Idea of the Day: Five Reasons Congress Should Agree to Fund the IMF

June 16, 2009

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The battle over America’s pledge of new funds to the International Monetary Fund is shaping up and will play out in Congress this week during the negotiations over the war supplemental. Congress should deliver the funds we’ve pledged, while also keeping up the pressure for reform. Here are five reasons why:

1. The IMF extends our dollars. Our share of the additional $500 billion pledged—$108 billion—is less than 22 percent of the total. That means that for every one dollar we contribute, other countries are putting in about $3.50. The amount we owe is significantly less than what we needed to bailout one U.S. company (AIG), and these are countries at stake.

2. We are going to pay one way or the other. Let’s be serious. We aren’t going to let Pakistan’s economy collapse, or for that matter Hungary’s, Romania’s, or Guatemala’s. The potential national security consequences of any of those countries failing are too dire, not to mention the ultimately higher economic costs to America.

3. This is a chance to show leadership again. American economic leadership has taken a serious beating lately. The world blames us for this crisis. This is a chance to do the right thing when countries are in need and gain back some credibility as an economic leader.

4. China is increasing its influence at the IMF. That’s largely good, because it comes with an increased contribution from them, and the IMF is developing into a forum to talk about their undervalued currency. But America will want to maintain significant influence at the IMF, too. We can’t have leverage if we don’t pay up. China has committed $50 billion of the $500 billion total.

5. The IMF will pay us back. These are bonds we are buying. And they’ve got gold to back them up.

For more on this topic, please see:

• Bailing Out the Bailer-Outer, by Nina Hachigian