Last Wednesday, while most of America was focused on Tuesday’s election results, the House was busy doing something really really important: Passing a resolution about beer!
House Resolution 1297, sponsored by Rep. Betsy Markey, supports “the goals and ideals of American Craft Beer Week.” (H/t beloved Fellowship co-founder Steve.)
Despite that, Congress did manage to do at least two useful things this week.
The first was the Senate’s unanimous vote, 94:0, blocking the use of taxpayers’ money for IMF (International Monetary Fund) rescues that make no economic sense or bail-outs for countries like Greece that far are beyond the point of no return. As reported by Ambrose Evans-Pritchard of the UK’s Telegraph, May 18, 2010:
“This amendment will help prevent American taxpayer dollars from underwriting dysfunctional governments abroad,” said [Republican] Texas Senator John Cornyn, the chief sponsor. “American taxpayers have seen more bailouts than they can stomach, and the last thing they should have to worry about are their hard-earned tax dollars being used to rescue a foreign government. Greece is not by any stretch of the imagination too big to fail.”
Co-sponsor [Republican] David Vitter from Louisiana said America had run out of money. “Our country already owes trillions of dollars in debt. We simply can’t afford to take on other countries’ debt in addition to our own.”
It is unclear where this leaves the EU’s $1 trillion “shock and uh” package. Urlich Leuchtmann from Commerzbank said the IMF share of $320bn was the only genuine money on the table, the rest being largely euro smoke and mirrors, or plain bluff.
The measure is an amendment to the US financial overhaul law. Backed by both parties, it can hardly be ignored by the Obama administration whatever Tim Geithner may or may not want to do. The bill has to go to Conference for reconciliation with the House, but the point is made.
It instructs the US representative at the IMF to determine whether a country with a public debt above 100% of GDP can be expected to repay IMF loans. If this cannot be certified, the US must oppose the rescue package. This is obviously aimed at Greece, which will have a debt of 130% by the end of this year. The debt will rise to 150% by the end of its the rescue/death package, leaving Greece in a worse position than before.
The IMF share of the Greek bail-out is 30 times quota, more than double any other rescue in the history of the Fund. There is a very strong suspicion in Washington that the IMF is being misused by French chief Dominique Strauss-Kahn – French presidential candidate in waiting – to support ideological purposes regardless of economic logic or sanity. This can (and in my view most likely will) destroy the credibility of the Fund itself unless the US and Asians can wrench the institution back from the Europeans.
The US is the IMF’s biggest shareholder and can veto aid packages, though it has never done so because the Fund has never been so stupid as to defy the world’s dominant financial and strategic power.
The second useful thing that Congress did last week was by Republican members of the House. Yesterday, May 20, 2010, 154 House Republicans, led by Rep. Joe Pitts (R-PA), sent a letter to the President’s debt commission asking the members to reject a job-killing value-added (VAT) tax.
The letter notes that the VAT tax – which has been imposed in 150 countries – has failed to stem the rising tide of deficits and debt that are engulfing much of Europe. Sold as a means of matching revenue to spending, the VAT tax has only served to finance a permanent expansion of government in Europe, the growth of which never seems to abate. Here’s an excerpt of the letter House Republicans sent, which explains the job-killing nature of the VAT tax:
In a depressed economy, the number one priority of government should be to stimulate job growth. With unemployment at nearly 10 percent, Americans cannot afford the burden of a new job killing tax. But this is exactly what a VAT will do. A VAT will increase the cost of goods and services for all Americans, including the lower and middle classes. It will tax our manufacturers, sending even more jobs overseas. And, it will decrease consumption, which will deepen the recession and suppress entrepreneurialism. This is exactly what has happened in Europe where increased government spending and taxation has led to consistently high unemployment and suppressed economic activity.