To hear most Washingtonians tell it, the worst thing about the regular meetings of the International Monetary Fund/World Bank in the nation’s capital is the gridlock.
Like previous conclaves of the world economic powers here, the IMF/World Bank meeting October 8-10 will attract demonstrators and top level security. And, as always, there will be traffic jams, gridlock, and lots of angry residents in the District of Columbia.
But this year, worse things result from the IMF/World Bank meeting than traffic jams—a lot worse.
With the world economy racked by deficits and the most uncertain condition since the Great Depression, there is perhaps greater interest in the IMF than there has been since it was established along with the World Bank back in 1945.
It is also safe to say that the tension between the U.S. and the IMF is at an all-time high. With the Obama Administration’s vigorous support, Congress last year narrowly approved an additional $100 billion for the IMF over the next ten years. In May of 2010, the Greek economy went belly-up and the IMF came to the rescue. President Obama supported the move, believing that a $145 billion bailout (or $13,000 per person in Greece) would pull Greece out of its doldrums.
“The President’s willingness to pump billions into a small European country such as Greece,” Rep. Cathy McMorris Rodgers (R.-Wash.) wrote in HUMAN EVENTS in May, “makes it more likely that other European countries with similar problems—namely, Spain, Portugal, and Italy—will be coming to the United States soon looking for even bigger bailouts.”
She was right. One month after the Republican congresswoman wrote those words, Youssef Boutros-Ghali, chairman of the IMF’s Policy Committee (and nephew of former UN Secretary General Boutros Boutros-Ghali), declared that the IMF’s financial reserves would have to rise “very significantly” in the wake of the IMF commitment to Greece and the European Union (which was also helping in the Greek bailout).
Does Mr. Boutros-Ghali’s statement, then, mean that Secretary of the Treasury Timothy Geithner “mis-spoke” when he replied to a letter from Rodgers and House GOP Conference Chairman Mike Pence (Ind.) assuring them that “an IMF role in Europe’s stabilization efforts would help Europe’s and the world’s economic recoveries stay on track—at no cost to U.S. taxpayers?”
As finance ministers from across the globe and other key economic players descend on Washington, the whispers are growing that the IMF and the World Bank will next be asked for a bailout by Ireland. Spain and Portugal are also rumored to be poised to seek IMF assistance as well.
And all this comes as the IMF is poised to release its twice-yearly economic outlook, which actually concludes: “Slashing government spending to reduce debt burdens will have unusually damaging effects on growth because of the weak economy,” according to the Financial Times.
Coupled with its hand in the world economy, the IMF will also attract attention because of the man who will open the session this weekend: Dominique Strauss-Kahn, managing director of the IMF since 2007. Polls show the former French finance minister the leading candidate for the Socialist nomination for President of France in 2011 and easily defeating President Nicolas Sarkozy.
More bailouts, more U.S. tax dollars for nations in red, and criticism of fiscal belt-tightening—not to mention some Socialist political maneuvering.
It sure sounds worse than traffic jams.