Margaret Thatcher, who is the subject of a new film starring Meryl Streep that will premiere in theaters this Friday, once said that the problem with European socialism was that it would eventually run out of other people’s money. That is a good summation of what has happened with today’s euro crisis. The politicians across the water have run out of other people’s money in their own countries, so now they want other nations to foot the bill.
Topping the list of potential suckers is the United States. Our Treasury secretary, Tim Geithner, has been in constant motion shuttling between the U.S. and Europe in recent weeks trying to contain the euro crisis. A study by the Fitch ratings agency warns that the exposure of the U.S. financial sector to European countries and banks is “sizable.”
The Obama administration realizes that if Europe’s economies get sicker, the U.S. economy will catch cold and see unemployment rise. But one method of staving off that prospect that is being pushed behind the scenes by the Obama administration is increased U.S. funding of the International Monetary Fund, which is already on the hook for previous massive bailouts of European banks and financial institutions.
Many Republicans in Congress want nothing to do with any more taxpayer bailouts. They say that would only avoid the painful decisions Europeans have to make to rein in their profligacy. Over 60 House Republicans have signed on to legislation to pull back on U.S. funding of the IMF.
Because the U.S. provides some 17 percent of the IMF’s funding, Oklahoma senator Tom Coburn estimates the U.S. could be liable for as much as $176 billion if the IMF extends its existing bailouts to Italy and Spain and the euro collapses.
The GOP bill would start unraveling that by snatching back a $108 billion line of credit the U.S. approved in 2009 for a crisis fund at the IMF. So far very little of it has been spent.
Its sponsors would like to keep it that way. Cathy McMorris Rodgers of Washington State, a member of the House Republican leadership and the author of the bill, points out that European countries have yet to provide any guarantees that promised fiscal reforms will be enforced. “We need transparency in our dealings with the IMF, and we aren’t getting it. Congress has to make clear that we don’t believe further bailouts in Europe will work, and the U.S. shouldn’t be a part of them,” she says.
Indeed, Greece has already gotten bailouts from the European Union and the IMF equal to $28,000 per Greek adult. Portugal and Ireland have received sums in the same neighborhood, but the debt-to-total-economy ratio of all three countries continues to grow, a sure sign that they are resisting real structural reforms. “Rather than participating in Europe’s version of TARP, America must focus on solving its own $15 trillion debt problems,” says Sen. Jim DeMint of South Carolina, who is carrying the Senate version of Representative McMorris’ bill.
There is no doubt such views are in accord with U.S. public opinion. If the euro continues to sink, the issue of bailouts to Europe could surface in the Republican primaries.
Americans for Limited Government commissioned a survey from the Polling Company last month in early GOP-caucus and -primary states. The results were unequivocal. In Iowa, which holds the first test for GOP presidential candidates next week, 76 percent of registered Republicans opposed any increased U.S. funding of the IMF. In New Hampshire, it was 68 percent, and in South Carolina, opposition hit 77 percent.
The 17 nations in the eurozone are now trapped between the unthinkable and the unsellable. Ending the euro is considered so radical a step that there are no backup plans for leaving it behind. But further integration of Europe’s economies is unpalatable because it would have to be sold to populations that, as the Washington Post put it, “were more skeptical about the Eurozone than their leaders to begin with, and have seen their worst fears realized.”
No one can predict with certainty just how bad the euro’s problems will become, but it’s safe to say that further involving the U.S. taxpayer in yet another bailout of Europe would only be putting a Band-Aid on the problem. Republican presidential candidates would be wise to highlight the efforts of the GOP congressmen fighting U.S.-taxpayer exposure in Europe’s mess, and given the continued public bitterness over the TARP bailout of 2008, it would certainly be smart politics.
— John Fund is a conservative writer and columnist and author of a new edition of Stealing Elections: How Voter Fraud Threatens Our Democracy.