WASHINGTON — House Speaker Nancy Pelosi (D., Calif.) said Thursday that unused money in the Treasury Department's financial rescue plan would be used to pay for a new job-creation package.
Pelosi said that she favored using funds in the Troubled Asset Relief Program to fund initiatives to try to kick-start growth in the moribund jobs market.
In doing so, she effectively ruled out implementing a tax on financial transactions by banks and other financial institutions.
Pelosi said she still favored a tax in principle but that the U.S. would have to work with other countries to implement such a levy.
So far financial institutions have repaid around $71 billion of taxpayer money to the Treasury. That figure doesn't include the $45 billion that Bank of America Corp. said Wednesday it intends to repay.
Additionally, there is approximately $226.5 billion of the original $700 billion fund that either was never used by the Treasury or was earmarked for initiatives but not yet spent.
A senior aide to Pelosi said that no decisions had been made as to which pot of money to use, or how big the final job-creation package would be.
He said House Democrats are talking to their counterparts in the Senate as well as in the Obama administration.
Lawmakers are aware of the possible political risk if, in spending money to spur job creation, they add to the federal government's budget deficit, already running at historically high levels.
Were they to use unspent Tarp money to offset the cost of any job package, this wouldn't add to the deficit according to the complicated budgetary rules. If returned Tarp money were used, however, it would add to the deficit.
Another potential wrinkle is that the administration has unveiled plans to use a portion of the Tarp funds to provide liquidity to regional and community banks in a bid to increase capital available to small businesses.
House Minority Leader John Boehner (R., Ohio) said he disagreed with the idea of redirecting Tarp funds to a job-creation vehicle.
"This idea that we're going to take this ... money that's being paid back to the government and then turn around and spend it on useless government programs ... is a very big mistake," Boehner said Thursday at a press conference.
Pelosi said serious thought is being given to investments in transportation infrastructure, seen by economists as one of the most efficient ways of creating jobs quickly.
She also said money could be used to preserve public-sector jobs such as firefighters, police and health-care providers.
The senior Pelosi aide said this would be distributed by bypassing state governments and providing funds directly to local or regional governments.
The aide also said there was little support for a tax credit for employers who hire new workers. The administration had floated this proposal earlier in the year. There is also likely to be a further extension of federal jobless benefits and funds to pay for a measure subsidizing health-care costs for people who have lost their jobs, Pelosi said.