A recent Wall Street Journal article is titled, “White House Aims to Cut Deficit With TARP Cash”. TARP is a $700 billion program the government implemented in late 2007 to rescue banks that were failing. Because the U.S. Goverment is already in a deficit – that is, it spends more than it takes in and borrows the difference – every bit of the TARP money had to be borrowed by the government.
The gist of the article is that the government may not need to spend all of the $700 billion so it is “considering setting aside a chunk for debt reduction”. It goes on to say that this idea is a matter of debate within the administration.
If I understand this correctly, in estimating the size of its current and future deficits, the administration penciled in extra borrowing of $700 billion to rescue the banks. Now that it appears not all of this borrowed money will be needed, it is considering paying back some of it. If you read the article’s title, “White House Aims to Cut Deficit With TARP Cash”, you’d think the government was actually doing something significant, something that showed restraint and discipline. You’d never think that the government was going to lower its deficit using…. money it previously borrowed.