House Republicans introduced legislation last week to prohibit U.S. taxpayer funds from being used to bail out a teetering European economy, especially upside-down Greece. “If the Obama administration has its way, the U.S. will contribute to a nearly trillion-dollar bailout of European countries with economic crises that are a direct result of wasteful government spending,” said Rep. Mike Pence, the House Republican Conference chairman from Indiana. The congressman is right. President Obama should focus on U.S. economic troubles instead of throwing our cash down a European rathole.
As things stand, the U.S. government is giving $30 billion in subsidized loans to Canadian banks, and the Obama administration has begun bailing out banks from Japan to Europe. The administration won’t say how much money is being doled out and who is getting it. Given American anger about bailing out our own banks, there’s sure to be a strong political backlash when taxpayers learn their money is being shipped off to foreign banks.
The new policy mirrors what the Federal Reserve did last year when it gave loans to U.S. banks at nearly zero percent interest. The banks turned around and used these government loans to lend money back to the federal government through the purchase of U.S. Treasury bonds, on which the banks received higher interest rates. Extending this practice to foreign banks is an outright gift to foreign shareholders.
Why the United States should subsidize foreign banks and their shareholders is a mystery. Compared to the U.S. economic crisis, many of these economies have done fairly well. Since Mr. Obama became president, U.S. unemployment has risen from 7.7 percent to 9.9 percent. Canada’s unemployment rate has only gone from 7.3 to 8.1 percent. Our own unemployment rate has soared relative to the rates in the European Union and Japan as well.
A second smaller part of the bailout comes from a $54 billion International Monetary Fund loan to Greece and other European countries. Again, it’s a mystery exactly how much of this loan will be the responsibility of the United States, but the number is likely to be at least $10 billion, since America typically contributes 17 percent of the IMF budget.
Subsidizing Greece doesn’t make any more sense. The Greek government possesses valuable assets such as land and corporate stock it can sell off to pay its debts. Instead, Athens is sitting on odd investments such as casinos, banks, jumbo jets and even a lucrative sports-betting organization. Greeks may not want to let go of those assets, but there’s no reason American taxpayers should fork over dollars to subsidize Greek nationalistic pride. This is particularly the case given that the Greek government spends 44 percent of gross domestic product, which is too much. American taxpayers shouldn’t feel sorry for a country that holds out a tin cup while refusing to cut government spending.
In September 2008, 400 top U.S. economists came out to oppose a bailout of U.S. financial institutions, and the American public overwhelmingly opposed the bailout bill. Even at the beginning of last year, when claims of a crisis still gripped Washington, a Rasmussen survey showed wide American opposition by a margin of 56 percent to 20 percent.
Last week, German Chancellor Angela Merkel lost her majority in Germany’s upper-house of parliament as a result of her support for an unpopular Greek bailout. If Washington politicians don’t start listening to their voters, many of them will suffer the same fate as Mrs. Merkel’s minions.