FRONT PAGE CONTRIBUTOR
McConnell Prepared to Cut Backroom Deal on IMF Bailout
Yesterday, the Senate Foreign Relations Committee passed a bill to authorize loan guarantees for Ukraine, similar to the bill that passed the House last week. The loan guarantee bill doesn’t directly increase spending; rather it adds Ukraine to the list of countries eligible for Economic Support Fund (ESF) grants. ESF grants have already been appropriated and are used as “walking around cash” for the State Department to send to allied countries in need of assistance (although the money often goes elsewhere). However, the bill does transfer extra funds into the Treasury in order to cover any potential default on the loan.
Let’s put aside judgment on the underlying bill for a moment; the more critical issue at hand is the International Monetary Fund (IMF) “reform” provision. Senate Democrats tacked on a provision that would weaken our sovereignty within the IMF, ostensibly increasing our quota and limiting our power. Here is how the Heritage Foundation describes the reform package:
“In 2010, the IMF board, with support from the Obama Administration, proposed a series of reforms that would increase the voting power of certain emerging-market nations and double the amount of member countries’ national “quota” contributions that are the primary source of funding for IMF loans.
The U.S. has the largest quota of any country in the world and also the largest single-nation voting share (16.75 percent). It has been the only country in the world with veto power at the IMF. Due to the constitutional role of Congress and U.S. veto power, this IMF reform package must therefore be approved by Congress before it can go into effect.
The reform package would change the rules for election of the IMF executive board, and the U.S. would lose the right it has heretofore enjoyed to appoint its own representative to the executive board—and that is where all the power is at the IMF.”
This “reform” package is similar to some of the treaties that are pushed through the United Nations by those in the world who want to attenuate our power. It would also cost us another $315 million.
GOP Senators Corker, McCain, Johnson, and Flake joined all the Democrats in supporting the bill. The other committee Republicans opposed it. Now everyone is wringing their hands over the impasse.
In comes Senator Mitch McConnell to cut a raw deal on a bill we don’t have to pass in the first place. The Hill has the details on the deal:
Republicans have long opposed the reforms, which they see as reducing U.S. influence in the IMF. They’ve sought to get a deal from the administration in which they’d agree to the reforms in exchange for the White House backing off on new regulations to govern 501(c)(4) tax-exempt groups that were at the center of the recent IRS targeting controversy.
The IRS rules, released after the tax agency acknowledged it improperly scrutinized conservative organizations, seek to clarify what would be considered political activity for tax-exempt groups.
The GOP offered a similar deal during a fight over an omnibus spending bill.
I’m hearing from a number of Senate sources that indeed it is Mitch McConnell who pitched this deal during the omnibus and is doing so now with the Ukraine bill. Politico also seems to confirm this through Senator Bob Corker. This is a quintessential McConnell backroom deal – to preemptively surrender on a definitive and immediate bad policy in exchange for mitigating a looming threat.
The IRS regulations have not yet been promulgated and they are illegitimate. We should not pay ransom on something Obama has no authority to do in the first place. We should fight the IRS regulations as part of a separate effort. If need be, we must use the power of the purse and fight them in appropriation bills for the IRS. Oh, I forgot, McConnell doesn’t believe in that.
Moreover, Obama has no leverage to pass the IMF bill. It cannot pass the House, and the Ukraine bill is not a must-pass bill. In fact, many conservatives would have rather we pass a bill eliminating the restrictions on exporting natural gas so that we can immediately lower the cost of energy in the world markets. The House should also attach a provision to pull out of New START. That would weaken Russia’s leverage and promote economic growth in one shot. That is the true conservative approach to peace through strength. But what can you expect from leadership?
Granting some loan guarantees to a weak country (that might use the money to pay off Russia anyway) is at best the most palatable option presented to House members by leadership and at worse, something to oppose. Even if you support the package, it is certainly not a hill to die on. We should not agree to weaken our power on a bill that was designed to project our power. If Obama insists on passing the IMF package, Senate Republicans should make it clear that we don’t care about passing a Ukraine bill while House Republicans should pass a bill dealing with energy exports.
However, from McConnell’s vantage point, this is a win-win scenario. He gets to evince power on the issue of campaign finance (which he likes solely because he is a campaign animal, not a believer in the Constitution), while empowering the world powers at the IMF. For McConnell, the IMF package in not a concession; it’s an ideal. In 1998, he sponsored and led the $18 billion IMF bailout package throughout the legislative process. Now he gets his IMF bailout and can claim credit for saving the Tea Party from the IRS – all in one backroom deal.
Who knows? This might even turn out to be “one of the Senate’s finest moments.”
Finally, does anyone think this behavior will change were McConnell to become Majority Leader? Obama will still be president in 2015 and will be as aggressive as ever. Now he knows how to pick McConnell’s lock. All he needs to do is threaten illegal action on one of McConnell’s white whale issues, and Mitch will oblige with a concession on legislation.
Does this man deserve a promotion?
Cross-posted from The Madison Project