House Republican Conference Chairman Mike Pence hosted on Wednesday a Big Fat Greek bailout grilling of several leading economists. The hearing focused on the costs and consequences of American taxpayer guarantees of International Monetary Fund (IMF) loans for the European bailouts.
Sen. Jim DeMint (R-S.C.) and Reps. Cathy McMorris-Rodgers (R-Wash.), Tom McClintock (R-Calif.) and Todd Tiahrt (R-Kan.) each questioned the panelists.
The IMF is primarily funded through a member quota system with contributions proportionally based on member representation in the world economy.
Currently American taxpayers are the largest single contributor to the loan guarantees — on the hook for 17 percent — and based on that formula the guarantors of $53 billion of the $310 billion IMF European bailout participation.
“We heard from several individuals from extraordinary backgrounds in areas of international finance, Treasury Department and international markets,” Pence said of Wednesday’s forum. “Several key messages came out that argue against continuing on the pathway to put American taxpayers on the the hook for European bailouts. The American people deserve to know we’re bailing out Greece and if the European-wide bailout plan goes forward American taxpayers could be on the hook for as much as an additional $50 billion in loan guarantees as part of Euro Zone-wide bailout.”
The crux of the issue at the forum was whether or not Greece represents a systemic risk.
“We heard from Randy Quarels who is a former undersecretary of the Treasury who used the phrase, ‘Greece is not systemic,’” Pence continued. “He pointed out the fact that over the last quarter century there has been over 80 soverign defaults and that he was ‘deeply skeptical of contagion.’”
“This headlong rush in taking the American taxpayer in the form of loan guarantees into subsidizing a bailout of Greece and potentially other European all of which was justified on the potential for systemic risk, bringing too big to fail to the global stage, was spoken about today by these experts with deep skepticism,” Pence said.
The experts also pointed out the foundation of Europe’s problems lie in clinging to socialist welfare state policy.
“As Marvin Goodfriend of Carnegie Mellon University said today, the Greek fiscal crisis was ‘not a surprise’ that in fact the reality is what we have in Europe today in Greece and in other countries like Portugal and Italy and Ireland and Spain are countries that have been spending recklessly on welfare state policies far beyond their means for a significant period of time,” Pence said. “The unwillingness of those countries to fundamentally rethink their commitment to welfare state policies and outright socialist policies continues to be a reality that should hold back American participation in these bailouts.”
“We also heard from others who simply stated as Chancellor Merkel said in Germany that the approach to borrowing and spending and bailouts are simply postponing what would need to be done to turn the fiscal crisis in these countries economies around,” Pence said.
“At a time of record unemployment in America and at a time of record deficits and debt, the American people should not be put on the hook to be bailing out fiscal recklessness in Europe,” Pence said.
You can view the entire “End the Bailouts: A Greek Forum” online here.