Imagine the following scenario: Your irresponsible teenage son has spent far beyond his monthly allowance. As a result, he’s overdrafted his bank account and incurred a nasty bank fee. Now, as a parent struggling to pay your own bills, which of the following two reactions would you choose? Would you be inclined to discipline your child and make him pay his debt? Or would you think it better to increase his future allowance in the hope he stays on budget next time? Any responsible parent knows the answer to this simple question. Only in Washington could this sort of common-sense, kitchen-table logic be puzzling.
American taxpayers are the single largest contributors to the International Monetary Fund, an organization that claims to promote economic development by stabilizing currency exchange rates. But over the past several years, while families and businesses have trimmed budgets to address the financial hardships they’ve faced, the amount of our money that has been made available to the IMF has more than doubled. Few Americans yet know about the tab coming due. But with the IMF making ever-bigger, ever-riskier loans to seemingly any nation with its hands outstretched, America will soon be stuck with yet another bill we and our children will have to pay.
Since Barack Obama’s election, IMF intervention has reached fever pitch with the administration giving its support to bailout after bailout. Proponents of these foreign bailouts assert they are nothing more than prudent and temporary loans that will stabilize markets, serve everyone’s interests and ultimately be repaid. But the people making these dubious claims are not the average U.S. taxpayer — they’re multinational organizations; they’re big-dollar bankers with a lot on the line; most frequently, they’re the debtors themselves.
If all this sounds familiar, it’s because these worn-out arguments have been used time and again to promote taxpayer bailouts of U.S. banks and industries. Now, big government wants taxpayers to prop up European welfare states that have already proven their obsolescence. The inaccuracy of their claim — that this is indeed a wise investment — is revealed by the facts:
In May 2010, Greece’s Socialist government received a massive $150 billion joint EU/IMF bailout. Greece had huge debt outstanding and galling deficits. The three-year bailout package was supposed to give Greece time to reorganize its finances, but deficits have since gapped much wider than projected. The country is further from solvency than before the bailout and is likely headed for a default.
Similar stories abound. November 2010 saw a $113 billion bailout provided to “shore up” Ireland’s finances. Ireland, too, had an exploding national debt and yawning deficits. We were told the exact same story: this bailout would be a crucial step in resolving Ireland’s financial woes. Six months later, a former high-ranking IMF official predicted Ireland will need another bailout in 2013, when the present rescue package expires.
Earlier this month, Portugal performed the same song and dance. The IMF again extended America’s checkbook, financing that country’s $116 billion bailout. Don’t hold your breath waiting for your “investment” to be returned there, either.
Our domestic bailouts were bad enough — banks, auto companies and the like — this notion that we will extend handout after handout to welfare states abroad without any indication that we will be repaid is beyond any basic standard of financial prudence. In fact, there is little indication that these countries will make the real spending cuts necessary to balance their budgets.
On Obama’s watch, Washington has expanded our financial obligation to the IMF, and Obama has even fought to disregard U.S. law that would require the Treasury to report on the bailouts it gives to foreign countries. While the U.S. has veto power over the IMF’s bailouts, Obama continues to dig the U.S. deeper into debt by bailing out countries that no one seriously believes will be able to pay us back, and at a time when our own financial condition continues to deteriorate. The U.S. must begin exercising its veto, putting the IMF on a tight leash and calling for substantial reforms. Without these changes, Europe and America can expect to ride the road to fiscal ruin together — like cash-strapped parents giving an ever-larger allowance to their irresponsible child.
Tom Leppert served as Mayor of Dallas from 2007 to 2011. He is now a Republican candidate for U.S. Senate.