U.S. lending to foreign governments through the International Monetary Fund (IMF) has reached $35 billion, representing more than 24 percent of the agency’s $145.4 billion of outstanding loans. Well above its 17.7 percent quota, the U.S. is therefore funding a disproportionate share of IMF loans.
Astonishingly, 60 percent of IMF lending, or $87.9 billion, has gone to just three countries, Greece, Portugal, and Ireland that have been rocked by sovereign and mortgage debt crises. The U.S. share of those European bailouts is now $21.1 billion. Should things worsen in Europe, we may ultimately wind up wishing we could get that money back from this foreign aid slush fund.
Initially, the IMF was set up by the West to issue foreign aid to third world nations during the Cold war. It was never intended to bail out advanced economies, but now that is exactly what it is doing.
The U.S. stake in the IMF used to be just $57 billion a few years ago, but in 2009, the Pelosi-Reid Congress expanded contributions by $108 billion on top of that to a $165 billion total, including a $65 billion quota and a $100 billion line of credit. That is more than triple the first year of sequestration’s $53 billion cut to outlays. No more votes will occur now to approve further bailouts, as the agency can lend it all away if it desires.
Hiding this theft of American taxpayers, almost none of this appears on-budget, but like student loans, when the IMF draws from these lines of credit, it gets drawn directly from the Treasury by being added directly to the national debt.
As if all that was not bad enough, when the agency is not busy bailing out bankrupt socialist governments and the banks that enable them, it is looking for ways to impose crushing taxes on the American people.
For example, in a recent study the IMF called on the U.S. to levy a $500 billion a year carbon tax on consumers to offset what it calls “underpriced” oil, coal, and other energy products.
This “mispricing” is supposedly leading to “excessive energy consumption,” which is “accelerating the depletion of natural resources” and contributing to climate change.
The carbon tax would supposedly counteract these trends: “The efficient taxation of energy further requires corrective taxes to capture negative environmental and other externalities due to energy use (such as global warming and local pollution).”
Still think the IMF holds U.S. interests at heart? In 2009, the G20 asked the agency to come up with ways to bail out the financial sector by imposing even more taxes on the American people.
That IMF study released in 2010 essentially proposed two types of taxes: a levy on financial institutions to create a pool of bailout funds, and a financial transaction tax. It came atop passage of the Dodd-Frank so-called financial reform legislation.
Sure enough, under Dodd-Frank, the Federal Deposit Insurance Corporation (FDIC) is charging assessments to about 60 bank-holding and insurance companies with $50 billion or more in assets to finance what is called an “orderly liquidation fund.” Really, it’s just a bailout fund allowing the government to take over systemically risky institutions, recapitalize them, and allow them to reenter the market under new management.
Of course, the American people bare the burden, as a Congressional Budget Office (CBO) analysis of a similar bank tax proposal by the Obama Administration at the time noted, “the ultimate cost of a tax or fee is not necessarily borne by the entity that writes the check to the government. The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees, and investors, but the precise incidence among those groups is uncertain.”
Under the law, that can come in the form of fees for merely holding a checking or savings account. Sure enough, such account fees are already being charged by many financial institutions and have in fact been increasing since the passage of Dodd-Frank, reports ABC News. The law also grants the Federal Reserve broad rulemaking authority over fees imposed by financial institutions.
At a time when the Obama Administration claims that there is nothing to be cut from the budget, the IMF appears as very low hanging fruit. Continuing to fund the agency with an open-ended $165 billion line of credit does nothing to advance U.S. interests. That is why Congress should proactively take up legislation to stop this foreign aid slush fund once and for all.