Stimulus and Bailout – 2 Different Things
Because the amount of money being doled out are similar in both cases, there is often confusion that the U.S. government’s bailout policy is the same thing as the stimulus package currently in the news. Make no mistake, they are very big, very expensive, and very different things.
The $700 billion bailout is known as TARP, or Troubled Asset Relief Program. The Treasury has distributed these TARP funds to troubled financial corporations and banks such as Fannie Mae, Citigroup, etc. in an effort to prevent a complete avalanche of financial failings. Roughly half of the funds are still not earmarked as the Treasury must decide what next to “rescue,” whether it be the auto industry, swallow up the other banks’ bad assets, or another approach.
The economic stimulus being promoted by Barack Obama is a spending effort by the government to right the economic ship in America. Slowly ballooning from $819 billion when it originally passed in Congress to well over $900 billion now, the Stimulus Bill is awaiting approval from the Senate. Some senators still need to change their votes for the bill to be passed, but it should be noted of what government stimulus consists:
“The Congressional Budget Office defines the goal of any such package this way: ‘Fiscal stimulus aims to boost economic activity during periods of economic weakness by increasing short-term aggregate demand.’ The theory is that if more goods and services are being bought, whether cement for a new highway or groceries paid for with a tax rebate, there is less chance that falling demand will lead companies to lay off workers, resulting in greater falls in demand and a deeper downturn.” (Source: NYTimes.com)
Read on:
WSJ – Watchdog Says U.S. Overpaid For Troubled Assets of Banks
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[...] a quick update to the previous post, the Senate has trimmed down the total amount of the stimulus package and reached a tentative deal. [...]