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Bailout Won't Boost Deficit

Government would be buying assets, which are worth something

By Will McCahill,  Newser Staff

Posted Sep 26, 2008 7:34 PM CDT
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(Newser) – The $700 billion bailout plan won’t have a big immediate impact on the US budget deficit, Phil Izzo explains in the Wall Street Journal, because the government would be buying assets that have an estimated value. That value will be knocked off the purchase cost. “The program does still have to be funded, and that likely means debt issuance from the Treasury,” he writes. “Once the purchase is done, the buyer owns something that has value and can be liquidated."

The deficit is currently forecast to near $440 billion for fiscal 2009, but the director of the non-partisan Congressional Budget Office sees a much bigger threat ahead, no matter how the bailout plays out—in Social Security troubles. “If one wants to worry about fiscal matters,” Peter Orszag said, “the demographically fueled entitlement problem will make the mortgage mess look like small beer.”

Henry Paulson And Ben Bernanke testify before the house in this undated file photo.
Henry Paulson And Ben Bernanke testify before the house in this undated file photo.   (Getty Images)
The $700 billion bailout might not have as big an impact on the US budget deficit, now more than $400 billion, as one might think.
The $700 billion bailout might not have as big an impact on the US budget deficit, now more than $400 billion, as one might think.   (AP Photo)
The US deficit is expected to near $440 billion next fiscal year.
The US deficit is expected to near $440 billion next fiscal year.   (AP Photo)
Because the $700 billion would go to buy assets, the bailout wouldn't increase the US budget deficit as much as some predict.
Because the $700 billion would go to buy assets, the bailout wouldn't increase the US budget deficit as much as some predict.   (AP Photo)
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More hand-wringing on the deficit
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