The Political Economy of TARP
Among the many faults of TARP, the most enduring is probably the way it discredited the concept of fiscal discipline. Now, all restraints on deficit spending have been lifted. For documentation of the huge rise in spending and deficits relative to GDP going forward, see Keith Hennessey, Philip Klein, and Hennessey again.
We were sold TARP and the stimulus as temporary measures to fight recession. But as the linked posts show, once the economy recovers, spending picks up again. Instead of TARP and the stimulus serving as temporary policies, they have been added to the spending baseline.
This is not a surprise. At some level, Bush and Paulson had to know that it was going to happen. And yet they pressed for it, anyway. If some day the U.S. faces hyperinflation because of its fiscal mess, so that people have to pay for bread with million-dollar bills, I think those bills should come with Paulson’s picture on them.