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President Obama inconsistent on TARP and jobs

President Obama speaks on the economy
President Obama speaks on the economy
Photo:AP/Susan Walsh

President Obama has been sending mixed messages about his plan for economic recovery, contradicting himself and using faulty logic several times in the past few weeks. One must wonder if he has become overwhelmed with the responsibilities of his office, or if he is simply assuming that Americans are not paying attention.

On Tuesday the President said that TARP (Troubled Assets Relief Program) was "launched hastily under the last administration," and that the policy was flawed but necessary. In reality, President Bush often consulted then-candidate Obama during the time that TARP was being designed, and both were lauded for their cooperation in the matter. Obama came out many times in support of the plan, and in the days leading up to the inauguration, he asked President Bush to request release of the second $350 billion of TARP funds. Key architects of TARP were tapped by Obama for positions in his administration, such as Henry Paulson and Tim Giethner.

In April, several banks (including J.P. Morgan and Goldman Sachs) attempted to repay TARP funds, but their attempts were rebuffed. A senior administration official shared with the Financial Times that this would not be allowed unless it was “good for the system”. This is contrary to promises that were made when TARP was being sold to the American people, namely that the money would be repaid as soon as possible, and that possibly a profit would be made on the funds loaned to the banks.

Some banks have since made repayments. Under law, repaid TARP funds must be used to pay down the federal deficit, but on Tuesday President Obama called for using those funds for job creation. This would be in addition to the $787 billion stimulus package that was passed for the same purpose, with little success yet realized.

On Tuesday the President said that the economy was in a much better place than it was this time last year. He said, “We are no longer seeing the severe deterioration in the job market we once were; in fact we learned on Friday that the unemployment rate fell slightly last month. This is welcome news, and news made possible in part by the up to 1.6 million jobs that the Recovery Act has already created and saved, according to the Congressional Budget Office."

Ironically, in November 2008 the unemployment rate was under 7%. It was 10% in November 2009, down slightly from a high of 10.2% in October.

This week the President said that it will be necessary to “spend our way out of this recession”, but this is contrary to his comment last week that “we are under no illusion that somehow the federal government can spend its way out of this recession”. This is yet another contradiction in his plan for the country’s economic recovery.

Is the President confused about an effective policy for recovery, trying to over all of his bases in order to please everyone in his party, or simply trying to keep the American people so overwhelmed with inconsistencies that they stop paying attention?



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