It gives you great confidence in someone when they can’t even tell you how much is left in a fund which they control. Apparently Treasury Secretary Tim Geithner thinks he has about $132 billion left in TARP funds.
But the Government Accountability Office, a non-partisan federal agency, reports that figure is closer to $32 billion, which is what ABC News and other independent analysts thought.
The Treasury Department continues to insist GAO and others are double-counting commitments and underestimating potential paybacks.
So everyone but Treasury is wrong. I’m willing, at this point, to wait until a final determination is forthcoming, but I have to tell you, if I were a betting person, I wouldn’t be backing Geithner’s position. And don’t forget how cooperative his department has been with the oversight folks.
Working off the budget post here, a commentary in my latest Examiner column about the impact of the Obama budget and how we’re eventually all going to have to pay for the profligacy inherent in his plan. I think you can pretty well imagine my answer to the question above.
Senator Tom Coburn’s office provides a few facts about the budget the Obama administration has submitted to Congress. Budget buster would most likely be a better description:
Total spending under this budget is $3.9 trillion in 2009, or 28% of GDP, the highest level as a share of GDP since World War II.
This budget provides $1.2 trillion in discretionary budget authority for FY 2010 and increases discretionary spending by $490 billion over 5 years. Total spending in 2009 is 28 percent of GDP.
The Democrat budget includes $2.2 trillion in mandatory spending for FY 2010, which includes Social Security, Medicare and Medicaid spending.
So there are the basics. And remember the pledge that by 2012 the deficit will be cut in half. Well, with this budget, that doesn’t mean a whole bunch in terms of what’s left in the deficit. It will still most certainly be higher than any deficit prior to this one.
Deficit is one thing, debt is another. Politicians like to use smoke and mirrors with deficit and debt, preferring to ignore debt and talk about how they’re dealing with debt. Well let’s get serious about this – the debt is what we owe, the deficit is just how much more we’re piling up.
Total National Debt Today:
Under the Democrat Budget:
FY 2010: $12.2 trillion
FY 2011: $14.3 trillion
FY 2012: $15.3 trillion
FY 2013: $16.1 trillion
FY 2014: $17.0 trillion
So now we see the bottom line. In FY 2011, we will have more debt than GDP (the US GDP is 13.84 Trillion). And, in all honesty, we don’t have to be – unless we pass this budget. You cannot spend yourself out of debt. And you cannot cure a credit problem by extending more credit.
This budget adds $4.96 trillion to the public debt by 2014. Debt will be about two-thirds of GDP for the entire budget window, and deficits will be at least $500 billion in each year of the budget window.
The Democrat Budget sets total outlays in FY 2010 at $3.53 trillion and total revenues at $2.29 trillion, for a deficit of $1.24 trillion.
This is truly the beginning of the end. And without cap and trade involved, without universal health care is factored in, just to pay for this mess, taxes are going to go up. The question is how high. And as you’ll see, it’ll be higher than the spin is spinning:
Against a baseline that assumes current law tax policy is extended, S. Con. Res. 13 raises taxes by $361 billion and allows for $1.3 trillion in additional tax increases. In addition their budget paves the way for additional tax increases from a proposed cap-and-trade tax in reconciliation.
If you’re wondering where the additional $1.3 trillion in taxation might (will?) come from, Coburn provides a little behind the scenes look at how the Democrats procedurally set up phantom funds that they can initiate through a majority vote anytime they wish to fund favored initiatives:
Deficit Neutral Reserve Funds:
The Democrat budget includes 15 “reserve funds,” which essentially “phantom spending” policy statements that allow the majority to say that they would like to fund a certain initiative. The deficit neutral requirement associated with the reserve funds typically require that taxes be raised in order to pay for the new policy initiative. If all reserve funds were to be fully enacted, total spending would increase by $1.3 trillion, financed by tax increases or spending decreases.
Welcome to “hope and change”. More debt, more spending, bigger deficit, and no end in sight.
Someone will end up paying for all of this mess, and my guess is it will be all of us – for generations.
I can’t say with any certainty what this forebodes, but this is a staggering amount of debt to pile onto any country, especially within just a few months (my emphasis):
The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.
The really scary thing is, the government is not even close to being done spending money. Yet we’ve already committed about 90% of GDP. Where is all that money going to come from?
As we’ve said before, there’s only a few options: (1) taxes; (2) borrowing; and (3) printing press.
Taxes will only raise so much, even when the government starts raising rates on lower income quintiles, and certainly not enough to keep up with the ballooning debt-service payments.
Borrowing just isn’t going to happen because there isn’t anybody else who either wants to or is capable of lending us more money. To wit, here’s some of Peter Murphy’s analysis on our borrowing problems:
The biggest buyers of US Government (and Agency) debt, for the past several years, have been China, Japan, and the Oil States.
However, the supply of loanable funds among these entities from which the US can borrow is drying up.
China’s current-account surplus, the source of the funds for its Treasury purchases, has dropped precipitously as the global economy has contracted over the past several months.
Japan, another major buyer of Treasuries over recent years, is now posting trade deficits for the first time since the early 1970’s. This current account deficit, combined with a significant fiscal shortfall and planned issuance of $33 Trillion Yen ($340 Billion USD) in government debt this year, means that Japan will be, in effect, competing with the US for funds, rather than lending to us.
And, the oil-exporters are in no shape to be buying anything right now, as oil prices have collapsed since last summers $147/barrel peak. Russia is busy selling foreign exchange to prop up its currency.
Brad Sester of the Council of Foreign Relations reports that foreign demand for long-term treasuries has faded, and notes, ominously, that “global reserves aren’t growing”.
Accordingly, borrowing does not look like an option. Which leaves really just one choice.
Printing money in a down economy, which will have to be done, increases inflation and saps purchasing power (potentially leading to hyper-inflation). We may be able to pay off our debts this way, but we’ll wipe out the wealth of the nation doing so. Think post-Franco-Prussian War where France drove its economy into the ground in order to pay off about 22% of its yearly GDP in war reparations to Germany … over three years. That strife led to the Paris Commune uprisings among other things. Or worse, consider post-WWI Germany, with inflation rising so fast that workers had to be paid twice a day and cart around wheelbarrows full of money just to buy a loaf of bread.
Is that what we’re headed for? I sure hope not, but the signs aren’t very encouraging if history is any guide. It is true that a much more dynamic and nimble economy exists today as compared to the late 19th and early 20th centuries. But the world tendency right now seems to be to shackle that economy, making it much less dynamic and nimble. The end result must be less wealth produced, and less money to pay these debts. In short, our government is currently cashing checks that our economy can’t pay.
If you’ve not kept up or been unable to keep up (that’s why we’re here), you’ve probably wondered about the references to the “underpants gnomes” when discussing the banking and auto industry situations.
Naturally we have precisely the information you need to be in the know. Just remember, as our own underpants gnomes are discovering, the tricky part is “Phase II”.
I‘m sure some will find this surprising. Others will say, “yeah, baby!” It certainly is the logical extension of what happened to GM’s CEO. I, for one, still find it to be very disturbing:
On the heels of the resignation of General Motors CEO Rick Wagoner, the Service Employees International Union is urging President Barack Obama to oust Bank of America CEO Ken Lewis.
“It defies logic, common-sense, and responsible governance to punish the auto industry while letting financial institutions off the hook,” SEIU President Andy Stern said, announcing his call for Lewis’s job Tuesday.
The same could be said for letting the union leadership off the hook.
Aren’t they responsible for declining membership? Aren’t they as much a part of the problem as the management of the auto industry? Why isn’t the SEIU calling for union heads as well?
Of course I ask that facetiously. Obviously we’re now going to hear every whiner and complainer in the world will demand the government fire their boss. Hey, the precedent has been set with one of the worst decisions I’ve seen in a while. Now we begin to see the results of such a blatantly dumb move.
You remember TARP. The “Troubled Asset Rescue Plan”? The plan which the Obama administration and the Treasury Department said they were monitoring closely? In fact, they even put a “watchdog” in charge of its oversight.
Transparency. Oversight. Hope and Change.
And any other buzzword promise that was thrown out there to describe how this administration would be so different from the last.
But apparently all the oversight promised depends heavily on cooperation, not stonewalling, by the Department administering TARP. That would be Treasury:
“We do not seem to be a priority for the Treasury Department,” the Congressional Oversight Panel’s Elizabeth Warren told a Senate Finance Committee hearing today.
“We have sent letters. We have requested that there be someone named so that we can get technical information. And so far, we have not been a first priority,” Warren said. “We use what you give us, and we will exercise the leverage given to us by Congress. In part, that’s why I’m here today. I’m here to talk to you about what’s happened so far, what we have discovered so far, the inquiries that we have in mid-stream and for which we continue to await responses.”
Warren, visibly frustrated with a lack of cooperation from the administration, emphasized, “This problem starts with Treasury.”
Now part of the problem, obviously, is that several key positions in Treasury have yet to be filled, over 60 days into the new administration and in the midst of a financial crisis. Apparently that’s not a priority either.
Oh, and you’ll love this:
Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, voiced similar concerns.
He noted that his office just conducted a survey of all 364 TARP recipients on their use of government funds, something they had requested Treasury do, only for the Department to decline to do so except in the cases of Citigroup and Bank of America.
“One thing is clear: complaints that it was impractical, impossible, or a waste of time to require banks to detail how they used TARP funds were unfounded,” Barofsky said.
I continue to be unimpressed with Tim Geithner and his management and leadership style. What you’re reading here is totally unacceptable. For once, Sen. Chuck Grassley (R-IA) said the right thing:
“Unfortunately, despite saying all the right things about open government, the new administration has not made any major changes aimed at making TARP more transparent,” he said. “Moreover, I have heard about potential problems with access to information from all three of the oversight bodies testifying.”
Hope and Change.
The person to whom the Navy recently bestowed the formerly prestigious Distingusihed Public Service Award had this to say:
“If I’m corrupt, it’s because I take care of my district,” Mr. Murtha said.
Because, you know, there’s obviously no other way to do that than be corrupt.
Shades of Georgia’s Eugene Talmadge:
“Sure, I stole. But I stole for you,”
My latest Examiner column. With housing values tanking, taxes based on that value ought to be going down as well, right?
A study just completed in Spain finds that the creation of so-called “green jobs” doesn’t at all seem to be the employment panacea promised by their advocates. As you recall, President Obama pointed to Spain as the reference point for the establishment of government aid to renewable energy. As the study points out, “No other country has given such broad support to the construction and production of electricity through renewable sources.” But the results are not at all what you might expect given the hype. In fact, they’ve been quite the opposite:
Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.
Be sure you read that last part of the sentence carefully as well – those jobs would have been created by “non-subsidizsed investments” with the “same resources” – or said another way, they’d have been created in the private sector without government picking winners and losers and spending billions in taxpayer money.
Between 2000 and 2008, Spain was very aggressive in pursuing alternative energy and green jobs. But its results were less than stellar:
Despite its hyper-aggressive (expensive and extensive) “green jobs” policies it appears that Spain likely has created a surprisingly low number of jobs, two-thirds of which came in construction, fabrication and installation, one quarter in administrative positions, marketing and projects engineering, and just one out of ten jobs has been created at the more permanent level of actual operation and maintenance of the renewable sources of electricity.
So 9 out of 10 were temporary jobs, while only 1 in 10 became permanent. And the cost?
The cost to create a “green job”:
The study calculates that since 2000 Spain spent €571,138 to create each “green job”, including subsidies of more than €1 million per wind industry job.
The cost in jobs lost:
Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.
And the eventual cost to consumers:
The price of a comprehensive energy rate (paid by the end consumer) in Spain would have to be increased 31% to being to repay the historic debt generated by this rate deficit mainly produced by the subsidies to renewables, according to Spain’s energy regulator.
Spanish citizens must therefore cope with either an increase of electricity rates or increased taxes (and public deficit), as will the U.S. if it follows Spain’s model
Previous studies have concluded that such increases would impact the poorest quintile the most:
• Reducing emissions, a major rationale for “green jobs” or renewables regimes, hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap-and-trade system aimed at reducing greenhouse gas emissions by just 15% will cost the poorest quintile 3% of their annual household income, while benefiting the richest quintile (“Trade-Offs in Allocating Allowances for CO2 Emissions”, U.S. Congressional Budget Office, Economic and Budget Issue Brief, April 25, 2007).
• Raising energy costs loses jobs. According to a Penn State University study, replacing two-thirds of U.S. coal-based energy with higher-priced energy such as renewables, if possible, would cost almost 3 million jobs, and perhaps more than 4 million (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006)
So to recap, we have a scheme which would see a net reduction in jobs by its implementation, create jobs of which only 10% were permanent, Cost anywhere from a half a million to a million dollars per job, increase energy costs tremendously and hit the poor the hardest.
Sounds like a winner, doesn’t it?
Will anyone pay attention to the actual experiment conducted by Spain and its results? Or are the blinders firmly in place?
While this scheme would be important to contest at any time, it is critically important to do so now, given the economic situation. One thing that must be avoided is government killing jobs as fast as the private sector creates them. This is truly a time when government should do all it can to enable the private sector to create jobs (tax cuts, etc.) and step back and allow that process to work. What it shouldn’t be doing is picking winners and losers and enacting a scheme which, in Spain at least, has proven to do all the things necessary to kill or at least cripple any economic recovery.