Washington Showdown Over IMF Money
The Obama administration and House Democratic leadership can’t seem to muscle the votes they need to pass a $108 billion appropriation for the International Monetary Fund (IMF). The stakes are high for both the administration and the world. The battle is taking place primarily under the radar, with the major media mostly ignoring it, and avoiding the substantive issues in the few reports that have surfaced. The details are very interesting for what they reveal about politics in the United States.
The cast of characters: the U.S. Treasury Department, an opaque institution that is kind of a permanent government; the anti-war movement, which has more clout and representation in Congress than you would know from reading the newspapers; groups concerned about global justice and the IMF’s abuses; the Republican congressional leadership, which hopes to score some political points in opposing the IMF funding; and the various Members of Congress and their personal beliefs and constituencies.
The plot: the Obama administration is trying to get $108 billion for the (IMF) as part of a commitment that President Obama made at the G-20 meeting in April, led by the G-7 (high-income) countries, to raise $500 billion for the IMF from member countries.
But, from the beginning, the administration has faced tremendous obstacles to getting a majority members of the House of Representatives to vote for the money in an up-or-down vote. This is because many members of both parties are afraid that it would be seen as another taxpayer bailout for the financial industry – and foreign banks at that.
Which it appears to be, actually. This unprecedented increase in the Fund’s resources, with a goal of $1 trillion, is vastly higher than anything the institution has ever seen. It happens to coincide with huge expected losses by Western European banks in Eastern Europe, where these banks have at least $1.4 trillion in exposure. To make the issue even more delicate, some of these banks, like France’s Societe Generale, have already received U.S. taxpayer dollars through AIG under the TARP program.
Some of these taxpayer handouts to domestic and foreign financial institutions have been difficult to justify, not least the billions that have ended up as dividends for shareholders or bonuses for executives who helped crash the economy. So it is easy to see why the Administration wanted to avoid an up or down House vote on the IMF money.
This was done by attaching the IMF money to a supplemental war spending bill in the Senate. The House had already passed its war spending bill without the IMF money. But the normal procedure is for the two chambers to reconcile their differences and present a bill – which would presumably include the IMF money – to both Houses, with the idea that “funding for the troops” must be passed.
Enter the anti-war movement: Fifty-one House Democrats had already voted against the war spending when it passed the House. Should they now vote in favor of it in order to give the IMF money? The Democratic leadership says yes, but anti-war Dems are saying no. They want to see some indication that the occupation of Afghanistan is not permanent. Jim McGovern of Massachusetts had proposed an amendment to the war spending bill that would have required the Pentagon to submit a report by December outlining an exit strategy from Afghanistan. (It now has 86 sponsors). The House leadership, presumably on behalf of the Administration, rejected this moderate proposal.
Then there are the Democrats who actually know what the IMF does. Forty-one of these (with much overlap with the anti-war Dems) signed a letter asking for the U.S. Treasury – which is the principal overseer of the IMF – to commit to some modest reforms of the Fund in return for the money. They want the IMF to stop requiring countries that are suffering from economic downturns to cut spending, raise interest rates, or take other measures that worsen their decline. They want parliamentary approval in recipient countries for IMF agreements, and to increase debt cancellation for poor countries. But Treasury has refused to offer any concessions.
Now come the Republicans, who supplied 168 votes for the war spending in the House. If you attach the IMF money, they say, we will vote against it this time. “Against funding for the troops?” asks the Democratic leadership, daring them. That’s right, say the Republicans, unless you put the IMF money to a separate vote.
Interestingly, the Republicans are not trying very hard to get the IMF money removed. They are not saying anything on television or in the media. This indicates that they may want this money to pass with only Democratic votes, so that they can attack the Dems – especially those in conservative districts -- when the money ends up bailing out the European banks in Eastern Europe.
So far, the Administration has failed to peel off enough anti-war or pro-social-justice Democrats to get a majority for a bill which includes IMF money.
What is at stake here? For the anti-war movement and the world, it would be a small but significant step forward if this legislation failed because a sizeable group of Democrats want an exit strategy from Afghanistan. For those who want reform of the IMF, and favor economic progress generally, there is perhaps even more at stake.
Ten years ago the IMF was one of the most powerful institutions in the world, and the main avenue of influence for the U.S. government in developing countries during a period in which the vast majority have suffered a long-term economic growth failure. Most of the IMF’s power was lost over the last decade. Treasury wants to use the current economic crisis to regain that power, and without reforming the institution or its policies, or granting a significant voice to developing countries. We will see what happens.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He received his Ph.D. in economics from the University of Michigan. He is co-author, with Dean Baker, of Social Security: The Phony Crisis (University of Chicago Press, 2000), and has written numerous research papers on economic policy. He is also president of Just Foreign Policy.