White House Says TARP Will Cost Less, Maybe Much Less
The New York Times, Wall Street Journal, and Bloomberg all had the same story this morning and obviously received the same briefing/leak from the White House over the weekend. The bottom line is that the administration is saying that the cost of TARP is now projected to be about $200 billion less than was estimated earlier this year.
I can't tell from the reports whether this means that total TARP spending or the budget impact will be that much less. They're not the same. TARP is scored on a credit reform basis so only the net present value of the expected total cost shows up in the budget. This is why the $750 billion in additional funds included by the administration in its 2010 budget just in case the financial sector needed more support only increased the deficit by $250 billion.
My guess is that the reports are talking about the budget impact. If that's the case, then all of lower TARP estimates will be recorded as a reduction in the 2010 deficit.
My numbers are admittedly much more optimistic than the official estimates, but a $200 billion reduction in the 2010 deficit could lower it to around $1 trillion, and possibly less. A $1 trillion 2010 deficit would be $400 billion less than the $1.4 billion recorded in 2009.
But before anyone books this lower projected cost, let's see whether any of the TARP funds are used for some type of jobs program and, therefore, the estimates change again.