In the next few weeks, Congress can approve at little budgetary cost to U.S. taxpayers an increase in resources at the International Monetary Fund (IMF) that will help protect Americans from the costs of the next global financial crisis.
Why should government leaders and taxpayers care about an increase in resources at the IMF?
Congress is understandably not focused on legislation to maintain the U.S. commitment to the IMF; in the partisan struggles on Capitol Hill, the IMF has been on the backburner. Now, however, the administration has begun providing much needed visible support for the legislation, and the omnibus appropriations bill provides an opportunity for the administration and Congress to move forward together on it.
The hard work has already been done. As part of the G-20 coordinated response to the 2008-09 crisis, the United States led a negotiation with the other 187 IMF members to increase IMF resources and to make modest changes in the allocation of the shares across country members. All other major economies, including key U.S. allies, have long since endorsed the agreement in their legislatures. Embarrassingly, this straightforward and sensible deal is now being held up by the failure of Congress to act.
The U.S. negotiators secured two key results in the 2010 negotiation that should make it easy for Congress to say yes. First, the United States need not contribute new money; it will simply transfer money Congress already appropriated five years ago from a special IMF-housed fund into the formal, permanent reserves at the IMF. Second, the United States will maintain its voting power within the IMF at the same level.
There are four reasons why the administration and Congress should work together to ensure that the necessary IMF legislation is included in the upcoming omnibus appropriations bill:
First, the United States benefits greatly from global financial stability. Bolstering the IMF’s capacity to assist hard-hit countries supports U.S. exports and jobs as well as confidence in financial markets generally.
Second, the IMF is a bargain for U.S. taxpayers. The specifics of the 2010 deal mean that the budget dollars the United States contributes to the IMF are leveraged one thousand percent by the other 187 countries’ contributions. Without the IMF, were a worldwide financial crisis to occur again, the United States and other wealthy countries would end up shouldering the burden directly at much higher cost.
Third, the IMF quota reform package includes modest increases in the shares and responsibilities of such large emerging markets such as Brazil, China and India. This is in everybody’s interest: it unlocks financial contributions to the IMF from these countries while ensuring their full engagement in a multilateral institution where the United States is still the dominant voice.
Finally, this is a thoroughly bipartisan cause. Since the IMF was created in the final years of World War II, every U.S. president, Republican and Democrat, has supported strong U.S. engagement with the institution. Presidents Ronald Reagan, George H.W. Bush, and Bill Clinton all backed legislation that increased resources to the IMF, and President George W. Bush championed legislation supporting reforms.
Who cares about the IMF? We all should. U.S. support for IMF critical to preserving U.S. global economic leadership. It’s also much needed insurance that when the next global financial crisis occurs we will have a global institution ready and able to respond as needed.
Birdsall is the founding president of the Center for Global Development. Lowery is vice president for Rock Creek Global Advisors and was assistant secretary for International Affairs at the U.S. Treasury from 2005-2009.