It's federal budget season. Do you know where your tax dollars are going?
Tracking them all down would be virtually impossible. But I can tell you where some $1.5 billion go every year, according to economics professor Adam Lerrick of Carnegie Mellon University: The International Monetary Fund.
That may come as a surprise, since officials classify that spending as an "off-budget" expense. Plus we're frequently told, as Treasury Secretary Robert Rubin said in 1998, that the IMF doesn't cost taxpayers "one dime." If only.
Even worse, we're not getting our money's worth from the international financial organizations we're funding so lavishly.
Consider this: More than 17,000 people work for the World Bank and its affiliated development banks. They've collected $500 billion from member governments (much of that from the United States), and they loan $50 billion per year to developing nations.
But the bulk of that money is wasted. By the Bank's own admission, only about 25 percent of its programs achieve satisfactory, sustainable results. (Even that number is probably inflated.)
Its sister organization the IMF does little better. It's become a financial paramedic, launching economic rescue missions for struggling countries. However, too often these bailouts bring no reform, and end up serving as large long-term loans to developing countries at low short-term interest rates.
The need for change has been apparent for years. In 1998, I served with a number of world-renowned economists on the congressionally mandated Meltzer Commission. We studied international financial institutions, then recommended a series of reforms. Among them, we called for:
The IMF to become the lender of last resort. It should charge higher-than-market interest rates, which would force countries to try private financial markets before turning, hat in hand, to the IMF. We should also require countries that get IMF loans to put up collateral.
The World Bank to direct its loans to the poorest countries. Many nations can't afford to borrow money on the open market, but right now 70 percent of World Bank loans go to 11 countries that enjoy easy access to the capital markets.
Both institutions to eliminate overlap in their services, and conduct audits to make sure they were funding only programs that actually work. That would help us phase out ineffective programs and trim waste.
Five years on, these reforms haven't happened, largely because U.S. policy-makers haven't insisted on them. It's high time we did.
This year alone, Carnegie Mellon's Lerrick (who served as research director for the Meltzer Commission) estimates we'll invest $1.9 billion in the IMF. We could turn that expense into a gain and accomplish more with our investment, if we loaned that money directly to countries through the existing marketplace, instead of handing it over to the IMF to loan on our behalf.
Rep. James Saxton, R-N.J., has another good idea. He's introduced legislation that would include our hidden subsidies to the IMF in the budget process, so lawmakers could debate whether they want to continue these subsidies. This is also a sensible step because Congress shouldn't be spending our money without at least telling us what it's being spent on. Greater transparency in the budget process is always a good thing.
Bureaucracy won't change itself. Neither will corporate culture. However, if the people paying the bills insist on reform, it will happen.
We need to shine some sunlight on the World Bank and IMF. They should implement all the recommendations of the Meltzer Commission, or else explain to Congress why they haven't.
The World Bank's motto says, "Our dream is a world without poverty." But it won't happen unless we reform the way the international financial organizations operate. We can wipe out poverty. Let's get started.
Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.