IS THE BUSH-BAKER CAMPAIGN SEEKING VOTES AT THE NATION’S, TAXPAYERS’ EXPENSE?

(Washington, D.C.): In the latest of a
series of transparent efforts to secure
political support from special interests,
the Bush Administration yesterday
announced that it would extend another
$1.15 billion in agricultural loan
guarantees and food assistance to Russia.
Administration spokesmen claimed that the
credit guarantees “will generate $3
billion in economic activity” and
that “over 30,000 jobs are
associated with the $1.15 billion in
export opportunities.” In other
words, putative economic benefits for
America’s long-suffering and politically
important Farm Belt are seen as
justifying possible additional taxpayer
exposure to losses in the former Soviet
Union.

With this latest announcement, that
exposure — in Commodity Credit
Corporation (CCC) agricultural loan
guarantees provided by President Bush to
the Gorbachev and Yeltsin governments
since 1 January 1991 alone —
amounts to $5.75 billion. What is more,
according to the U.S. Department of
Agriculture’s Office of Public Affairs,
“Today’s announcement of
credit guarantees does not cover the
entire 1993 fiscal year, and additional
guarantees could be announced later.”

What Is Wrong With This
Picture?

Unfortunately for the American
taxpayer, this announcement
coincided with the convening this week of
the Paris Club to consider how to deal
with Russia’s non-performance on loans to
the former USSR from Western government
creditors. Within a matter of
days, there will likely be an agreement
among the major official creditors to
reschedule Russia’s estimated $81 billion
external debt. The rapid deterioration in
the Russian economy may even be
compelling Washington to do something as
part of this multilateral effort that the
Bush Administration has desperately
sought to avoid href=”#N_1_”>⁽¹⁾:
the deferral of payments on a large part
— if not all — of the U.S.
government-guaranteed loans extended by
commercial banks to underwrite
Soviet/Russian commodity purchases.

In short, the Bush Administration’s
campaign to benefit the politically
significant few at the expense of the
many is prompting it to throw yet another
billion dollars in additional guaranteed
credits into a vast economic black hole:
The recipient is a country in the midst
of a necessary debt rescheduling. So
serious is the problem that Russia
conceded only last week href=”92-D112.html#N_2_”>⁽²⁾
that it could pay a total of just
$2.5-$3 billion on its $20.5 billion in
debt payments due this year to all
Western creditors.

A Noncreditworthy Borrower

The Agriculture Department’s press
release of 14 September claims that
“Russia has not defaulted on any
payments throughout the period the [CCC]
program has been offered.” This may
be an accurate historical statement;
under present circumstances, it should
hardly be permitted to serve as a
predictive one. Indeed, it is
highly unlikely that Russia will be
capable of making payments to the U.S.
Treasury anywhere close to the $1 billion
it owes this year alone on CCC
loan guarantees extended in
January, June, October and November 1991.
Such a country cannot remotely be
considered to be creditworthy.

If so, then President Bush’s
latest act of largess is not merely
wantonly irresponsible, it is illegal.
Under the terms of the Farm Act of 1990,
the Administration is required to
determine that any borrower of CCC funds
is creditworthy. While the Administration
has sought to have this provision
substantially repealed as part of the
so-called “Freedom Support
Act,” Congress has not yet
agreed to do so. In fact, at the
urging of Agriculture Committee chairman
Patrick Leahy (D-VT), the Senate on 1
July 1992 voted 93-2 to reject any
loosening of the existing statutory
creditworthiness test for CCC programs.

Even if the proposed additional credit
exposure had none of the
aforementioned risks, it is not
entirely clear that the new CCC credit
guarantees are actually needed.
For example, on 10 September 1992,
Russian Vice President Alexander Rutskoi
told Interfax that Russia would only need
to import 12-15 million tons of grain
this winter and little, if any, in 1993
due to the recent introduction of Western
technology, improved seeds and
fertilizers and reduced livestock herds.
If true, the multiplied job-creation
opportunities and economic stimulus that
supposedly justify the risk of new
taxpayer losses are likely to prove
chimerical.

The Bottom Line

The Center for Security Policy
believes that the Bush
Administration has done a real disservice
to the cause of advancing democracy and
free enterprise in the Soviet successor
states by dint of such decisions
as:

• the extension of $3.75 billion in
  CCC credits in 1991 as a form of
  life support for Mikhail
  Gorbachev’s failing and
  noncreditworthy regime;
• the encouraging through
  subsidized grain sales of
  undesirable dependencies in the
  former USSR and the stifling of
  agricultural reforms necessary
  for greater self-sufficiency on
  the part of Russian and other
  ex-Soviet republics’ farmers; and
• the refusal to grant appreciable,
  multi-year debt relief much
  earlier, when it might have
  made a real difference to the
  implementation and consolidation
  of reforms.

Unfortunately, the damage does not
stop there, however. The Bush
Administration seems determined to
compound the adverse impact already being
experienced by the people of the former
Soviet Union and the American taxpayer by
throwing good money after bad. The
Center calls upon the Congress,
therefore, to repudiate Bush-Baker’s
latest expediency-driven and cynically
manipulative step. In addition, Congress
should act to retain — and to enforce
far more effectively — the existing
statutory provision requiring CCC
borrowers to meet a minimum standard of
creditworthiness.

– 30 –

1. See in this
regard the Center’s Decision Brief
entitled, “Summit-Scam:
Munich Response on Debt Relief Undercuts
C.I.S. Reformers, Sets Stage for U.S.
‘December Surprise,'” ( href=”index.jsp?section=papers&code=92_D72″>No. 92-D 72, 7
July 1992).

2. “Russian
Offer to Ex-Soviet States on Debt,” Financial
Times, 9 September 1992.