The Europeans have just agreed to another bailout for Greece. That’s the bad news.
The good news is…well, there is no good news. Sarkozy, Merkel, and the other statists have once again failed to do the right thing and instead have decided to throw good money after bad and dig the debt hole even deeper.
But there is worse news. The IMF is financing part of the bailout and American taxpayers are “shareholders” in the IMF.
In other words, I’m helping to reward bad behavior and misallocate global capital. This doesn’t make me very happy – especially since the White House supports this misguided approach.
But this is business-as-usual for the IMF, and here’s a first-hand example.
I’m in El Salvador where I just finished two days of speeches, meetings, and interviews to discuss how the country should deal with its fiscal imbalance.
Discussing Mitchell's Golden Rule in El Salvador
My message is simple. El Salvador should reject tax hikes and instead put government on a diet by capping annual spending growth so the budget grows by 1 percent or 2 percent annually.
Ever single reporter responded by saying some variant of “but the IMF says we need to raise taxes.”
During the first interview, I simply said the IMF was wrong. During the second interview, I said El Salvador should refuse to let IMF bureaucrats in the country. After I heard the same IMF message the third time, I suggested shooting down any flight carrying IMF bureaucrats and their snake-oil economic advice.
The last comment was a joke, of course, but it does raise a fundamental question. Why are American taxpayers subsidizing an international bureaucracy that runs around the world urging higher taxes and bailouts?!?
To be fair, the IMF usually includes some good advice in their reports. If you read the fine print, the bureaucrats often recommend reductions in subsidies, red tape, government payrolls, and handouts.
But if you give politicians in any country a set of options, and higher taxes and/or bailouts are on the list, it doesn’t take a genius to realize that the good reforms will get ignored while the bad policies will be adopted.
