Using the old reliable excuse that it was in the interest of "national security," President Clinton last week opted to obligate the money of the American taxpayers to bailout the troubled South Korean economy and the legions of wealthy investors who had made a mistake in sinking their cash into a bad market.
Just a few weeks ago, the president and the Secretary of the Treasury announced that no taxpayer cash would go to the bailout, except as a last resort. Backing off from another promise, though, the Clinton Administration announced on Christmas Eve that it would go ahead and send almost $2 billion from the Treasury's Emergency Stabilization Fund.
This kind of frivolous use of taxpayers' money is a sham. Under our Constitution, this fund should not exist in the first place, given the Article 1, Section 7, powers and restrictions on raising and spending money. Brought online by the Roosevelt Administration in the 1930s, the fund was set-up to stabilize a volatile US dollar, not prop-up foreign currencies and markets. So even if this fund were constitutional - which it clearly is not - to use the money to cover the bad investments of Wall Street bankers and save the hides of Korean government officials is against the premise under which the fund was established.
Further, the same section of the Constitution requires that Congress allocate taxpayer funds for expenditure, not the President, the Secretary of the Treasury or the Prime Minister of South Korea.
But the stage was set for this kind of bail-out funding several years ago, during the so-called "Mexican Peso Crises." Then, the US raided the Stabilization fund to pay-off another bad set of investments in a risky foreign economy. At least then the US was given collateral for the loan in the form of oil production revenues.
This latest bail-out loan, however, is being given to the Korean government without so much as a cheap used car as collateral. If you or I tried going to the local bank and asked for a $1.7 billion loan without so much as presenting a trinket for collateral, we'd be laughed out the door.
Apparently, though, if you are a nation with a bad credit problem and a history of making stupid economic decisions, you can come to Uncle Sam and get the cash without any question. Or, as apparently in this case, not even any real requirement to change your mode of behavior.
Of course, Mexico and South Korea do have something special which makes their case easier for the politically minded controllers of the taxpayer purse-strings. Both countries had a lot of American investors wanting to cash in on lucrative deals abroad with the possibility of big payoffs. Of course, as anyone who invests knows, the bigger the potential payoff, the bigger the risk. But many investors today are eager to embrace the philosophy of free-market economics when it comes to making money and keeping their profits, but at the first sign of those investments going sour, they want the government to socialize their losses at the expense of the taxpayers.
And since these investors have also heavily "invested" in American politics, it is easy for the politicians to use your money to help them out. After all, it is very easy to be generous with other people's money.
This bailout policy flies in the face of sound economics, of constitutional principles, and even old-fashioned common sense. But even worse, this policy immorally exposes the taxpayers to a tremendous risk. If Korea doesn't pay back the cash, then the only way for the government to make up the shortfall is to come knocking on your door again and reaching further into your pocket. After all, neither this president nor a majority of the Congress has any desire to cut spending to cover their improper uses of your money.
And while $1.7 billion may not seem like a lot to the quasi-socialist nations like Korea, it represents a significant amount of money to most Americans. By giving away almost $2 billion to a foreign government at a time when we face a continually growing national debt, proposals to cut benefits to senior citizens and veterans, and an tax rate of over 50 percent, it seems our national security and well-being is weakened by this maneuver, not mystically increased as the president would have us all believe.
But then, worrying about real national security, the risk to
the taxpayers, and the viability of our own economy, is something
upon which most politicians prefer not to dwell.
Ron Paul represents the 14th District of Texas. He may be contacted
at his office, 203 Cannon HOB, Washington DC 20515, or on the