Saturday, November 21, 2009

Another TARP

We all know about TARP, the Troubled Assets Relief Program. It was supposed to cover all the bad loans that were dragging down the banking system. Pay the banks for those and the credit market loosens up, right?

Well, they seem to be spending the TARP money for other things these days. Bank stocks are rising, but we didn’t see the kind of real relief we expected. But that’s a story for another time.

I’ll call this caper "TARP 2," because tarps are used to cover things up. And that’s exactly what the stimulus money is doing; covering up the mistakes of governments. State-level mistakes mostly.

For example, the State of Illinois has been under-funding education for decades. And when the State doesn't pay their share, the burden falls on property owners.

There have been efforts to fix the problem. There was the 51% campaign in the 90s. It went nowhere. There was the Lottery in the late 70s. The idea was that the State would sponsor gambling and the school fund would benefit. And the Lottery money began to flow quite nicely.

But…the State turned it into the Lootery. They would give all that money to education and give education LESS from the general fund. The net result was that the State had MORE money to spend on other things and education spending stayed flat.

To make matters worse, Illinois is late in making payments to the school districts. (Late, like 6 to 9 months late!)

So…..along comes the stimulus money…save and create new jobs…get the economy back on its feet.

TARP 2 is being used to cover all the sins of the State of Illinois by giving hundreds of millions of dollars to the State for old bills, not local jobs or programs. As the Chicago Tribune put it, “It appears the state treasury -- not students or school districts -- was the prime beneficiary of the education stimulus jackpot in Illinois. In great measure, funds simply were used to replace general aid payments already owed to local districts by the state. That gave Gov. Pat Quinn breathing room in his struggle to rein in a whopping two-year budget deficit of more than $10 billion.” (“Illinois data on stimulus-related jobs saved, created don't add up” - Chicago Tribune, November 4, 2009)

And just today, The Daily Herald reported that over a billion dollars in stimulus money will be used by Illinois to pay past-due Medicaid payments:
“The state is expecting to get more than $1.1 billion from Washington because the federal government has temporarily increased its Medicaid reimbursement rate as part of the stimulus package.

“The money will help the state pay Medicaid bills owed to hospitals and some other providers, including pharmacists.”

Gee, health reform isn’t even passed yet and Obama is passing out the bribe money.

No doubt Washington is pulling similar stunts in other states. Since the states can’t print money, Obama is going to give them some off the federal presses.

And the worst of it is that they are claiming to be creating jobs with this money. What they are doing is masking the failures in the States by shoring up their treasuries. Like I say, TARP 2.

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