ECONOMY: Smoke and mirrors

Arguing that the return of unused or returned TARP funds represents a budget deficit involves a heavy dose of smoke and mirrors, according to the chairman of the Senate Budget Committee.

“It’s the ultimate in spin exercise,” Sen. Judd Gregg (R-N.H.) said of the administration’s floated plan to put toward the deficit $210 billion in funds never used or paid back by banks.

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Gregg helped write the TARP law, which specifically states that TARP funds paid back by the banks are to go to debt relief. So saying that you’re going to do so is really just following the statute’s intent.

As for the funds not spent, “you don’t get debt reduction if the money is not spent,” Gregg said.

He also said the $700 billion TARP was sold on the idea that all of the funds would not be needed. The idea was to create a large fund to create confidence the U.S. would back up the financial system.