Opposition to funding $1.4T European bailout

With the European debt crisis dominating the news and threatening to pull the world into a double-dip recession, there are growing calls for Uncle Sam to come to the rescue.

The U.S. is already committing untold billions to the $1.4 trillion European bailout fund, but that’s not enough, according to some European leaders and even U.S. politicians. They say that while the EU bailout is costly, it’s also necessary.

They are only right about the cost. These endless bailouts are not only unnecessary, but are in fact dangerous.

“The problem with socialism,” former Prime Minister Margaret Thatcher once said, “is that eventually you run out of other people’s money.” She was right. Now, as politicians run out of other people’s money in their own country, they want other nations to foot the bill.

Consider the situation in Greece. For the past decade, Greece engaged in unrestrained deficit spending, accumulating a debt worth 143% of their GDP today. When Greece could no longer borrow money in the private markets last year, the European Union and the International Monetary Fund gave them bailouts of over $300 billion (nearly equal to the entire Greek economy, or $28,000 per person).

But the problem hasn’t been confined to one nation. Ireland and Portugal have received bailouts from the EU and the IMF at a cost of over $100 billion apiece.

Who's next? Likely, Spain and Italy. Spain is running a deficit around 9% of GDP because its jobless rate is stuck at 23% – highest in the euro zone. Italy’s debt is 115% of the economy. If it were to receive a “small” bailout – say, the size of Portugal’s, about half the economy – it would cost over $1 trillion.

Who will pay for it? America? Considering that our debt-to-GDP ratio is close behind Europe’s, who will bail out America when our time comes?

Of course, we are assured that Greece, Italy and the other European nations are making “tough” spending cuts as a condition for this generous bailout cash. But it’s worth noting that many of these “cuts” are cuts in the Washington, D.C., sense – spending still increases, just a little bit slower than planned.

One example: Italian Prime Minister Silvio Berlusconi was forced to resign in exchange for passage of his “ambitious” austerity program. The centerpiece of that program? Raising the retirement age for men from 65 to 67 ... by 2026. Even the U.S. – home of the third rail of entitlement politics – took it upon itself to adopt this change years ago. Of course, since that change won’t take full effect until over a decade from now, we’re hardly in a position to brag.

There is only one solution to the European debt crisis – just like there’s only one solution to the American debt crisis: balancing the budget by cutting excessive government spending.

A crisis caused by spending and borrowing will not be solved by more spending and borrowing, yet Senate Democrats voted in June to allow the IMF over $100 billion in fresh U.S. lending authority for more bailouts.

Rather than participating in Europe’s $1.4 trillion TARP, America must focus on solving its own economic problems. Therefore, we are calling on the Obama administration to use the vote of the United States, the single largest contributor to the IMF, to stop America’s participation in these bailouts. In addition, we have introduced legislation in Congress to protect our tax money.

Rather than bailing out Europe, America should be far more concerned about our own day of reckoning. We have a $15 trillion debt already larger than our entire U.S. economy. To avoid a Greek-like debt crisis, we need to pass a balanced budget amendment that forces us to cut spending immediately.

While the future of Europe’s economy is ultimately up to the Europeans, we are confident that free-market solutions are the answer. It wasn’t socialism and central planning that made America the most powerful economy in the world. It has been our commitment to free markets, free people and a limited government.

While trillion-dollar bailout Band-Aids might be able to prop up failed socialist policies temporarily, it cannot – and will not – be the catalyst for a new era of prosperity.

Thatcher also said that Europe is “a monument to the vanity of intellectuals, a program whose inevitable destiny is failure. Only the scale of the final damage is in doubt.”

To minimize the damage, Europe needs to turn to the principles of freedom. That means government must do less, not more, and government must take less, not more from the people. Freedom, not bailout socialism, is the path to a brighter, freer tomorrow.

Senator DeMint of South Carolina and Congresswoman McMorris Rodgers of Washington state, both Republicans, have introduced legislation to stop U.S. participation through the IMF in the European bailouts.