Monday, December 6, 2010

TARP Wasn't Obama's Doing

47 percent of Americans believe that TARP, the Troubled Assets Relief Program, that helped prevent the collapse of several financial institutions during the worst of the recession was the doing of President Barack H. Obama. Some who opposed TARP and other "bailouts," see them as a socialist concept that a liberal President decided was a good idea.

The truth, however, is that 47% of Americans are wrong. TARP was actually signed into law by President George W. Bush on October 3, 2008, several months before President Obama took office. In his book Decision Points, Bush discusses the creation and thought process behind TARP in Chapter 14, titled "Financial Crisis." There is no doubt, the financial crisis started during the Bush administration, and some of the blame should fall on the Bush administration. However, the Obama administration policy of pushing all of the blame on the Bush administration is improper. Under President Obama, the economy has become worse. When President Bush left office, unemployment was high. However, under President Obama, unemployment went even higher, from 7.6% to last month's 9.8%.

There is no doubt about it, TARP did help the economy in the short-run and in fact helped the country's deficit as TARP funds were paid back at a profit of over $25B. The difference between TARP and the Federal Reserve's "quantitative easing," is that TARP wasn't an expansion of the money supply, but rather a series of loans that would be repaid earning the lender (the government) interest and profit. TARP was, by no means, a socialist program that involved the redistribution of income from the American taxpayers to banks and other companies that made poor decisions.

While TARP wasn't something President Obama has done, the President deserves credit for having pushed forward items that are beneficial to the economy. The President's current push for unemployment benefits to be extended is a push in the right direction. Ideally, job creation would take place at a rate that makes an extension of unemployment benefits unnecessary. However, the ideal situation is unrealistic right now. If Americans find their unemployment benefits coming to an end with no job in sight, it will lead to more economic troubles as people are forced to default on obligations such as credit cards, utility bills, and mortgages. This will lead to even more foreclosures and more bankruptcies, which will have a negative effect on the economy. Congress would be wise to listen to President Obama when it comes to extending unemployment benefits, and Congress would be wise to also ensure that no American faces an increase in taxes on New Year's Day.

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