Income Redistribution: The TARP Slush Fund

02/05/2010 14:55

Apparently Barack Obama found a Chuck E. Cheese game token in his pocket. What else can explain his "Whac-A-Mole" economic policy? Obama called for Congress to provide $30 billion in Troubled Asset Relief Program (TARP) funds allocated for small business loan funding via community banks with $10 billion or less in assets. Obviously, he thinks (or "feels," since it's obvious that he hasn't engaged in cognition) that banks are just hoarding the money instead of lending to cash-strapped businesses.

Banks lend money on the basis of ability and willingness to repay. At present, small businesses are finding it difficult to determine what they can repay. In fact, Obama's 2008 presidential campaign has also found it hard to repay things, reportedly still owing Springfield, Illinois, a chunk of change.

Furthermore, businesses create jobs to capitalize on economic growth. Public policy can increase or decrease the cost of job creation, but without the base element of economic growth, most jobs will be simply transferred as older workers retire and younger workers enter the workforce.

Another reason we take issue with Obama's plan is that, as we and others warned in 2008, TARP has become a political slush fund. Larger banks were forced to take the money, and they have now repaid it with interest. Of course, this doesn't include Fannie Mae or Freddie Mac, or GM or Chrysler -- that money is simply lost. Now, instead of returning these repaid taxpayer dollars to their rightful place, Obama plans to pass out more unconstitutional goodies.

As the Heritage Foundation's Andrew Grossman points out, "The administration lacks legal authority" to use TARP fund for anything outside the bill's specific intent. "If the authority is as broad as the administration and some lawmakers say, then it is unconstitutional. Congress cannot pass the buck and give unlimited power to the executive." Investor's Business Daily concludes, "The administration seems to have discovered a new universal law of perpetual motion -- that money once extracted from the taxpayers or borrowed from others can never be returned whence it came. As for the Constitution, we don't need no stinking Constitution."

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