01/04/2009 05:12 am ET Updated May 25, 2011

Is The TARP Spending Or Investment?

Hank Paulson likes to insist that the hundreds of billions of dollars his Treasury Department has handed out to banks is an investment program rather than a spending program. The difference, for the Treasury Secretary, seems to be that he expects the government will see a positive return on the investment.

Steve Randy Waldman says that this is bunk. Of course it's a spending program. What's more, it's a spending program subsidizing past consumption.

All of the iffy securities that are weighing down the banking system represents money already spent on real projects or consumption. When the government purchases a security, it is taking the place of the party that originally fronted money for that expenditure. Every penny of government "investment" is retroactive expenditure on housing, real-estate, consumer credit, whatever.

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