Political operatives have long understood that high-profile crises present opportunities.
In 1959, John F. Kennedy adorned this Machiavellian wisdom in the intrigue of Eastern poetry, fallaciously emoting that the Chinese word for “crisis” is composed of the symbols for both “danger” and “opportunity.” His translation may have been incorrect, but his sentiment was on the right track. Half a century later, President Obama's former chief of staff, Rahm Emanuel, became famous for echoing that sentiment by saying, "You never want a serious crisis to go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.”
Emanuel’s “crisis” was the biggest recession in U.S. history since the Great Depression; his “opportunity” was to implement a massive stimulus spending bill to “jump-start” the economy.
Now, the Obama administration is again applying the Emanuel Doctrine. This time, the Ukrainian “crisis” provides the White House with a convenient “opportunity” to push through changes to U.S. International Monetary Fund policies that Congress refused to adopt in the last spending bill. A White House “fact sheet” titled “International Support for Ukraine” states: “We are working with Congress to approve the 2010 IMF quota legislation, which would support the IMF's capacity to lend additional resources to Ukraine, while also helping to preserve continued U.S. leadership within this important institution.”
Translation: The White House wants to exploit American’s sympathies for the Ukrainian situation to sneak unpopular IMF funding surges right under our noses.
This 2010 IMF quota legislation would, among other things, double the amount of funds the IMF is allowed to loan to any country it wishes, with virtually no limit. For the United States, this spells a 100 percent increase in its contribution to the IMF from its current level of $63 billion. According to a Congressional Research Service report, this change would constitute “the largest proportional quota increase in the history of the IMF.”
This Ukrainian disaster is shaping up to be quite profitable for the IMF.
If Washington and the IMF were sincerely concerned about the Ukrainian plight, there are other ways they could help the troubled country that don't require higher quota contributions for the IMF. In fact, according to a March 2014 IMF report, the organization's “forward commitment capacity” figure, which measures how much funds the IMF can lend, currently exceeds $400 billion at current exchange rates. The IMF's own figures clearly show that the organization already maintains more than enough funds to financially support the Ukraine for the next two years.
The American Enterprise Institute's Desmond Lachman elaborates: “[T]he Ukrainian government itself estimates its total borrowing needs for 2014 and 2015 at only around $35 billion. This would imply that at most the IMF would be called upon to finance Ukraine by between $15 billion and $20 billion. Such amounts would represent no more than 5 percent of the IMF's currently available resources.”
The IMF isn't at the mercy of waiting for U.S. permission, either. On March 12, Sen. Pat Toomey questioned Treasury Secretary Jack Lew on the IMF's ability to lend money to Ukraine without adopting the 2010 IMF quota reform. Lew had to acknowledge that there is no link between the two issues and that the IMF has an existing framework already in place to allow Ukraine to receive the needed $15 billion IMF loan -- not that this admission will prevent his colleagues from implying the opposite.
There are plenty of other reasons to be opposed to the 2010 IMF quota legislation. Like the U.S. government, IMF has often demonstrated its poor stewardship of taxpayers’ money. For instance, the recent European crisis presented the IMF with an opportunity to break its own rules and begin extending loans to countries with unsustainable debts.
Writing in the Wall Street Journal, Stanford economist John Taylor explains how the IMF changed its practice of requiring that “countries and their creditors had to restructure and write down debt to a sustainable level before the IMF would grant them any new loans” so that the organization could inject billions of dollars in such reputable borrowers as Greece. The change is not only irresponsible but it also calls the ostensible independence of the IMF into question, as the new rule may have been the result of “pressure from euro-zone countries and their banks, which held a large fraction of Greek debt.”
Unfortunately, this is hardly the first idiotic move by the geniuses at the IMF. After all, this is an organization whose purpose is to reward bailouts to governments after their reckless national fiscal and monetary policies collapse under the weight of their own economic absurdity, thereby facilitating corruption and encouraging moral hazard. The organization also spends a notable amount of time advocating for higher taxes in the U.S. -- while charging the cost on the U.S. taxpayer's tab, the single largest contributor to the IMF.
Not only should the U.S. not double its funding to the IMF, it should limit -- or completely eliminate -- the funding that is already wasted on the organization. The White House should also drop its vulgar Ukrainian pretext for shoving higher IMF commitments down taxpayers' throats. Their Emanuel Doctrine isn't fooling anyone anymore.VERONIQUE DE RUGY, a Washington Examiner columnist, is a senior research fellow of the Mercatus Center at George Mason University.