President Obama is known for being generous (with other people’s money). It’s little wonder then that he went all out on a gift for Europe. No doubt, it was a struggle to pick something out. After all, what do you get for a continent that needs everything? A bottle of wine? No, they’re pretty good at making that on their own. A Starbucks gift card? Meh, too generic. Oh I know, how about a $100 billion bailout!
Although very little was heard about it at the time, Rep. Barney Frank slipped a provision into a war supplemental bill that gave the International Monetary Fund a $100 billion line of credit that they could use at any time. And the way the law is written, the funds are fully authorized, meaning that the Obama Administration can send the IMF a bailout without Congressional approval.
That’s not the end of America’s deep financial involvement with the IMF. Although very few Americans are aware of it, the IMF receives most of it’s funding through a member-quota system, in which member states contribute to the fund based on their size relative to the world economy.
Despite President Obama’s best efforts to the contrary, the U.S. remains the world’s largest economy, meaning we carry the biggest burden within the IMF. In fact, our member quota is 17.7 percent of the entire fund, while Japan, the next largest contributor pays 6.5 percent of total contributions. As if all of that wasn’t enough of a burden on US taxpayers, the IMF’s Board of Governors approved a package last year doubling member dues.
And guess who’s now being asked to act as the “lender of last resort” as Europe spirals deeper into trouble? That’s right…the IMF. As the Washington Post reports,
“So far, European leaders have set up the European Financial Stability Fund for that purpose [to act as a lender of last resort], especially since Germany doesn’t want Europe’s central bank to start printing euros and doling them out left and right. But . . . the EFSF has only raised about €440 billion — and nearly half of that is already committed to Ireland, Portugal, Greece, and (possibly) some troubled banks. . . Now, enter the IMF.”
So the IMF, which the Pelosi-led Congress authorized $100 billion in funds on top of our status as the largest dues-payer, may now be stepping in to fill the void in Europe.
Even with all of our financial help, the $390 billion IMF fund still isn’t big enough to keep huge economies like Italy, Spain, and (gasp) France afloat. So who’s going to fill the gap. But what they do have is 187 members (including the US) that they can milk for more money.
And sadly, President Obama seeks to be fine with being Europe’s cash cow. Although White House spokesman Tim Carney has said, “We do not in any way believe that additional resources are required from the United States and from taxpayers,” Obama seemed to contradict these words. Following a meeting with European Council President Herman Van Rompuy, Obama said “The United States stands ready to do our part to help them resolve this issue,” adding, “We’ve got a stake in their success.”
Republicans are doing their best to protect taxpayers from being on the hook for bailing out the fiscal mistakes of other nations. After all, it makes little sense to give profligate European countries hundreds of billions of dollars when many in the United States are suffering and we have a little bit of a debt problem ourselves.
Rep. Cathy McMorris Rodgers (R-WA) and Sen. Jim DeMint (R-SC) have introduced a bill that would prevent taxpayer money from being used in a possible IMF bailout of the eurozone. Senator Coburn, one of the Senate’s leaders in rooting out waste, has also backed the measure. “We’re throwing good money after bad down a hole that I think is not a solvable problem,” Coburn said. “Europe is going to default eventually, so why would you socialize their profligate spending?”’
It’s a good question. One we can’t figure out the answer to. Unless that is, Obama just wanted to give Europe a huge taxpayer-funded Christmas present.