YOUR TAXES FUND SOUTH AMERICAN BAILOUT
You may have seen minor media coverage last week focusing on the economic problems in South America, particularly Uruguay and Brazil. The U.S. Treasury, acting through the Exchange Stabilization Fund and without congressional approval, gave Uruguay $1.5 billion to ease the impact of a bank shutdown. While $1.5 billion barely raises an eyebrow in Washington anymore, and scarcely attracts media attention, this latest bailout provides a telling example of the real priorities of our federal government.
This money, we are told, is just a "bridge loan" to give Uruguay a little breathing room until it receives its next cash infusion from the International Monetary Fund. In other words, the plan for Uruguay is to pay off one loan by getting a bigger loan, like a hapless spendthrift using one credit card to pay off another. What’s worse is that American taxpayers already fund the IMF with a $37 billion line of credit, so Uruguay will be paying us back with our own money! The same goes for Brazil, which just received a record $30 billion from the IMF to deal with its own looming bank collapse.
Why the sudden interest in Uruguay? Treasury Secretary O’Neill’s statement on the matter makes it sound like Uruguay is a real financial powerhouse. In fact, he tells us "Uruguay’s approach to bank reform should encourage confidence of depositors in the financial system. Uruguay has effectively implemented sound economic policies and embraced free markets." Apparently, those sound economic policies led to outright collapse and a run on the nation’s banks, while their commitment to free markets involves billions in welfare bailouts courtesy of American taxpayers. If Uruguay is indeed so financially and politically stable, why in the world would it need billions in foreign welfare?
The truth is that our government officials are not particularly concerned about economic hardship in Uruguay. Uruguay, like many South American countries, is economically unstable because of its government’s bad policies. Our loans and bailouts simply keep their unstable system running a little longer, while miring the Uruguayan people further in debt. We’re not doing the people any favors. On the contrary, our "aid" just makes the inevitable collapse all the more serious.
The real concern behind schemes like the Exchange Stabilization Fund and the International Monetary Fund is the corporate interests they subsidize. American banks and corporations have a great deal of money invested in South America, and a bank default by any country there directly threatens those dollars. The multinational banks especially fear a chain reaction of economic meltdowns, beginning with Argentina and spreading to Uruguay, Brazil, and beyond. So they use political influence to thwart the free market process and prop up bankrupt economic policies in Uruguay.
But why should taxpayers subsidize the risky business practices of multinational lenders? The banks themselves should bear the risks of investing in unstable nations, just as surely as they enjoy the rewards when investments in foreign markets prove profitable. They want taxpayers to protect them from risk, but never share in the rewards.
What a shame that our government continues to fund risky overseas bailouts and unconstitutional foreign aid, even as our own nation faces serious financial problems here at home. Congress has lapsed into uncontrolled deficit spending, and billions more will be spent creating the Department of Homeland Security and funding an unwise war in Iraq. The private economy sputters along with little or no growth, while the stock market bubble loses more air almost daily. The pension and retirement plans of millions of Americans have suffered heavy losses, and the very solvency of Social Security is threatened by the coming retirement of the baby boom generation. Meanwhile, our military families and veterans are allowed to live in poverty. In the midst of all these problems at home, how in the world can we justify another nickel for foreign bailouts?