During a January 20th interview on PBS’ Newshour with Jim Lehrer, President Clinton was asked about the Administration’s bailout of some Asian nations, and was reminded that “some members of Congress … are saying what this really boils down to is welfare for international bankers.... How do you respond to that?” To which Mr. Clinton replied: “First of all, there is some truth to it.” The President went on to explain: “I don’t think any American likes the idea that every single banker in one of these countries that made every bad loan will get paid back. And that, in fact, won’t happen.” Indeed, all will not get their money back — only a select few with the appropriate political connections.
The $120 billion bailout of four Asian nations — South Korea, Indonesia, Philippines, and Thailand — would flow through a variety of multilateral lending institutions, mainly the International Monetary Fund (IMF), but also the Asian Development Bank and the World Bank. The U.S. government is the largest contributor to all of these UN-linked institutions, each of which has already lent billions to troubled Asian nations under their regular subsidy programs before the bailout began.
Fat Cat Favorites
Undoubtedly, among those favored with bailouts will be the big six U.S. banks which have a total of $19.2 billion in outstanding Asian loans. Four of those six — J.P. Morgan, Chase Manhattan, Bank America, and Citicorp — collectively have more than $100 billion sunk into the Asian economy. With such powerful elements pulling strings on Wall Street, one can understand the heated White House push for a bailout. Representative Ron Paul (R-TX) summed up the attitude of the Wall Street corporatists: “The big bankers and investors quite correctly support the notion of less government and economic liberty when we talk about their profits, but when losses occur they are quick to call for the government to socialize the burden. If we were to put purple dye on the taxpayers’ money that we are today sending to these countries under the auspices of the IMF, the Wall Street fat cats will be walking around with purple pockets tomorrow.”
The price to the U.S. taxpayer for the Asian Bailout will be more than $19 billion, including a $3 billion contribution to the IMF’s “emergency fund” and more than $16 billion in appropriations for expanded capitalization of the IMF. But the more than $19 billion price tag is only the beginning. Clinton officials have been trumpeting the idea that in the evolving global economy, the U.S. cannot afford to let foreign nations suffer recessions. Such rhetoric raises the prospect of perpetual taxpayer bailouts of foreign dictatorships and corporatist governments.
But must the American taxpayers be robbed for the sake of Asian dictators? Will the American economy fail if we do not bail out the Thai monarchy? What happened to the great faith in the natural free market and principles of free trade that Clinton and “conservative” pal Gingrich professed when they pushed for NAFTA and GATT?
President Clinton signed the GATT agreement with the expressed purpose of having “a fair and increasingly open world trading system that allows the free market to work and rewards the most productive people in the world.” Now he insists that the U.S. government must intervene in the global economy by making the American people fork over billions to foreign governments which have suffered an economic downturn. As the pleas to allow the natural free market to take its course dissipate, they are replaced with statist bailout fever. Apparently, America cannot afford to let Chase Manhattan’s bottom line show a loss.
The truth is that the Clinton Administration’s nearly apocalyptic prognostications are greatly exaggerated. The American economy is not so greatly linked as to make it necessary to bail out any Asian nation. But taking the Clinton Administration’s statements of American economic dependency at face value would lead one to the logical conclusion that perpetual U.S. taxpayer bailouts of trading partners are a fact of life. Under this kind of policy, we can expect new and regular U.S. taxpayer bailouts of foreign countries. Were Americans apprised of these costs during the GATT and NAFTA bailouts? Of course not. Yet the one-time perpetuators of pseudo-free trade propaganda, Clinton and Gingrich, have once again joined forces to bring about the market intervention known as the Asian bailout. When a congressman endorses a bailout of corrupt foreign governments with loans to help improve the bottom line of huge Wall Street banks and brokerage houses engaging in risky foreign deals, you know that this congressman has contempt for the concept of delegated powers under the U.S. Constitution. When this same congressman cites “free trade” dogma as the reason why he cannot use taxpayer money to bail out American families and small businesses, you don’t have to look at a list of campaign contributions to know on which side his bread is buttered.
Our Own Interests
NAFTA and GATT would never have passed had they been paired with taxpayer bailouts. Many Americans, including some of the most ardent free traders, would no doubt have preferred outright protectionism to economic dependency and endless taxpayer bailouts of corrupt foreign governments. Founding Father James Madison wrote in 1828: “A nation leaving its foreign trade in all cases to regulate itself, might soon find it regulated by other nations into a subserviency to a foreign interest. In the interval between the peace of 1783 and the establishment of the present Constitution of the United States, the want of a general authority to regulate trade is known to have had this consequence.”
Past is not yet prologue, however. American dependence on Asia is not yet such that the U.S. economy cannot survive an Asian economic downturn. American dependency has been exaggerated in order to bail out key Wall Street Insiders, who warn that the American taxpayer will pay a price if the bailout does not go through. They’ve got it reversed. The American taxpayer will pay a heavy price if the IMF package does go through.
