A recent Reuters article reports that the Congressional Budget Office has raised its estimate of the cost to taxpayers for the government’s Troubled Asset Relief Program (TARP), the $700 billion bank bailout plan passed last fall.
In just a few months, the CBO’s projected net loss to taxpayers from the TARP has grown from $189 billion to $356 billion, an increase of over 88%!
So much for all those grand projections about taxpayers getting all their money back–and then some!–when the bailout package was being debated in Congress. As a Time article from December 2008 noted,
[O]ne of the arguments for the $700 [billion] bailout has long been that there was a strong possibility that the government’s plan would be able to stabilize the banking system and make money for taxpayers at the same time. For now, that doesn’t seem to be the case.
Last October, then-Treasury Secretary Henry Paulson boasted that not only would the government’s bank stock purchase program under TARP not cost taxpayers money, but that it would be an “investment” that should eventually produce a windfall for them. Said Paulson, “This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything.” Oops!
Of course, there was every reason to expect that taxpayers were going to get fleeced, as they always do by such bailouts. All that government money propping up and subsidizing the poor decisions and business models of banks and U.S. auto manufacturers and insurance companies must be taken from the taxpayers, who would have put that money to much more productive use. Bailout advocates argued that these companies were somehow “too big to fail.” Ultimately, the federal government may disprove this myth when it collapses under the weight of the spending and debt it has wrought upon itself (and us).