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Posts Tagged ‘International Monetary Fund’

The International Monetary Fund is a great place to work – at least for those who don’t feel guilty about getting extravagant salaries from taxpayers. And what do IMF bureaucrats do for the money we pay them (American taxpayers finance the biggest share of the bureaucracy’s expenses)?

Many of them jet around the world in business class, stay at first-class hotels, and tell nations to raise taxes and devalue their currencies. And to add insult to injury, they specialize in misallocating global saving and investment by bailing out irresponsible nations.

This is not to say the bureaucrats are always wrong. While the IMF often is bad on taxes and monetary policy, the bureaucrats sometimes give good advice on trade, regulation, and government spending.

But even when they give good advice, that doesn’t justify their big salaries (which are tax-free, by the way). The real question, though, is whether the IMF should even exist – especially when the bureaucracy more often than not is on the wrong side of key public policy issues.

Unfortunately, instead of being cut back or phased out, the IMF is getting even bigger. While the rest of us are having to tighten our belts, the bureaucrats at the IMF are having fun spending our money. The gold-plated international bureaucracy now wants to spend big bucks to upgrade it already lavish headquarters in Washington. Here’s a blurb from the UK-based Guardian.

…the International Monetary Fund’s bureaucrats plan to concentrate on a matter closer to home in the new year – sprucing up their offices in downtown Washington DC. Dominique Strauss-Kahn, the fund’s managing director, quietly announced last week that he would be asking permission from the organisation’s cash-strapped member states to refurbish its main headquarters building. …Pressure groups greeted the news with scepticism, pointing out that eight years ago the fund spent $150m on a second building, complete with external waterfall, after saying its original site – known as HQ1 – was no longer big enough for its staff of highly-paid international officials.They said the fund was now flush with cash after selling some of its stock of gold and extracting fees and interest payments from troubled countries such as Ireland and Greece. …Peter Chowla, programme manager at the Bretton Woods Project, a think tank that monitors the activities of the IMF and the World Bank, said: “After a nice financial crisis, the IMF’s balance sheet is looking very health – lots of interest to pour in from Greece and Ireland and commitment fees on money never even lent to Colombia, Mexico and Poland. So the fund is thinking about spending some of the proceeds on remodelling its headquarters.”

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The mid-term elections were a rejection of President Obama’s big-government agenda, but those results don’t necessarily mean better policy. We should not forget, after all, that Democrats rammed through Obamacare even after losing the special election to replace Ted Kennedy in Massachusetts (much to my dismay, my prediction from last January was correct).

Similarly, GOP control of the House of Representatives does not automatically mean less government and more freedom. Heck, it doesn’t even guarantee that things won’t continue to move in the wrong direction. Here are five possible bad policies for 2011, most of which the Obama White House can implement by using executive power.

1. A back-door bailout of the states from the Federal Reserve – The new GOP Congress presumably wouldn’t be foolish enough to bail out profligate states such as California and Illinois, but that does not mean the battle is won. Ben Bernanke already has demonstrated that he is willing to curry favor with the White House by debasing the value of the dollar, so what’s to stop him from engineering a back-door bailout by having the Federal Reserve buy state bonds? The European Central Bank already is using this tactic to bail out Europe’s welfare states, so a precedent already exists for this type of misguided policy. To make matters worse, there’s nothing Congress can do – barring legislation that Obama presumably would veto – to stop the Fed from this awful policy.

2. A front-door bailout of Europe by the United States – Welfare states in Europe are teetering on the edge of insolvency. Decades of big government have crippled economic growth and generated mountains of debt. Ireland and Greece already have been bailed out, and Portugal and Spain are probably next on the list, to be followed by countries such as Italy and Belgium. So why should American taxpayers worry about European bailouts? The unfortunate answer is that American taxpayers will pick up a big chunk of the tab if the International Monetary Fund is involved. Indeed, this horse already has escaped the barn. The United States provides the largest amount of  subsidies to the International Monetary Fund, and the IMF took part in the bailouts of Greece and Ireland. The Senate did vote against having American taxpayers take part in the bailout of Greece, but that turned out to be a symbolic exercise. Sadly, that’s probably what we can expect if and when there are bailouts of the bigger European welfare states.

3. Republicans getting duped by Obama and supporting a VAT – The Wall Street Journal is reporting that the Obama Administration is contemplating a reduction in the corporate income tax. This sounds like a great idea, particularly since America’s punitive corporate tax rate is undermining competitiveness and hindering job creation. But what happens if Obama demands that Congress approve a value-added tax to “pay for” the lower corporate tax rate? This would be a terrible deal, sort of like a football team trading a great young quarterback for a 35-year old lineman. The VAT would give statists a money machine that they need to turn the United States into a French-style welfare state. This type of national sales tax would only be acceptable if the personal and corporate income taxes were abolished – and the Constitution was amended to make sure the federal government never again could tax what we earn and produce. But that’s not the deal Obama would offer. My fingers are crossed that Obama doesn’t offer to swap a lower corporate income tax for a VAT, particularly since we already know that some Republicans are susceptible to the VAT.

4. Regulatory imposition of global warming policy – This actually is an issue we needed to start worrying about before this year. The Obama Administration already is in the process of trying to use regulatory edicts to impose Kyoto-style restrictions on energy use, and 2011 may be a pivotal year for this issue. This issue is troubling because of the potential impact on economic growth, but it also represents an assault on the rule of law since the White House and the Environmental Protection Agency are engaging in regulatory overreach because they did not have enough support to get so-called climate change legislation through Congress. The new GOP majority presumably will try to use the “power of the purse” to limit the EPA’s power grab, and the outcome of that fight could have dramatic implications for job creation and competitiveness.

5. U.N. control of the Internet – The Federal Communications Commission just engaged in an unprecedented power grab as part of its “Net Neutrality” initiative, so we already have bad news for both Internet consumers and America’s telecommunications industry. But it may get worse. The bureaucrats at the United Nations, conspiring with autocratic governments, have created an Internet Governance Forum in hopes of grabbing power over the online world. This has caused considerable angst, leading Vint Cerf, one of inventors of the Internet (sorry, Al Gore) to warn: “We don’t believe governments should be allowed to grant themselves a monopoly on Internet governance. The current bottoms-up, open approach works — protecting users from vested interests and enabling rapid innovation. Let’s fight to keep it that way.” International bureaucracies are very skilled at incrementally increasing their authority, so this won’t be a one-year fight. Stopping this power grab will require persistent oversight and a willingness to reject compromises that inevitably give bureaucracies more power and simply set the stage for further demands.

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