The House and Senate appear to be on a collision course about how to pay for a new jobs bill (aka a stimulus bill). The issue? Whether Congress can pay for new jobs programs by cutting back on TARP.
The House embraced that approach in the bill it passed before Christmas. That bill–H.R. 2847, the Jobs for Main Street Act–would cut TARP authority by $150 billion. For reasons I’ve discussed before, the Congressional Budget Office scores that cut as generating $75 billion in net budget “savings.” The House bill then uses those “savings” to offset $75 billion in new spending on transportation infrastructure, support to state and local governments, and other measures.
I put “savings” in quotes because no one believes that the TARP reduction would help taxpayers by anything close to $75 billion. Back in December, Treasury Secretary Geithner estimated that TARP would use at most $550 billion of its $699 billion in existing authority. As a result, Congress can cut at least $149 billion from TARP without having any effect whatsoever on the budget. In other words, the House’s TARP rescission would reduce TARP activities by at most $1 billion (and, in practice, probably by $0). So there aren’t any real budget savings here.
But that’s not the only problem with using TARP as an offset. As I noted in another post, the drafters of TARP tried to prohibit future Congresses from using TARP rescissions to pay for new spending. That prohibition is spelled out in Section 204 of the law:
SEC. 204. EMERGENCY TREATMENT.
All provisions of this Act are designated as an emergency requirement and necessary to meet emergency needs pursuant to section 204(a) of S. Con. Res 21 (110th Congress), the concurrent resolution on the budget for fiscal year 2008 and rescissions of any amounts provided in this Act shall not be counted for purposes of budget enforcement.
The House vs. Senate debate comes down to the interpretation of that section. The House apparently does not believe that Section 204 applies. As a result, it believes that TARP rescissions can be used to “pay for” other spending increases. The Senate, however, disagrees. It believes that Section 204 forbids the use of TARP rescissions to pay for other spending.
That conflict hasn’t flared up in public yet, but it is apparent in a carefully-worded footnote in CBO’s cost estimate of the House bill:
The House Committee on the Budget does not consider the original TARP authority to have been designated as an emergency requirement. Persuant [sic] to Sec. 204 of the Emergency Economic Stabilization Act of 2008 (Division A, P.L. 110‐343), the Senate Committee on the Budget does consider the TARP authority to have been designated as an emergency requirement.
Under congressional budget rules, emergency spending gets special treatment: it doesn’t need to be paid for (a fact that the House bill uses, by the way, since it designates about $79 billion as emergency spending that needn’t be offset). To avoid some obvious abuses, the budget rules therefore specify that rescissions of emergency spending can’t be used to pay for increases in regular spending (or regular tax cuts). Based on Section 204, the Senate believes that TARP is emergency spending and therefore can’t be used to pay for new jobs programs. For reasons I don’t yet understand [readers?], the House disagrees.