Original Article: National Review Online.
All across America, people are suffering from “bailout fatigue.” In the last two years, U.S. taxpayers have spent hundreds of billions of dollars to bail out Wall Street, GM, Chrysler, Fannie Mae, and Freddie Mac, and now President Obama is taking us down a new road that could lead to spending tens of billions of dollars more to bail out foreign countries.
At yesterday’s House Leadership press conference, Rep. Mike Pence and I announced that we are circulating a letter to Treasury Secretary Tim Geithner expressing our opposition to using taxpayer dollars for a European bailout. Greece’s $145 billion bailout is just the tip of the iceberg. By rewarding Greece’s failed socialist policies, a Greek bailout makes it more likely that other European countries — especially Spain, Portugal, and Italy — will get in line for American tax dollars and delay the inevitable fiscal reforms that are needed for a long-term recovery.
In recent days, Portugal and Spain have seen their credit ratings downgraded on foreign exchanges. Piero Ghezzi, an economist at Barclay’s Capital, estimates that Spain may need a $450 billion bailout. As a larger economy, Italy may need even more.
While we root for Europe’s success, because a strong European economy benefits America, it’s worth nothing that the EU was created to be an economic competitor to the United States. Therefore, while it may be appropriate for the EU to pay for these bailouts, the same logic doesn’t apply to America. President Obama should extricate the U.S. from the gathering storm of European bailouts which will only delay the fiscal reforms that are necessary for long-term recovery.
Even at this late hour, the Obama administration has considerable power to stop the U.S. from going down this ruinous road. Under current IMF rules, the United States needs only one other IMF member to oppose the bailout to defeat it. Therefore, we are calling on President Obama to publicly oppose the $145 billion Greek bailout, and refuse to participate in any larger European bailout which may be forthcoming.
Although Greece’s population is just over 11 million, Greece employs more than a million people in their public sector. Greek civil servants enjoy 14 months of pay for twelve months worked, and their average retirement age is 53. Once retired, they enjoy generous pension benefits worth 80 percent of their salary.
While many of these benefits will inevitably be reduced as part of the IMF bailout, the sheer size of bailout will dull much of the pain. After all, given Greece’s small population, $145 billion works out to $13,000 per person. An equivalent bailout of the United States — which has a population of over 300 million — would cost over $4 trillion.
At a time when America is experiencing its worst economy in 30 years and is burdened by a $1.4 trillion deficit, U.S. taxpayers should not be forced to prop up failed socialist policies in relatively wealthy European nations.
The question needs to be asked: Why should American taxpayers contribute to such a generous bailout when most states, including California, New York, and New Jersey, are making severe budget cuts to balance their budgets? Strong leaders like Governor Chris Christie of New Jersey are making tough choices without raising taxes or even requesting aid from Washington, D.C. If America isn’t asking for Europe’s help with New Jersey, why should Europe feel uninhibited about asking for America’s help with Greece?
After all, the U.S. is in the midst of its own debt crisis. The Congressional Budget Office predicts that America’s debt held by the public will reach 90 percent of Gross Domestic Product within ten years. By comparison, Greece’s current debt-to-GDP ratio of 112.5 percent has resulted in a lowering of their credit rating to junk status. Without dramatic spending restraint, the U.S. is on a path towards the same catastrophe.
With its record spending and deficits, the Obama administration has shown little interest in taking fiscal responsibility. That is a mistake. To see the consequences of “Obama-nomics,” take a look at Greece today. Or look at Spain tomorrow. That is America’s future unless we reverse course, and do it soon. Contributing to a Greek bailout — or any larger European bailout — will only speed up the day of reckoning.
The Obama administration should protect U.S. taxpayers and publicly oppose a European bailout. At the very least, the president should be upfront and forthright about the potential costs of such a bailout. And he should take ownership of his decision by acknowledging he has tools at his disposal to stop a bailout, if he chooses to use them.
European bailouts are a legitimate national issue that requires an open debate. We look forward to the administration’s response.