Congressional Budget Office
Director's Blog

Today CBO released the fourth of its statutory reports on transactions undertaken as part of the Troubled Asset Relief Program (TARP)—the program established in October 2008 to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” The report discusses CBO’s estimate of the costs of transactions completed, outstanding, and anticipated under the TARP as of November 18, 2010. The report also provides a comparison of CBO’s estimate with that published by the Office and Management and Budget (OMB) in October.

CBO estimates that the cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), including grants that have not been made yet for mortgage programs, will amount to $25 billion. That cost stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding mortgage foreclosures: CBO estimates a cost of $45 billion for providing those three types of assistance. Other transactions will, taken together, yield a net gain of $20 billion to the federal government, CBO estimates.

It was not apparent when the TARP was created two years ago that the costs would be this low. At that time, the financial system was in a precarious condition, and the transactions envisioned and ultimately undertaken through the TARP engendered substantial financial risk for the federal government. However, the cost has come out toward the low end of the range of possible outcomes anticipated when the program was launched. Because the financial system stabilized and then improved, the amount of funds used by the TARP was well below the $700 billion initially authorized, and the outcomes of most transactions made through the TARP were favorable for the federal government.

CBO’s current estimate of the cost—$25 billion—is substantially less than the $66 billion estimate incorporated in the agency’s latest baseline budget projections (issued in August 2010) and the $109 billion estimate shown in the agency’s previous report on the TARP (issued in March 2010).  The reduction in estimated cost over the course of this year stems from several developments:

• Additional repurchases of preferred stock by recipients of TARP funds; 
• A lower estimated cost for assistance to AIG and to the automotive industry; 
• Lower expected participation in mortgage programs;
• The elimination of the opportunity to use TARP funds for new purposes (because of the passage of time and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act). 

This report was prepared by Avi Lerner of CBO’s Budget Analysis Division.

Today I spoke to the National Tax Association in Chicago and earlier this week I spoke to the Society of Government Economists in Washington, D.C.  This week’s presentations are quite similar to those that I gave last month in Los Angeles and New York. (See my posts on October 27 and October 21.)  I highlighted aspects of my testimony to the Senate Budget Committee in late September, reviewing CBO’s recent analyses of the economic outlook and the potential impact on the economy of various fiscal policy options that CBO studied earlier in the year. I also discussed CBO’s estimates of the economic impact of extending some or all of the 2001 and 2003 tax cuts that are scheduled to expire at the end of the year.

This morning, CBO issued its Monthly Budget Review, which summarized the end-of-year budget results reported by the Treasury for fiscal year 2010. In that year, which ended on September 30, the federal government recorded a total budget deficit of $1.3 trillion, $122 billion less than the deficit incurred in 2009. The deficit fell as a share of the nation’s gross domestic product (GDP) from 10.0 percent in 2009 to 8.9 percent in 2010—the second-highest deficit as a share of GDP since 1945 and about four times the average deficit as a share of GDP recorded between 2005 and 2008.

The large deficits in 2009 and 2010 reflect a combination of factors: an imbalance between revenues and spending that predates the recent recession, sharply lower revenues and elevated spending associated with those economic conditions, and the costs of federal policies implemented in response to those conditions. Revenues in 2010 were 16 percent below the peak amount reached in fiscal year 2007 and only slightly above the amount collected in 2005. Total revenues in both 2009 and 2010 were 14.9 percent of GDP, the lowest share since 1950. In contrast, outlays in 2010 were 27 percent more than spending in 2007.

Receipts and Outlays
As a Percentage of GDP

Sources: Department of the Treasury; CBO

The deficit was smaller in 2010 than in 2009 because revenues increased and spending declined. Receipts in 2010 rose for the first time in three years, reaching $2,162 billion, up 3 percent from collections in 2009. Expenditures decreased by $64 billion (or 2 percent) from 2009 to 2010.

On the revenue side, corporate income tax receipts showed the largest gain in dollar terms from 2009 to 2010—$53 billion (or 38 percent). Despite the gain, those receipts were just over half as large as in 2007 and 37 percent below the amount collected in 2008. The gain in corporate income tax receipts can be attributed to higher taxable profits resulting from both improved economic conditions and the temporary lapse of provisions that allowed taxpayers to take higher depreciation charges in 2009. Receipts from the Federal Reserve also rose substantially, increasing by almost $42 billion to an amount more than double the 2009 receipts. The central bank’s increased profits resulted from an enlarged portfolio and a shift to riskier and thus higher-yielding investments.

Those gains in 2010 receipts were partially offset by declines in receipts from social insurance (payroll) taxes of $26 billion (or 3 percent) and individual income taxes of $17 billion (or 2 percent). Receipts during the first several months of the fiscal year were below those during the same period in 2009. But in the last five months of fiscal year 2010, collections of withheld and nonwithheld taxes, which were based on taxable incomes in 2010, were 4 percent higher than in the same period in 2009.

Spending related to the financial crisis dropped sharply in 2010. Net outlays recorded for the Troubled Asset Relief Program (TARP), federal deposit insurance, and Treasury payments to Fannie Mae and Freddie Mac were $367 billion lower in 2010 than in 2009. Conversely, spending associated with the American Recovery and Reinvestment Act (ARRA)&emdash;the stimulus bill&emdash;rose by approximately $110 billion to a total of roughly $225 billion.

Outlays for defense rose by 4.7 percent in 2010, lower than the previous year’s increase of 7.1 percent and about half the average annual growth rate of 8.8 percent over the past decade. The 3.4 percent rise in spending for procurement was markedly lower than recent double-digit growth, and spending on research and development declined by 2.6 percent—the first drop since 1999. Nearly one-quarter of military spending in 2010 was associated with operations in Iraq and Afghanistan—about the same portion as in 2008 and 2009, CBO estimates.

Outlays for the three largest entitlement programs—Social Security, Medicare, and Medicaid (not including spending from ARRA)—rose by 5.4 percent in 2010. That increase was smaller than the 7.0 percent average annual growth over the past five years. Nevertheless, Social Security outlays as a share of the economy grew for the fifth consecutive year, rising from 4.1 percent of GDP in 2006 to 4.8 percent of GDP in 2010. Spending for Medicare and Medicaid (excluding the effects of ARRA) represented 4.7 percent of GDP, compared with an annual average of 4.1 percent of GDP experienced over the past five years.

Payments for unemployment benefits were one-third greater in 2010 than in 2009. Those payments totaled $162 billion (or 1.1 percent of GDP), more than triple the amount paid in 2008. Spending for net interest on the public debt also increased to 1.6 percent of GDP, up from 1.4 percent of GDP in 2009. Spending on the wide variety of other federal programs accounted for about 30 percent of the budget and was equal to 7.2 percent of GDP, slightly more than spending in 2009 and the average over the past five years.

I am speaking today to the Forecasters Club in New York. My remarks are the same as those I gave to Town Hall Los Angeles on Friday. You can read a summary in Friday’s blog posting or check out the slides.

I am honored to be speaking today to “Town Hall Los Angeles,” which has been providing a public forum for discussion of important issues since 1937. My remarks highlight aspects of my testimony to the Senate Budget Committee a few weeks ago. (Sorry, Town Hall LA does not use slides, so there is nothing to accompany this summary.)

CBO and most private forecasters expect that the economic recovery will proceed at a modest pace during the next few years. In the forecast that we completed this summer, the unemployment rate remains above 8 percent until 2012. Two key factors influence that forecast. First, international experience suggests that recoveries from recessions that were spurred by financial crises tend to be slower than average. Following such a crisis, it takes time for consumers to rebuild their wealth, for financial institutions to restore their capital bases, and for nonfinancial firms to regain the confidence required to invest in new plant and equipment; all of those forces tend to restrain spending. Second, our projection is conditioned on current law, under which both the waning of fiscal stimulus and the scheduled increases in taxes (resulting from the expiration of previous tax cuts) will temporarily subtract from growth, especially in 2011.

Weak economic growth has serious social consequences. About 9½ percent of the labor force is officially unemployed, but many other people are underemployed or have become discouraged and left the labor force. The increase in unemployment is not uniform across demographic groups or regions; rather, the unemployment rate has risen disproportionately for less-educated workers, for men, and for people living in certain states. Moreover, the incidence of unemployment lasting longer than 26 weeks has been the highest by far in the past 60 years. CBO published an issue brief in April about the personal consequences of job losses.

Policymakers cannot reverse all of the effects of the housing and credit boom, the subsequent bust and financial crisis, and the deep recession. However, in CBO’s judgment, there are both monetary and fiscal policy options that, if applied at a sufficient scale, would increase output and employment during the next few years. In a report last January, we analyzed a diverse set of temporary policies and reported their two-year effects on the economy per dollar of budgetary cost, what one might call the “bang for the buck.” The overall effects of those policies would depend also on the scale at which they were implemented; making a significant difference in an economy with an annual output of nearly $15 trillion would involve a considerable budgetary cost.

In brief, CBO found the following: A temporary increase in aid to the unemployed would have the largest effect on the economy per dollar of budgetary cost. A temporary reduction in payroll taxes paid by employers would also have a large bang-for-the-buck, as it would both increase demand for goods and services and provide a direct incentive for additional hiring; this approach also could be scaled to a significant magnitude. Temporary expensing of business investments and providing aid to states would have smaller effects, and yet smaller effects would arise from a temporary increase in government spending on infrastructure or a temporary across-the-board reduction in income taxes.

However, there would be a price to pay for fiscal stimulus: Those same fiscal policy options would increase federal debt, which is already larger relative to the size of the economy than it has been in more than 50 years—and is headed higher. If policymakers wanted to achieve both stimulus and sustainability, a combination of policies would be required: changes in taxes and spending that would widen the deficit now but reduce it relative to baseline projections after a few years.

To illustrate this point, we analyzed both the short-term and longer-term effects of various options for extending the 2001 and 2003 tax cuts, extending higher exemption amounts for the AMT, and reinstating the estate tax as it stood in 2009 (adjusted for inflation). As I reported in the recent testimony, permanently or temporarily extending all or part of the expiring income tax cuts would boost income and employment in the next few years relative to what would occur under current law. That would occur because, all else being equal, lower tax payments increase demand for goods and services and thereby boost economic activity. That increase in demand is crucial because we think that economic growth in the near term will be restrained by a shortfall in demand. A permanent extension of the tax cuts would provide a larger boost to income and employment in the next two years than would a temporary extension. In addition, an extension of all of the provisions would provide a larger boost than would an extension of all provisions except those applying only to high-income taxpayers.

But the effects of extending those tax cuts on the economy in the longer term would be very different from their effects during the next two years. The longer-term effects would be the net result of two competing forces: All else being equal, lower tax revenues increase budget deficits and thereby government borrowing, which reduces economic growth by crowding out investment. At the same time, lower tax rates boost growth by increasing people’s saving and work effort. Those effects on the supply of labor and capital are crucial because we think that economic growth over that longer horizon will be restrained by supply factors. For some of the options, our estimates of the net effect of these forces based on different models and assumptions span a broad range. But the averages of the estimates across different models and assumptions indicate that all four of the options we analyzed—permanently or temporarily extending all or part of the expiring income tax cuts—would probably reduce national income in 2020 relative to what would otherwise occur. Beyond 2020, the reductions in income from all four of the policy options would become larger—especially for the permanent extensions.

Similarly, permanent large increases in spending that were not accompanied by reductions in other spending or tax increases would also put federal debt on an unsustainable path. For example, if discretionary appropriations apart from those for operations in Iraq and Afghanistan increased at the rate of growth of nominal GDP, rather than increasing just with inflation as assumed in our baseline, debt held by the public would reach nearly 80 percent of GDP by 2020.

The federal government’s fiscal year 2010 has come to a close, and CBO estimates, in its latest Monthly Budget Review, that the federal budget deficit for the year was slightly less than $1.3 trillion, $125 billion less than the shortfall recorded in 2009. Relative to the size of the economy, the 2010 deficit was the second-highest shortfall—and 2009 the highest—since 1945. The 2010 deficit was equal to 8.9 percent of gross domestic product (GDP), CBO estimates, down from 10.0 percent in 2009 (based on the most current estimate of GDP). CBO’s deficit estimate is based on data from the Daily Treasury Statements and CBO’s projections; the Treasury Department will report the actual deficit for fiscal year 2010 later this month.

The estimated deficit is about $50 billion less than CBO projected in its August Budget and Economic Outlook. Outlays turned out to be lower and revenues higher than CBO anticipated.

Outlays

Outlays ended the year about 2 percent below those in 2009, CBO estimates. That decline resulted primarily from a net reduction in outlays for three items related to the financial crisis: the costs of the TARP ($262 billion lower than in 2009), payments to Fannie Mae and Freddie Mac ($51 billion lower), and federal deposit insurance ($55 billion lower). Excluding those three programs, spending rose by about 9 percent in 2010, somewhat faster than in recent years.

Payments for unemployment benefits rose by 34 percent in 2010 because of high unemployment and increased benefits provided by various laws, including the American Recovery and Reinvestment Act (ARRA). Other ARRA provisions led to double-digit growth in spending for a number of programs—particularly the State Fiscal Stabilization Fund, refundable tax credits, and certain education programs. In contrast, defense spending grew more slowly than in recent years, increasing by about 5 percent in 2010 after rising by an average of 8 percent annually from 2005 through 2009. Medicare and Social Security outlays rose by about 5 percent this year, somewhat less than in most recent years. The 9 percent increase in Medicaid outlays partly reflects a temporary increase in the federal share of Medicaid assistance authorized in ARRA; excluding ARRA-related expenditures, Medicaid outlays rose by about 6 percent.

Receipts

CBO estimates that total receipts rose by 3 percent in 2010, following declines in each of the prior two years. Growth in receipts of corporate income taxes and remittances from the Federal Reserve more than offset reduced collections of individual income and payroll taxes in 2010.

Corporate income tax receipts rose by $53 billion (or 39 percent) in 2010; improved economic conditions and the expiration of legislation that allowed taxpayers to take higher depreciation charges in 2009 has resulted in higher taxable profits in 2010. Receipts from the Federal Reserve increased by $42 billion this year, to more than double the amount received in 2009. The central bank’s increased profits resulted from an enlarged portfolio and a shift to riskier and thus higher-yielding investments in support of the housing market and the broader economy.

Those increases were partially offset by a drop in the total of individual income and payroll taxes, which were about $43 billion (or 2 percent) less than those receipts in 2009. That result occurred primarily because withheld income and payroll taxes declined by about $13 billion (or 1 percent), and nonwithheld receipts fell by about $35 billion (or 10 percent). In both instances, the declines occurred early in the fiscal year and were largely attributable to lower collections of tax liabilities incurred in 2009. Collections of income and payroll taxes in the past five months are 4 percent above the amounts collected during the same period in 2009.

The Monthly Budget Review was prepared by Elizabeth Cove Delisle and Daniel Hoople of CBO's Budget Analysis Division, and by Barbara Edwards and Joshua Shakin of our Tax Analysis Division.
 

In September 2008, the federal government took control of Fannie Mae and Freddie Mac—two government sponsored enterprises (GSEs) that provide credit guarantees on more than half of the outstanding residential mortgages in the United States. Although they are not legally federal agencies, the government operates them to fulfill the public purpose of supporting the housing and mortgage markets. Therefore, CBO believes that it is appropriate to include the GSEs’ financial transactions in the federal budget.

In its August 2010 baseline projections, CBO included an estimated $53 billion in costs for new mortgage guarantees that Fannie Mae and Freddie Mac will make over the 2011–2020 period. That estimate was made using a so-called “fair-value” basis of accounting, which differs from the way most federal credit programs are reflected in the budget. In a letter sent today to Congressman Barney Frank, CBO discusses that estimate and compares it with the budgetary impact that would be estimated using the procedures specified in the Federal Credit Reform Act of 1990 (FCRA), which governs the accounting for most federal direct loans and loan guarantees. CBO estimates that on a FCRA basis, Fannie Mae’s and Freddie Mac’s new mortgage guarantees made over the 2011–2020 period would generate total budgetary savings of $44 billion.

Both types of estimates use an accrual basis of accounting (the estimates represent the lifetime cost of credit commitments at the time when a federal loan or guarantee is provided) and are based on the same projected cash flows—but the estimates are very different because they involve the use of different discount rates to convert the expected future cash flows into one number representing the present value of those transactions. FCRA estimates are based on Treasury rates (which are generally viewed as risk-free), whereas fair-value estimates employ discount rates that are adjusted to match the risk of the specific credit obligation. Because it fully accounts for such risk, the fair value of a federal loan guarantee represents the amount that would have to be paid to induce a private entity to assume that liability in an orderly market.

The fair-value approach thus provides a more comprehensive measure of cost because it recognizes the cost to taxpayers when the government assumes financial risk. FCRA accounting, by omitting part of the cost of risk, makes a federal direct loan or loan guarantee appear to be less costly than an economically equivalent grant program. However, using the fair-value approach to account for the budgetary cost of the GSEs has the drawback that it reduces the comparability of the GSEs’ cost with that of other federal mortgage guarantee programs, such as those operated by the Federal Housing Administration.

The Administration takes a different approach to showing the impact of Fannie Mae and Freddie Mac on the federal budget. It treats the GSEs as separate from the federal government, and records the cash transactions between those two GSEs and the federal government. That is, it shows the payments the government makes to those entities when it purchases preferred stock, less the dividends Fannie Mae and Freddie Mac pay to the government. CBO estimates that those cash transactions will result in net receipts to the government of $8 billion over the 2011–2020 period, reflecting additional costs for more cash infusions from the Treasury in the near term (2011 and 2012) and dividend payments from the GSEs to the Treasury that will exceed cash infusions in subsequent years. That budgetary treatment, however, does not reflect the governmental nature of the GSEs’ activities, nor does it capture the full cost of the risks associated with them.
 

I’m speaking this afternoon to the Washington Policy Seminar sponsored by the Macroeconomic Advisers forecasting firm.  My presentation draws on several reports that CBO has released over the course of this year and emphasizes these points:

• CBO and most private forecasters expect that the economic recovery will proceed at a modest pace during the next few years. For example, in the forecast that we completed in early July, the unemployment rate remains above 8 percent until 2012. In addition, the economic data released since we finished that forecast have been weaker than we had expected, so if we were to construct a new forecast today, we would project slightly slower growth in the near term.
• Weak economic growth has serious social consequences. About 9½ percent of the labor force is officially unemployed, but many other people are underemployed or have left the labor force. The increase in unemployment is not uniform across demographic groups or regions, with larger run-ups for less-educated workers, men, and people living in certain states. The incidence of unemployment lasting longer than 26 weeks has been the highest by far in the past 60 years. As discussed in our April issue brief, the short-term and long-term impact on people of losing a job during a recession can be very significant.
• Some observers have argued that there is not much that policymakers can do about the weakness of the recovery. That is not our view at CBO. Although there are no magic cures, we do think there are both monetary and fiscal policy options that, if applied at a sufficient scale, would increase output and employment during the next few years (but not overnight). Such options would have costs though—in particular, expansionary fiscal policy would increase federal budget deficits and debt relative to current baseline projections, which are already quite worrisome.
• One key question I’ve been asked in the debate about fiscal policy: What sorts of fiscal policies would actually encourage greater economic activity and more employment? Fiscal policy can affect behavior through several channels: by changing direct demand for goods and services, changing people’s current and/or expected income, changing the payoff from extra work effort and saving, changing the cost of investment, and so on. Predicting the effects of particular policies is difficult, and estimates are quite uncertain.
• In January of this year, we published a study titled Policies for Increasing Economic Growth and Employment in 2010 and 2011. We studied temporary policy changes to be enacted in early 2010, because most observers were interested in the question of how to provide a short-term boost to the economy without significantly worsening the medium- and long-term budget situation. In most cases, permanent changes would generate larger short-term stimulus but would have substantially larger medium- and long-term budget and economic costs. We estimated the “bang for the buck” of different policies; of course, the effect on the economy would also depend on the scale of the policies. This graph summarizes our estimates:

Cumulative Effects of Policy Options on Employment in 2010 and 2011, Range of Low to High Estimates

• The other key question I’ve been asked: How can short-term fiscal stimulus be reconciled with the imperative—and it is a critical imperative—to put fiscal policy on a sustainable medium-term and long-term path? As I said to the Fiscal Commission at the end of June, there is no intrinsic contradiction between providing additional fiscal stimulus today, while the unemployment rate is high and many factories and offices are underused, and imposing fiscal restraint several years from now, when output and employment will probably be close to their potential.
• If taxes were cut or government spending were increased permanently that would worsen the already worrisome fiscal outlook, as shown in the graph below.  Even if changes were temporary, the additional debt accumulated during that temporary period would weigh on the budget and the economy in the future. Achieving both stimulus and sustainability would require a combination of policies. If policymakers wanted to avoid worsening the large medium-term and long-term imbalance between federal spending and revenue, any policies that widened budget deficits in the near-term would need to be accompanied by specific policies to reduce spending or increase revenue over time.

Rising Burden of Federal Debt Held by the Public

• In summary, the economic recovery will probably proceed at a modest pace—leaving total output well below its sustainable level, and the unemployment rate well above its sustainable level, for a number of years. In CBO’s judgment, the available monetary and fiscal tools, if applied at sufficient scale, would improve economic conditions during the next few years—though with costs and risks in the medium and long term. Policymakers need to address those trade-offs.
   

The federal government incurred a deficit of nearly $1.3 trillion in the first 11 months of fiscal year 2010, CBO estimates in its latest Monthly Budget Review—a total that is about $100 billion less than the shortfall recorded through August of last year. Outlays are about 2 percent less than they were in the first 11 months of 2009, whereas revenues have increased by 1 1/2 percent.

CBO recently released its latest annual budget estimates for 2010 and beyond in the Budget and Economic Outlook: An Update. CBO estimates that the deficit for 2010 will be about $70 billion below last year’s total, but will still exceed $1.3 trillion. Relative to the size of the economy, this year’s deficit is expected to be the second-largest shortfall in the past 65 years: At 9.1 percent of gross domestic product (GDP), that deficit will be exceeded only by last year’s deficit of 9.9 percent of GDP.

By CBO’s estimate, spending through August was $77 billion (or about 2 percent) less than during the same period last year. That decline includes a net reduction in outlays of about $373 billion for three items related to the financial crisis: the costs of the TARP (a reduction of $274 billion from 2009), payments to Fannie Mae and Freddie Mac (a drop of $42 billion), and federal deposit insurance (a decline of $57 billion). Excluding those three programs, outlays through August increased by $296 billion (or 10 percent) relative to spending in the same period last year. Slightly more than one-third of that increase stemmed from provisions in the American Recovery and Reinvestment Act (ARRA), the majority of which was for the State Fiscal Stabilization Fund and other Department of Education programs, additional unemployment benefits, refundable tax credits, and the federal share of Medicaid assistance.

Several major entitlement programs accounted for another one-third of the overall increase in spending. Social Security benefits increased by $34 billion (or 6 percent) and Medicare expenditures rose by $19 billion (or 5 percent). Excluding spending under ARRA, outlays for unemployment benefits were $35 billion higher and Medicaid spending was $12 billion higher than in the previous year. Outlays for net interest on the public debt were $24 billion (or 13 percent) higher than during the same period last year. Most of that growth reflects adjustments to the value of inflation-indexed securities.

Total receipts for the first 11 months were $29 billion (or 1 1/2 percent) higher than in the same period last year.  Higher net corporate income taxes and receipts from the Federal Reserve have been partially offset by declines in individual income and payroll taxes. Corporate income taxes rose by $32 billion (or 30 percent) primarily because of higher taxable profits stemming from improved economic conditions and lower depreciation charges. With an increase of $41 billion, receipts from the Federal Reserve were more than double the amount received in the comparable period in 2009. The Federal Reserve’s higher remittances stem from a much larger portfolio and a shift to riskier and thus higher-yielding investments.

In contrast, combined receipts from individual income and payroll taxes declined by about $47 billion (or 3 percent) compared with receipts in the same period last year. Withheld income and payroll taxes fell by about $19 billion (or 1 percent), and nonwithheld receipts fell by about $37 billion (or 12 percent). In both instances, the declines occurred earlier in this fiscal year and were largely attributable to lower collections from tax liabilities incurred in 2009.

The Monthly Budget Review was prepared by Elizabeth Cove Delisle and Daniel Hoople of CBO's Budget Analysis Division, and by Barbara Edwards and Joshua Shakin of our Tax Analysis Division.
 

In March, CBO estimated that the total cost of the Troubled Asset Relief Program (TARP) would be $109 billion over the life of the program.  That estimate (which represented the present value, adjusted for market risk, of the program’s activities) was based on market values in February, actions that had occurred up to that time, and an assumption that additional amounts would be allocated to programs that were not yet specified.  In the baseline budget projections that CBO released yesterday, the lifetime cost of the program has been reduced to $66 billion.  Three factors account for the reduction: further repurchases of preferred stock and sales of warrants from banks, a lower estimated cost for assistance to the automobile industry, and the elimination (due to the passage of time and provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203) of the opportunity to create new programs.  Additional information about CBO’s current projections of the cost of the TARP can be found on page 9 of yesterday’s Budget and Economic Outlook: An Update.  CBO will release its next report on the activities and cost of the TARP in the fall.