Suspected racist wants you to know that TARP is going to hurt a lot more than you think

The TARP’s Special Inspector General issued a blistering report on Wednesday stating that the financial sector bailout will cost the tax-payers billions of dollars but that the government stands to lose much more than the money it’s pouring into companies and which further contributes to our growing suspicions that we will experience a double-dip recession which we wrote about previously, here.

Neil Barofsky, the TARP SIG, laid it out in essentially 3 points:

1. The hard cost of borrowing the money: We’ve been lucky in that the Treasuries we’ve sold to fund the $467 billion we’ve spent so far in this particular bailout have been at historically low interest rates. However, as our debt continues to grow, interest rates will rise in response as we need to sweeten the pot to get people to buy this debt. It sort of feeds on itself.

2. The cost of indulging bad behavior: Far from being merely psychological in nature, this continuing indulgence indicates we don’t seem to be learning the lessons of what got us here in the first place and appear very intent in repeating all the same mistakes. Double-dip recession.

3. Cost of political distrust: The lack of transparency in the TARP program, specifically with respect to how companies that have received TARP money are spending it causes the government to lose credibility with the public. And let’s not forget about those tax-payer funded bonuses TARP babies are getting. Barofsky believes this loss of credibility will harm the federal government’s ability to pass needed legislation in the future. It’s like, imagine if the current healthcare reform bill did not stink as bad as it does. What if it actually reformed something? Obviously, this public distrust thing cuts both ways.

The last two points are what has driven tens of thousands of people who have never protested or demonstrated a single day in their lives out to the streets. They may not know exactly or be able to precisely articulate every single detail and nuance of Bailout Nation. There is a well-grounded intuitive sense, however, that what is going on isn’t right.

Then again, Barofsky is probably just un-patriotic as well as racist.

So, what are we doing about all this? Absolutely nothing. In fact, we’re compounding the problem.

Again, “we” seem to lack the fortitude to face up to this mounting risk. Just this week, the CBO tabbed the current House version of health care reform at $900 billion. Remember, the President pledged that health care reform is to be deficit neutral so in order to fund it there will be cuts in medicare reimbursements to doctors and tax hikes.

The tax hike part of the equation is easy enough but what about effective pay cuts to the physicians? In order to get all those white lab-coated doctors back onboard, a $247 billion kickback to the doctors is making its way through Congress in a completely different bill… and with no professed way to pay for it.

Also, the President plans to buy off seniors to the tune of $14 billion worth of $250 “stimulus” checks to 57 million people… again, with no way to pay for it.

We hate to be pessimists, it’s not in our nature but the numbers quite simply do not add up. Any sort of rebound in the near or mid-term future looks like it will be thwarted by rising interest rates and tax hikes.

And because we do believe ourselves to be somewhat patriotic and somewhat not racist, we hope we are completely wrong.

P.S. More good news: housing prices are expected to drop 11% by next summer. The two big twins: housing and finance don’t appear to be getting any better. What are we missing?