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
Henry Paulson And Ben Bernanke testify before the house in this undated file photo.   (Getty Images)
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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.”