"NO" on Ukraine Package and Unrelated IMF "Reforms"
"NO" on Ukraine Package and Unrelated IMF "Reforms"
This week the Senate will consider the Support for the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014 (S. 2124), which also contains controversial and long-stalled "reforms" to the International Monetary Fund (IMF). The IMF is unrelated to Russia's aggression toward Ukraine and subsequent takeover of Crimea.
Any attempt to conflate the two issues is politically motivated; indeed, the Obama Administration is misleading the American people to make these so-called reforms appear urgent. Alarmingly, the proposed "reforms" are not even in America's best interest because they would reduce the power of the United States. In fact, the Heritage Foundation points out "the reform package would also increase Russia's power at the IMF at the very time when the U.S. is seeking to punish Russia for its act of war and aggression in Crimea."
The IMF reform package would undermine the United States' power in several ways. The Heritage Foundation explains the reforms would shift more voting power to countries like Russia, China, Brazil, and India, as well as specific emerging-market nations. It would also double the amount of member countries' national "quota" contributions. "The higher 'quota' levels would come from shifting certain special 'emergency account' funds over which the United States has had more control."
Loss of U.S. control over these "emergency account" funds could also expose U.S. taxpayers to billions of dollars in additional financial liability from morally hazardous IMF loans (e.g. to Greece).
The U.S. would also lose its current right to appoint its own representative to the IMF Executive Board. Under the new rules, the U.S. executive director would have to be elected, which means in the future, the President of the United States "may not be able to name someone to the IMF who shared his or her political and economic philosophies."
The U.S. has the largest quota of any country in the world, as well as the largest single-nation IMF voting share (16.75 percent). It has also been the only country in the world with veto power at the IMF. Due to the constitutional role of Congress, and the U.S. veto power, Congress must therefore approve this IMF reform package before it can go into effect.
Many are also "concerned that American tax dollars are being used for IMF programs that bail out bad decisions by other governments that follow reckless fiscal and monetary policies." Conservatives have rightly pointed out the IMF has been an "enabler of moral hazard."
The so-called "reforms" some lawmakers are now trying to pass are not urgent. As Heritage notes, "there is no reason why the IMF cannot continue lending at current levels pending additional revisions to the reform package."
Heritage Action opposes S. 2124 and will include it as a vote on our legislative scorecard.
Related:
Heritage Action Scorecard
Treasury Is Misinforming the American Public about Ukraine and IMF Reforms
Q&A: International Monetary Fund Reforms and U.S. Aid to Ukraine
"NO" on Ukraine Package and Unrelated IMF "Reforms"