrowed money, or even future money, to pay down current liabilities does not make Democrats seem fiscally responsible. But of course they are too entrenched in "Fantasy Island" to see that.