A few days ago, Portugal officially requested a $116 billion bailout from the European Union and the International Monetary Fund. This makes Portugal the third European nation to seek such a bailout in the past year (Greece got $157 billion; Ireland $122 billion). What most people don’t realize is that the U.S. is the largest contributor to the IMF. Therefore, U.S. taxpayers are paying for Portugal’s bailout, which — like the earlier bailouts of Greece and Ireland — was caused by too much government spending and borrowing.
Last year, at the start of the Greek debt crisis, E.U. bureaucrats insisted that no U.S. tax dollars would be included in a bailout. I didn’t believe it. And on March 24, 2010, I warned that President Obama’s silence on the matter was making it more likely that U.S. taxpayers would help foot the bill. That’s exactly what happened. Not long after, the IMF created a $356 billion bailout fund for European governments with the consent of the Obama administration. That fund will likely cost U.S. taxpayers between $50-100 billion — and it was all done without a vote in Congress.
On April 29, 2010, Rep. Mike Pence (R-IN) and I wrote a letter to Treasury Secretary Tim Geithner warning of the dangers of U.S. participation in a Greek bailout. “The Obama administration needs to understand that bailing out Greece will not solve Greece’s problems,” I said at the time. “It will only create a moral hazard that gets America more involved in the gathering storm of European bailouts.” That storm has since consumed Ireland and Portugal and others may be on the way.
At a time when the U.S. government is borrowing $5 billion every day on top of a $14 trillion national debt, does it really make sense for us to borrow even more money (much of it from China) to help bail out Europe? After all, the European crisis was caused by too much spending and borrowing, and that crisis will not be solved by more spending and borrowing.
While the IMF refuses to provide a reliable number, we estimate that America’s contribution to a Portuguese bailout is equal to writing a check worth $600 for every man and woman in Portugal. This largesse makes it more likely that larger counties — particularly Spain and Italy — will be standing in line for U.S. tax dollars tomorrow. That is unacceptable. We cannot take the “too big to fail” philosophy to a global level. The only thing “too big to fail’ is America itself.
Rep. Cathy McMorris Rodgers is Vice Chair of the House Republican Conference and represents Washington State’s 5th Congressional District. A compilation of her work on this issue can be found here.