Politico: In a World Without Citigroup, Survivors Would Envy the Dead

As you pack up your beach chair and bid the Summer of Recovery goodbye, you may notice that the shoreline is still strewn with bodies. Manufacturing is down. Home prices are down. Even the "Diesel Fuel Index" is down. Formerly recession-proof industries from gambling to cable to death itself are struggling.

So what better time to celebrate the success of the government program that did so much to make it all possible? Politico's Ben Smith declares the Bush Administration's Troubled Asset Relief Program a "success none dare mention."

Smith's argument, to put it mildly, is political rather than economic. He posits that the program staved off the economic hyperpocalypse, but that this achievement has largely been lost on a public too stupid to know what's good for them. Politicians are "generally scared" of a "rank and file" that has managed to channel "anger into an assault on members of Congress who voted for the measure." This last part is not a particularly bold claim, and Smith finds some funny examples of TARP supporters trying to recast themselves as TARP opponents. The TARP is extremely unpopular.

And it deserves to be. Smith's defense of the TARP consists of the shrill, panicky rhetoric we have heard many times before: "meltdown," "looked into the abyss," "narrowly avoided another Depression," "bread lines and cat food," "apocalypse avoided," "dark scenario," "1930s-like depression," "consensus," "consensus," and "consensus."

Some of the facts are wrong: "The banks at the center of TARP" have not "paid the money back" unless Citi has stopped being a bank.

Others are misleading: Smith asserts without evidence that the TARP is "widely viewed as the original sin of the Obama administration," but elsewhere notes that Democrats have spent more money on anti-bailout campaign ads this cycle than Republicans.

And others are both misleading and wrong: Even if the top 10 TARP recipients had paid back their bailouts (they haven't), there is still a large and growing list of TARP deadbeats once you get outside the major leagues.

If the "angry electorate" Smith condemns is having trouble recognizing the TARP's life-giving properties, that could be the stark contrast between the recovery described by political hacks and the recession as measured by the growing number of For Lease signs in towns all over this country. But Smith is here to disambiguate us all:

Polls suggest the public has only the haziest view of what TARP was. It's often conflated — not least by politicians who voted for it and now seek to muddy the waters — with the stimulus, a piece of policy whose supporters and foes have fallen into a much more familiar debate about the role of government and public spending.

How could anybody have gotten the idea that TARP and the ARRA Stimulus are related? Could it be that four of the 10 largest TARP payouts went to auto makers, an insurance company and the GSEs instead of going to the troubled banks the program was designed for – and that these payouts are among the nearly $400 billion in committed TARP funds that have not been paid back?

For support, Smith turns to some politicians, a Brookings Institution scholar and the July study "How the Great Recession Was Brought to an End" [pdf] by Princeton's Alan S. Blinder and Moody's Mark Zandi (two vociferous bailout supporters back in the day).

While some of that study's claims have been pre-empted by subsequent bad news, the ones that remain are pretty amusing. Zandi and Blinder point to the upcoming General Motors IPO – a nakedly political gesture completely disconnected from the company's performance – as evidence that Treasury's excellent adventure in auto and auto parts manufacturing has worked out. They consistently lowball economic performance in their no-bailout scenarios and goose it in their with-bailout projections (adding, for example, a percentage point to 2009 GDP decline more than was indicated by actual GDP performance at the time; click here for Veronique de Rugy's quick lesson how to game GDP numbers).

But in the end, even Zandi and Blinder have to allow that "It is not feasible to identify and count each job created or saved by these policies" and concede that "with the economy still weak, more government support may be needed, as seen recently in both the extension of unemployment benefits and the Fed's consideration of further easing."  Translation: Performance of the economy has been even worse than interventionists claimed it would have been without any intervention, so that proves the intervention worked. Because being a hawk means never having to say you're sorry.

If the polls are any indication, the American people have figured all this out already. Someday the media may catch up with them. Maybe we'll even have consensus.