Robbing TARP to pay Paul?

The Obama administration knows it has to get serious about tackling the deficit and the national debt. Apparently, it’s considering the following plan: take a chunk of money from the credit line kitty known as TARP and pay down the deficit.

The initial reaction to today’s Wall Street Journal story paints this as a shell game, a robbing-Peter-to-pay-Paul situation. Dealbreaker penned this imaginary quote:

“While we are not happy to have to contemplate this measure, the deficit is such that all options must be considered,” White House Press Secretary Robert Gibbs said at today’s daily press briefing. “Programs like TARP have put us so deeply in debt that we may have no choice but to resort to TARP funds.”

The Journal story is filled with sarcastic comments like this one:

This is another brilliant move. But why don’t they extend this to a logical conclusion. We use $12T of TARP money and pay off ALL the debt? This is so easy, I should be a politician.

I don’t blame people for thinking that way. But in this case, I’m not sure it’s fair. Our Washington bureau chief John Dimsdale is reporting on this for tonight’s Marketplace. I just had a brief chat with him.

His main points: This was money that was set aside. The administration would just be deciding not to use it. Yes, we’d be paying interest on the money that was borrowed to create the kitty, but that’s about it. As John says, ” if you’re going to get out of the hole, you have to stop digging sometime.”

Especially when the hole you’ve dug might be filled with leeches and other creepy crawlies. Consider this Newsweek characterization of TARP:

“Tracking the funds over the last year, figuring out who got what from where, has been like following laundered money, leading to a situation rife with conspiracy theories and potential conflicts of interest.”

When you consider that, folding some of the TARP money back into the budget doesn’t sound like robbery at all. It might be robbery prevention.

But maybe you see it differently?