Earlier this month, the International Monetary Fund (IMF) and members of the European Union agreed to a $145 billion (110 billion) rescue package for Greece, which has been gripped by economic turmoil and social unrest. Because the United States is the biggest contributor to the IMF, this had led Republicans in Congress to run wild with claims that American taxpayers are bailing out Greece. The GOP has even drafted legislation in an attempt to compel Treasury Secretary Tim Geithner to prevent the IMF from following through on its loan offers.
Over the last two days, a series of Republicans — including House Republican Conference Chairman Mike Pence (R-IN) and Conference Vice Chairwoman Cathy McMorris Rodgers (R-WA) — have gone to the House floor and onto television to condemn the IMF loans in the name of taxpayer protection. Watch a compilation:
First off, the IMF extends loans — not simply lump payments — using a line of credit extended by, among others, the U.S., for which the U.S. receives repayment. To date, no IMF borrower has defaulted on its obligations, so the odds that the U.S. actually loses money are very small. Having a severely weakened European Union — which, counted as a single economy, is the United States’ largest trading partner — would be far worse than extending these loans. Why do we even have the IMF, if not for this express purpose?
Plus, these Republicans refuse to acknowledge that the current mess in Europe is a glaring example of the failure of conservative economics. As my colleague Max Bergmann pointed out, the fiscal response to the economic crisis in Europe has been limited, largely thanks to the economically conservative leadership of Germany, while the European Central Bank “has resisted injecting any life into the broader European economy.” Thus, a problem that should have been headed off was allowed to fester and has now exploded.
Had policymakers in the U.S. followed the fiscal advice of Congressional Republicans — which involved implementing spending freezes of various degrees — the recession would only have been exacerbated and we would be looking much more like Greece. Instead, thanks to the economic stimulus package, the economy is very slowly starting to turn around. To his credit, earlier this year Geithner was urging the IMF to make a loan to Greece, which would have come with a much smaller $40 billion price tag. But Europe dithered, and now finds itself short of options.
Fortunately, the Obama administration doesn’t seem to be taking the GOP’s response seriously at all. Both President Obama and Vice President Joe Biden have offered their support to Europe’s fiscal response. After a meeting with Spanish Prime Minister Jose Luis Rodriguez Zapatero, Biden said that “we agreed on the importance of a resolute European action to strengthen the European economy and to build confidence in the markets. And I conveyed the support of the United States of America toward those efforts.”