Dan Calabrese

Here’s what I’m going to do. Since I am carrying considerably more personal debt than I would prefer (don’t lease fancy offices . . . long story, pretty boring), I am going to borrow a whole bunch of money and then use it to pay off my creditors.

Hey, we might as well.

Thus, I will reduce my debt.

What do you mean it doesn’t work that way? I know it works that way because I read in the Wall Street Journal that the president of the United States is going to do that very thing. Except that he’s using your money instead of his.

So goes the latest economic gambit of the Obama Administration, which now proposes with a straight face to use TARP funds to reduce the deficit.

Seriously.

Let’s review: The Troubled Asset Relief Program was a $700 billion emergency expenditure designed to head off the collapse of the entire financial industry. From what government bank account did we allocate this $700 billion? From none. We didn’t have $700 billion. We borrowed it. That’s not generally a good idea, but it was an emergency (or so we were told), and regardless of what you think of the merits of that move, that’s what we did.

This, in fairness to President Obama, was undertaken by President George W. Bush, who soon thereafter left office. Along came the Obama Administration, which was left to spend about half the TARP funds, but also threw an additional $787 billion in “stimulus” funds on the fire – a perfect analogy, as we may as well have burned the money for all the good it did.

Where did we get this money? Oh, we borrowed it too. And once Obama was done remaking federal spending habits in the image of crystal-meth-addicted sailors everywhere (putting the old drunken ones to shame), we were suddenly projecting a decade’s worth of deficits in excess of $1 trillion.

What to do, what to do?

Well, it turns out some $200 billion of those TARP funds haven’t been spent yet. Not only that, but about $80 billion of them have been repaid by banks who didn’t much like being micromanaged by the federal government, and another $50 billion is expected to be repaid soon.

So in an attempt to look like he’s serious about deficit reduction, Obama says he will now apply this money to that very thing.

Have you ever moved a credit card balance to a different credit card? I did. You might do this to get a lower interest rate or a better payment schedule, but you wouldn’t tell yourself or anyone else you were somehow reducing your debt load, would you?

But apparently that’s what Obama is considering telling us in January’s upcoming State of the Union address. But wait. There’s more. He is also directing those who run federal agencies to submit two budgets for next year. One will be a status quo budget. The other will represent a 5 percent cut. Obama doesn’t say which amount the administration will actually spend, of course. I bet I know. I’ll bet you the difference between the two which one it will be.

But even if they did enact the 5 percent cuts, and even if they do hang onto the unspent TARP money, none of this represents serious deficit reduction in any way. The deficit is soaring for two reasons:

The first and most important reason is that spending on entitlements – Social Security, Medicare and Medicaid – is out of control. These three line items account for more than $2 trillion of this year’s $3.4 trillion federal budget. And because they are mandated by law and cannot be cut without a change in the law, they simply grow automatically every year.

If Obama really wanted to exercise leadership on deficit reduction, he would propose to reform entitlements. Instead, he is proposing a new entitlement in the form of health insurance for everyone in the country. This will ensure that the $58 trillion worth of unfunded entitlement obligations facing the nation will grow by a sizable margin, and will eventually require huge increases in the percentage of GDP absorbed by the federal government, which will kill the robust growth that once characterized the U.S. economy.

The second reason for the soaring deficits is that Obama’s “stimulus” was never intended to be a one-time thing. Most of it went to states and local governments and was used to paper over their own structural deficits. Next year they will be back for more, crying poverty once again, and getting what they want.

In order to fund all this, the federal government will borrow more at increasingly high interest rates, and will crank up the presses to print more money, thus further devaluing the dollar.

But don’t worry. TARP to the rescue. Obama is going to use deficit spending to reduce the deficit. He really can do the impossible. Either that or he just doesn’t know the difference.

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