Dick Morris wrote an interesting article on Feb. 2 on what’s really been happening with the deficit situation. President Obama and the Democrats have been distorting the record to make their own profligate spending look moderate. First, they excused the $1.4 trillion deficit we accrued last year by saying that Obama put the wars in Afghanistan and Iraq “on budget” where Bush had put them “off budget”, but the truth was the war budget was a minority proportion of the deficit. The rest of it was $300 billion of the $787 billion “stimulus” bill, and entitlement programs. In Obama’s recent State of the Union speech he said that he inherited a huge deficit that was just a little smaller than the deficit we had last year, and a bad economy. “Bush made me do it,” is his refrain. Such a leader.
Morris lays out the truth about Bush’s deficit from 2008. It was not $1.3 trillion as Obama claims. It was more like $800 billion, which is still huge by pre-Obama standards. Democrats and Republicans used to complain if deficits were $400 billion or more.
The reason Morris makes his claim is that Obama, in blaming Bush, is including the $700 billion the Bush Administration allocated for TARP. Now, TARP, if you’ll remember, was supposed to be used to prop up our major financial institutions, to save them from collapse. It was money on loan to them. They were supposed to pay it back with interest. Most of this money has been paid back by now, with interest. So why is the Obama Administration counting this money as part of the deficit? First of all, as Morris points out, Obama has an easy excuse. According to budget rules, any loans have to be counted as grants–expenditures in the budget. So officially TARP was counted as part of the deficit for 2008. Any repayment would be counted as a credit in a future budget. If we look at this situation realistically though, it doesn’t make a lot of sense to count a loan as an expenditure if the money was going to be paid back, and be credited towards the public debt. If we’re concerned about the debt, it’s net effect would be to count against the debt in the long term, not increase it, or at the very least be deficit neutral. In that case, this interpretation makes more sense than to make it sound equivalent to an expenditure which will never be repaid. Of course, being a lawyer, Obama has to make his case look as good as possible, and officially he has the facts on his side. He’s just hiding the effect of what he is saying.
There’s a silver lining in the accounting of TARP for Obama. Sen. Judd Gregg complained bitterly yesterday that the Obama Administration wants to use the repaid TARP funds as a credit source for small businesses. Gregg pointed out that there was a provision in the TARP legislation, which he put in, which said that the monies that were to be paid back must be used to pay down the public debt. If the government did that, Gregg said, it would reduce the national debt by $300 billion next year. But no. Obama wants to reuse $30 billion of it, and he’s confident that the Democrats will change the law to allow it. In effect, Obama wants to make it so that this money is not counted as a credit in the budget. Not that small businesses wouldn’t repay their loans, but come on. Look where this is going. Once that money is repaid through their new program, they’ll just find some other use for it. Obama wants the government to become a bank. He is covering for this by once again blaming Bush, making him look like a liberal spender, not unlike himself. The reality is that Obama’s deficit was not merely $100 billion more than Bush’s. He nearly doubled Bush’s 2008 deficit in 2009! This is yet another distraction.