THE NEWLY enacted omnibus appropriations bill, like life itself, is full of surprises. Given the bill’s complexity and massive size — 2,009 pages chock-full of policy arcana — it could not be otherwise. Yet not all of these surprises are unpleasant ones. To the contrary, paging through this magnum opus, you will come across a quiet compromise provision that could enable the United States, belatedly, to help reform international economic institutions and reassert U.S. leadership in them to boot.
We refer to the bill’s approval of a plan to increase U.S. financial backing for the International Monetary Fund, while modernizing IMF governance. In 2010, President Obama agreed to a doubling of the IMF’s permanent resources, which it uses to stabilize countries in financial distress, to about $725 billion, including an increase in the U.S. commitment from $65 billion to $128 billion. The extra U.S. money would come from shifting an existing U.S. commitment to a crisis-fighting fund put together at the height of the Great Recession, so there would be no real change in U.S. taxpayer exposure. Meanwhile, the same 2010 agreement included an increase in the contributions to the IMF from wealthy emerging nations such as China, as well as a corresponding upgrade of their voting power on the IMF board — though, crucially, their increased votes would come at the expense of Europe, not the United States, which would retain veto power.
Republicans stalled approval of the plan after taking control of the House in 2010, in part because of concerns that the IMF had gone beyond its self-imposed financial limits on bailouts in Greece that year, despite uncertainty about the ultimate sustainability of Greek debt. That was a legitimate concern, but holding the entire IMF funding and governance reform package hostage was a counterproductive way to address it. Among other negative consequences, it disappointed U.S. allies and enabled China to start forming multilateral counter-institutions of its own, such as an Asian infrastructure bank, with significant European and Asian participation.
In return now for allowing these reforms to go forward, Republicans secured a commitment from the administration that it would work to restore IMF limits on “exceptional access” to its funds (i.e., emergency loans bigger than the country would otherwise be entitled to based on its contributions to the fund). The goal is that even if a particular country is, in effect, too big to fail, it can’t secure a supersize bailout unless the IMF can certify that its debt will be sustainable. To the extent this incentivizes countries to avoid excessive debt, it is probably a wise idea; the IMF staff itself has publicly supported it. Additionally, future U.S. administrations will have to give Congress notice before voting on any proposal to grant a country “exceptional access.” The only thing wrong with this smart solution is that Congress and the administration could not consent to it a few years ago.