Memo to E.U.: Slash Spending or No Bailout


The American people deserve to know that billions of taxpayer dollars are on the hook for bailing out European Union countries that engaged in years of reckless spending.

The EU and the International Monetary Fund established a near $1 trillion bailout fund, in addition to a costly package for Greece. As the IMF's largest contributor, the U.S. shares more of that burden than any nation in the world, potentially reaching $60 billion.

This means American taxpayers can be forced to bail out eurozone countries that created their own crises through wasteful spending.

Despite these global bailouts, investors worldwide still fear the worst in Europe. These bailouts are the largest in history, but investors recognize that they don't solve the fundamental problem that made European nations vulnerable in the first place — out-of-control spending, deficits and debt.

As long as the debt is not addressed, confidence will not be restored and all the bailouts in the world will merely make the inevitable collapse more expensive.

American taxpayers understand the foolishness of trying to use bailouts to fix the deeper problem of deficit spending. The U.S. faces a debt crisis of its own.  Since 2007, our own annual deficits have jumped by 10 times, from $160 billion to a projected $1.6 trillion in 2010.  Fueled by reckless spending, these unprecedented deficits are propelling U.S. debt to levels nearing those of Greece.

From 2010 to 2020, U.S. public debt will grow by 120%, predicts the Congressional Budget Office.  Now is the time to put our own fiscal house in order, not commit to an open-ended foreign bailout that does not address the real causes of the crisis.

Last week, Treasury Secretary Timothy Geithner traveled to Germany and Great Britain. It was a chance for him to tell both governments that America will not support IMF participation in any new European rescue while EU nations willfully ignore their own commitments to debt reduction.

These nations should take tangible steps to reduce their own debt before seeking foreign assistance.

Unfortunately, the administration and Secretary Geithner have already expressed their support for the Greek and euro bailouts, and we fear they are unlikely to change their position despite the lack of details from the IMF or the EU.

That is why we have introduced the European Bailout Protection Act. This legislation would prohibit U.S. contributions to the IMF from being used for an EU bailout until each EU nation complies with its agreed-on debt-to-GDP ceiling.

This past week, Secretary Geithner and the Obama administration missed a chance to send an unambiguous signal that the U.S. will not support an endless succession of bailouts, at home or abroad.  True economic growth will never occur until countries, including the U.S., make tough decisions to reduce spending and end the carousel of bailouts.

We hope Secretary Geithner will project this message in the future. The administration needs to listen to the American people and reject open-ended bailouts.

Pence of Indiana and McMorris Rodgers of Washington are chairman and vice chairwoman of the House Republican Conference.

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