I’ve had enough of bailouts. We’ve bailed out auto companies, we’ve bailed out banks, we’re about to bail out Wall Street, and now we’re on the hook for bailing out Greece? How much more can we take before taxpayers decide to bail?
Admittedly, America’s involvement in the Greece bailout is tricky to understand. To keep the country out of default the European Union and International Monetary Fund (IMF) have agreed to give Greece a loan package worth $144 billion. For some perspective, if you compare the size of Greece to the United States, a comparable bailout package for us would be around $4 trillion dollars. In other words, we’re not exactly dealing with pocket change here.
The United States has very little to do with the European Union portion of the loan (approximately $105 billion) but may be heavily involved in the IMF portion ($40 billion). The problem is that the United States is by far the largest shareholder of the IMF – supplying close to 20% of the IMF’s total funding. Although there is not a perfect correlation between our percentage of the IMF’s budget and the amount that will be paid to Greece, the worry is that we are creating an “international bailout slush fund.”
As Senator Jim DeMint (R-SC) explains, the problem began back in 2009.
Congress didn’t learn their lesson after the $700 billion failed bank bailout and let world leaders shake down U.S taxpayers for international bailout money at the G-20 conference in April 2009. G-20 Finance Ministers and Central Bank Governors asked the United States, the IMF’s largest contributor, for a whopping $108 billion to rescue bankers around the world and the Obama Administration quickly obliged.
Rather than pass it as stand-alone legislation, President Obama asked Congress to fold the $108 billion into a war-spending bill to send money to our troops.
It was clear such an approach would simply repeat the expensive mistake of the failed Wall Street bailouts with banks in other nations. Think of it as an international TARP plan, another massive rescue package rushed through with little planning or debate.
American taxpayers have already voiced their disapproval of the stimulus and bank bailouts – money that was supposedly spent to help our own floundering economy. How can the government possibly believe that we approve of money going to fund another nation’s fiscal irresponsibility? An informal poll taken on CNBC.com asking whether “American taxpayer dollars should be used to bail out Greece” finds that an overwhelming 86% say that “no.”
Unless taxpayers cry foul, Greece may be only the beginning of a never-ending story of foreign bailouts. As the Financial Times reports,
But it is far from clear that [the bailout] will help other members now in the firing line None is in as bad a condition as Greece and none has shown the same malfeasance. But several have unsustainable fiscal deficits and rapidly rising debt ratios. In this, their situation does not differ from that of the UK and US. But they lack the same policy options.
This story, in short, is not over.
Well, the United States’ role in the story should be over. Many European Union nations share a shaky bottom line. Portal, Spain, Italy and Ireland all owe more than their GDP. Time will tell if they will be able to make the massive cuts to their social welfare programs that will be necessary to keep their economy afloat. As of last week the S&P credit rating agency lowered the bond rating of Spain and Portugal, sending stock and bond markets into a downward spiral. The fall of Greece will only further stoke the fires of worry that many international investors are feeling.
Will the European Union or IMF be financially prepared to continue the bailouts if other nations fail? If not, has the United States involvement in the IMF set a precedent of support that could push us further into our own financial insolvency? In the words of Cathy McMorris Rodgers (R-WA), “at a time when America is experiencing its worst economy in 30 years and is burdened by a $1.3 trillion deficit it is simply unfair to force American taxpayers to spend billions more…”
by Brandon Greife, Political Director of the College Republican National Committee