As The Wonk Room noted yesterday, Sens. Ben Nelson (D-NE) and Susan Collins (R-ME) are attempting to craft a “compromise” on the economic stimulus package. This compromise entails making devastating cuts to the proposed education funding in the bill, a significant portion of which is aimed at low-income, disadvantaged students. A draft of their proposed cuts includes:

- 50 percent of Title I funding, which goes to disadvantaged students ($6.5 billion)

- 50 percent of Head Start funding, which goes to low-income families ($1 billion)

– 50 percent of Individuals with Disabilities Education Act funding ($6.75 billion)

- 100 percent of state education stabilization funding ($24 billion)

Nelson and Collins have convened a “gang of moderates” to hash out the specific cuts from the legislation. OpenLeft has compiled a list of likely participants in the gang.

With these members in mind, it’s worth pulling up data regarding students who stand to benefit from this stimulus funding. Here are five Senators who should be very concerned with denying the proposed education funding to their constituents. Full list after the jump.

Of course, it’s not just that this would be good funding on a moral level, but also that education funding provides strong stimulus. This is money that will be spent now, preventing teacher layoffs and upgrading equipment, while at the same time making an investment in human capital. Down the line, when the stimulus effects of the funding have worn off, these investments in a better educated workforce will still be paying dividends. And by cutting it, these Senators gain…what?

There is also a flaw in the Senators’ thinking. They propose cutting 50 percent of some funding, but by leaving half of the money in they seem to be acknowledging that it is, in fact, stimulative. What is the point of affirming that funding will work as stimulus and then cutting it in half? This quibbling doesn’t do justice to the urgency of addressing our economic woes.

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Data compiled by Zachary Meisel of the Center for American Progress Action Fund.

Yesterday, Elizabeth Warren, Chair of the $700 billion Troubled Asset Relief Program’s (TARP) Congressional Oversight Panel, told the Senate Banking Committee that “the Treasury Department overpaid for the assets it purchased” under the program. Currently, the $254 billion in assets that the government bought are worth $176 billion — $78 billion less than what Treasury paid. As Warren said:

Despite the assurances of then‐Secretary Paulson, who said that the transactions were at par — that is, for every $100 injected into the banks the taxpayer received stocks and warrants from the banks worth about $100 — the valuation study concludes that Treasury paid substantially more for the assets it purchased under the TARP than their current market value.

An analysis by the Center for American Progress Action Fund (CAPAF) shows just how poorly these investments by the Treasury have fared. Looking at recipients of more than $1 billion in TARP funds, CAPAF examined the date on which each investment in a bank was made and the stock price on said date, to determine how many market days the U.S. taxpayer has been “in the money.” (Each day that money was invested in an individual bank counted towards the total, and a day was recorded as “in the money” if that day’s closing share price was greater than the price of Treasury’s warrants.)

Of the 888 possible days, taxpayers have been in the money for just 41 of them, or 4.6 percent of the time. Here is a sample of how some of the larger investments have panned out. Full table after the jump.

Of course, it wasn’t really expected that these investments would be worth much yet, considering how the deals were structured. However, this data shows that the Obama administration can almost certainly redesign TARP to be more beneficial to the taxpayer.

To that end, Treasury Secretary Timothy Geithner on Monday plans to announce the “combination of approaches” that the administration will use for the TARP overhaul: “Along with further injections of taxpayer funds into major financial firms, the strategy is likely to include guarantees for illiquid assets on banks’ balance sheets and possibly some form of a so-called bad bank that would purchase toxic investments.”

As Warren said, Treasury needs to “articulate a clear strategy, otherwise they are spending billions of dollars on an ad hoc basis.” Ad hoc is exactly the way to describe Paulson’s use of the TARP; Obama and Geithner must not fall into the same trap.

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