Claims that the war spending bill does more for the IMF than the wars

In an unusual role reversal, most Congressional Republicans recently voted against a war funding bill. Some said they opposed the bill because it had so much money for the International Monetary Fund, a coalition of 185 countries that tries to foster global economic growth.

Among the Republicans sounding off was Rep. Lynn Westmoreland of Georgia, who wrote this on his party's blog:
 
"We’re getting an alleged war spending bill that actually spends more money on the International Monetary Fund than on the war," he wrote. "We have the ability to bounce back out of this recession, but we can’t afford to pay for a global bailout – we have more than enough bailouts going on in our own country, thank you very much."

All but five of the 178 Republicans in the House voted against the measure on June 16, 2009. The bill is at the White House awaiting President Barack Obama's signature.
 
The IMF's profile has risen in recent months in the wake of the economic crisis, and some financial leaders want the agency to loan more money to jump-start the global economy. We wondered if it was possible that a war funding bill would have more money for the IMF than the wars.
 
Overall, the bill costs about $106 billion, according to the House Appropriations Committee. Approximately $82 billion — or about 77 percent — is for war-related items, everything from new machinery to hospitals.

And for the IMF?

Zero dollars, according to the Appropriations Committee.

So does that mean Westmoreland's claim is false?

Not so fast.

The bill does establish a $100 billion line of credit for the IMF that the agency could use to make loans to other countries. But the Congressional Budget Office has estimated the actual cost to the Treasury at approximately $5 billion. That sum is largely the product of some confusing budgetary gymnastics based on estimates of how dramatically the IMF would have to use the line of credit and how quickly loans would be repaid, the CBO explained on its Web site.

"In forming this estimate, CBO envisioned various potential state of the world economy," wrote CBO director Douglas Elmendorf on May 19, 2009. "In the most likely situations, the IMF would draw against only a small portion of the U.S. commitment and, CBO assumes, the likelihood of those funds being promptly repaid would be high. Thus, the cost of the U.S. commitment would be close to zero in those cases."

The CBO said there's a slight chance the IMF would need to loan most or all of the line of credit. In that case, the IMF might not recoup all of the money and the cost to the U.S. Treasury would therefore be higher.

CBO noted that no IMF borrower has defaulted on its obligations, but many have had their loans extended or been late on their payments.

We spoke with budget experts who said the CBO's estimate is reasonable because it reflects the likely risk to the taxpayers.

Loans are a routine part of the annual appropriations process, and they are typically assigned some cost based on risk, said Brian Riedl, a budget expert at the Heritage Foundation. If no money is paid back, "that does potentially make it the most expensive part of the bill. But the odds of it becoming the most expensive part of the bill are slim."

The real cost to the Treasury Department all comes down to whether other countries pay back those loans, said Edwin Truman, who is an IMF expert with the Peterson Institute for International Economics, an economic think tank.

"Since no country has ever lost money in [IMF's] history, the notion that we will lose $5 billion is a stretch," he said.

So as for Westmoreland's claim, he's wrong that the appropriations bill spends more money on the IMF than for the war. Lawmakers aren't literally giving the organization a bundle of cash. But he's right that there's a potential for the U.S. Treasury, over time, to give the IMF quite a chunk of change as a result of the line of credit. However, Westmoreland's claim is based on the premise that countries borrowing from the IMF will never pay those loans back, which is a worst-case scenario that experts say is unlikely to occur. So we rate his claim Barely True.

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