PENCE’S BAILOUT CONFUSION…. Rep. Mike Pence (R-Ind.), the easily confused chairman of the House Republican conference, has a new issue he’s especially excited about: the notion that Americans are “bailing out” Europe.
He’s issuing all kinds of press releases about it, and rumor has it, Pence is even weighing new legislation to prevent such a development. “The bailout of Greece set a dangerous precedent of using American tax dollars for other European bailouts,” Pence argued this week.
It’s probably worth setting the record straight.
First, the International Monetary Fund — which is 17 percent financed by American taxpayers — says it is prepared to contribute up to $321 billion to the relief effort, with certain caveats.
Generally, the IMF says it will require countries receiving assistance to enact stringent deficit fighting measures, which would force nations such as Portugal and Spain that might be next in line for assistance to undergo bruising internal political fights to rein in their social spending in exchange for the aid.
Second, the Federal Reserve has reopened so-called swap lines that allow it to lend dollars to the European Central Bank in exchange for euros, which helps pump dollars into the EU economy.
The Fed has also opened swap lines with the Bank of Japan, the Bank of England and the Swiss National Bank. The Fed used a similar mechanism during the height of the 2008 financial crisis but had wound down the program as the crisis eased late last year.
How much will this cost American taxpayers? Nothing. The Fed’s swap lines tend to make money, not lose money. And since the IMF is already fully funded, it’s not like Congress will have to spend additional resources. Besides, as the White House is quick to point out, Americans have never lost money on IMF investments.
By Pence’s reasoning, every time the IMF has ever intervened to help anyone, it constitutes an American “bailout” of the aided nation. Since U.S. administrations of both parties have supported IMF for decades, Pence should have started whining years ago.
The alternative to this ongoing response in Europe — which, again, won’t cost taxpayers an additional dime — is a far more serious problem that would adversely affect Americans.
In other words — stop me if you’ve heard this one — Mike Pence has no idea what he’s talking about. The fact that congressional Republicans have put him in a position of authority, and he’ll likely play a key role in shaping federal policy if the GOP retakes the House, is more than a little scary.