Rep. Hill pushes against IMF Special Drawing Rights for pandemic relief
A French Hill (R-AR) spokesman joins Yahoo Finance’s Christine Myers to discuss a new bill he is introducing to block the IMF’s SDR to alleviate COVID-19.
CHRISTINE MYERS: Now I want to show the Congressman of Arkansas French Hill to talk more about this, as well as a new bill he is proposing to turn to the support of Finance Minister Janet Yellen for special drawing rights. These are the SDRs in the IMF.
So Congressman, I want to start from this point of stimulus. We just heard Jessica Smith from Yahoo Finance inform us about this. We have now seen a lot of bilateral support for this bill. Of course, some Republicans, your Senate colleagues, are dragging their feet a little.
But I want to ask you about further rounds of incentives, as the stimulus is expected to clear the Senate to a large extent. Do you think there may be other or further economic aid – additional stimulus packages that may come?
FRENCH HILL: Well, thanks for having me. I think the $ 1.9 billion challenge proposed by President Biden and passed through the House is that they are too big. It is not targeted enough. And it’s not just about fighting the virus and opening up the economy.
In my opinion, I hope that the Senate will focus on this by reducing the amount, targeting it specifically and directing it to public health, and not to the long progressive wish list that has passed through the House. In terms of the extra incentive, let’s start with where we are.
Last year, in 2020, we passed nearly $ 4 trillion in additional costs to fight the virus and protect our economy. That’s roughly what we spend all year on the entire federal budget. And it is estimated that about $ 1 trillion of that $ 4 trillion has not yet been spent and injected into the economy.
And that’s why Republicans are pushing back $ 1.9 trillion, and while Larry Summers, Democratic finance minister and Democratic economy adviser, is also warning the Senate that the number is too high, out of focus.
CHRISTINE MYERS: Yes, we have heard some concessions on this issue to make some of this relief far more targeted. Even in previous accounts, we have seen, for example, when it comes to small businesses, many people stay out of some of those loan programs that really need help.
Where do you think compromise points can be made, where points of reconciliation – reconciliation – sorry – can be made between Democrats and Republicans for a package to be adopted?
FRENCH HILL: Well, I think Jessica had the outlines of government support. There are $ 350 billion that goes mainly to states that are not well managed and did not do very well with their finances during the pandemic. The money for schools in this proposed bill is not even spent until 2022. And it is not even directed to open schools.
In Arkansas, we have 80% of our schools open as part of classroom instruction since August. They are discriminated against in this account and the amount of money for pandemic unemployment. As early as ’09 during this crisis, President Obama offered an additional $ 25 a week at the federal summit on the amount of unemployment in the state.
Here, Democrats, we were originally at $ 600. We’re at $ 400 now. So I think that’s an opportunity for compromise in the Senate. Finally, Jessica noted it. Perhaps a fine-tuning of the additional tax rebate or incentive payment to families in a much more targeted amount of income and whether they are really affected from the moment out of work due to COVID-19.
CHRISTINE MYERS: I want to move on to this new bill that you are proposing. But I wanted to ask you here very quickly, Congressman. On this issue of state and local business aid, we have had several senators – sorry – state mayors with Republican governors who say, frankly, they still need help. They still need help.
And when it comes to this moment for poorly governed countries, what exactly do you mean there? Because when you look at a lot – and all the rankings, at least economically from all the states in this country, those below have Republican leadership, not entirely, not 100%, of course. But there are many Republican leaders in countries whose countries are not doing well economically. So what exactly do you mean in the sense that these countries are not well governed?
FRENCH HILL: Well, there’s a problem with the perpetual budget deficit and underfunded pension liabilities that you see in Illinois and some of the northeastern states, for example. The money is exchangeable. And so members of Congress are very concerned that this kind of support for COVID-19 will go to support major systemic budget problems and pension problems in the states.
I measure success based on the level of openness and the fact that tax revenues in most countries have exceeded the forecast and this difference between the forecast last spring for what could happen to COVID-19 in state and local public finances. And what actually happened is drastically narrowing. And that’s why I think senators are right when they look at that money and make sure it’s directed in the right way.
CHRISTINE MYERS: Okay, so let’s move on to SDRs just for everyone at home who may not know what they are. They are an artificial currency that is usually used to replenish reserves. Now, Congressman, you argue that the use of special drawing rights does not help some of the most needy countries, as they are distributed by shareholder weight in the IMF. And this is very true.
Most of the money will not go to some of the poorest countries in the world. However, there is an argument that perhaps the distribution of these SDRs should be changed instead of scrapping, using SDRs as a fixed asset during this pandemic and during this crisis. How about that?
FRENCH HILL: Well, overall distribution, IMF, you’re right. He goes to all members independently. There are 189 countries. It is distributed on the basis of their percentage of ownership in the International Monetary Fund. And this is not aimed at helping poor countries.
Helps rich countries. The Netherlands would receive billions more support than Nigeria, for example. And fraudsters, such as Syria, Venezuela, Cuba, Russia, Iran, are gaining billions of hard access to currency through this move. This is not in the interest of America or our foreign policy.
Republicans have a better way, which is to provide targeted support through both the World Bank and the IMF to help the poorest countries struggling to adapt through the pandemic.
CHRISTINE MYERS: You now argue that instead of using these SDRs, there is an IMF emergency lending program that many of these countries could use as a better alternative. It is interesting to know then what you say to the fact that A IMF has repeatedly stated that it needs more resources to act during a crisis like the pandemic and that B that, frankly, the IMF is struggling to allocate resources, with who have. Only 10% of its capacity has been deployed throughout the pandemic.
So this is not very useful there when it comes to these difficult countries. What do you say to these criticisms and these criticisms of these lending programs?
FRENCH HILL: Well, three key points. First, the World Bank grants concession loans. They have allocated $ 160 billion to the poorest countries, including about $ 16 billion for direct vaccination, training, delivery and support to the poorest countries fighting public health. And the IMF has suspended payments to many of the severely affected client countries. And the G20, the world’s richest countries, has stopped paying debt for many of the most troubled countries. So they take action.
I recommend that trust funds be used for this type of short-term assistance to the poorest countries. They already exist in the IMF. I would advocate for more resources for them. This can be done through contributions from Member States or through exchange, by providing their SDRs – their existing, redundant SDRs – in support of these trust fund operations.
By my calculations, there is only $ 40 billion of excess access to SDRs among European countries alone. So there are alternatives to the full overall distribution proposed by Secretary Yellen.
CHRISTINE MYERS: Now, of course, Congressman, the issue of the SDR is a rather complex and difficult topic. So I’m glad we were able to get into it in just a few minutes. We hope we can get you back in the future to talk more about this. Congressman from Arkansas French Hill, thank you so much for joining us–
FRENCH HILL: Thanks a lot, Chris …