Another Issue with Using TARP Funds for Other Purposes
According to a Donald Marron, reallocating TARP funds to use for other purposes (such as a jobs bill) may violate the letter of the law (and certinaly violates the spirit of it). We've written before about the problems of trying to repurpose TARP money (see CRFB's new paper on TARP, discussing its costs, programs, and issues going forward).
For one, the savings which CBO will score of rescinding TARP money are too high. They assume a 50 percent subsidy rate (based on their March baseine), which means that rescinding a dollar saves fifty cents. Newer estimates put subsidy rates at around 35 percent..
Secondly, both OMB and CBO now project a lot of the TARP money won't be spent anyway. How can you claim savings from deciding not to spend money which wouldn't have been spent anyway?
But Donald Marron points out a third, more fundamental issue from the law itself. Section 204 of the Emergency Economic Stabilization Act, the act that created TARP, states (emphasis added):
All provisions of this Act are designated as an emergency requirement and necessary to meet emergency needs pursuant to section 204(a) of S. Con. Res 21 (110th Congress), the concurrent resolution on the budget for fiscal year 2008 and rescissions of any amounts provided in this Act shall not be counted for purposes of budget enforcement.
This basically says that lawmakers cannot rescind TARP funds to pay for other initiatives. Despite this, Congress has already done so twice – rescinding $1.26 billion to help pay for the HOPE for Homeowners Program and $34 million to pay for a new TARP database. (It may be that this was allowed because both programs were related to TARP's innitial pupose).
A new “jobs bill” using a rescission of TARP funds as a “pay for” could be a whole separate issue. Congress rushed the passage of TARP because it was an emergency measure—lawmakers wanted to make sure that approved funds wouldn’t be “rescinded to pay for new, non-emergency spending.”
We aren't lawyers here. But if nothing else, using TARP as a pay for seems to violate the spirit of the law.