TARP Bailout to Cost Less Than Once Anticipated
Now Treasury figures taxpayers will lose less than $50 billion at worst, but could break even or even make money. Sure some elitist Wall St rascals got their butts saved, but a small price to pay not to have 15 to 20 percent unemployment.
Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all — the $700 billion lifeline to banks, insurance and auto companies — will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.
A final accounting of the government’s full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly.
But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.
The rescue of the troubled insurer included $70 billion from the bailout program that was enacted two years ago, at the height of the global financial crisis late in the Bush administration, initially to prop up big banks.
At the White House on Thursday, the Treasury secretary, Timothy F. Geithner, briefed President Obama about A.I.G. and about the broader outlook for the expiring rescue program, putting the projected losses at less than $50 billion, at most. Yet neither the White House nor Congressional Democrats are likely to boast much in the month remaining before midterm elections. For most voters, TARP remains a four-letter word.
Brian A. Bethune, the chief financial economist in the United States for IHS/Global Insight, while critical of parts, called the program over all “a tremendous success. Now obviously, they can’t go out on the campaign trail and say that, because certainly, for a lot of voters, it’s just not going to resonate.”
The “bank bailout” was the first big issue, before the Obama administration’s roughly $800 billion stimulus plan and its health insurance overhaul, to stoke the rise of the Tea Party movement. After supporting TARP, several Republicans have lost elections largely because of their votes. For many Americans, TARP is more than a vote; it is a symbol of big government at its worst, intervening in private markets with taxpayers’ billions to save Wall Street plutocrats while average Americans struggle through the recession those financiers spawned.
Fewer than three in 10 Americans say they believe the program was necessary “to prevent the financial industry from failing and drastically hurting the U.S. economy,” according to a poll in July for Bloomberg News.
“This is the best federal program of any real size to be despised by the public like this,” said Douglas J. Elliott, a former investment banker now associated with the Brookings Institution, a Washington think tank.
“It was probably the only effective method available to us to keep from having a financial meltdown much worse than we actually had. Had that happened, unemployment would be substantially higher than it is now, the deficit would have gone up even more than it has,” Mr. Elliott added. “But it really cuts against the grain for a public that is so angry at banks to think that something that so plainly helped the banks could also be good for the public.”
Democrats pass new tax break for self-employed - A New Tax Break for the Self-Employed
Self-employed workers who pay their own health insurance premiums have always been able to deduct those costs, along with premiums for family members, when calculating their federal income taxes. The new law allows them to also deduct those costs before computing their self-employment taxes, also known as payroll taxes, which cover Social Security and Medicare.
Before the new law, which is only scheduled to last until the end of this year, self-employed people had to pay payroll taxes on their entire income, said Kelly Phillips Erb, a tax lawyer in Philadelphia who wrote about the new provision on her blog, TaxGirl.
This is a welcome break — payroll taxes, after all, are far more burdensome for the self-employed than regular employees.
