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'What's coming next? Intergalactic bailouts?'

Earlier today, I caught some of a House-Senate GOP forum on the economic crisis in Greece -- specifically, why Americans should oppose an IMF bailout of the country and how its problems augured poorly for Democratic plans to expand the welfare state.

Rep. Mike Pence (R-Ind.) chaired the event, joined by Sen. Jim DeMint (R-S.C.), Rep. Cathy McMorris-Rodgers (R-Wash.), Rep. Tom McClintock (R-Calif.) and Rep. Todd Tiahrt (R-Kan.), and over the course of 90 minutes they grilled a panel of economists on those two main points. The GOP sentiment might have been best expressed after the event by Rep. Jeb Hensarling (R-Tex.), who hadn't attended.

"We should not be borrowing money from the Chinese to bail out the Greeks," said Hensarling. "What's coming next? Intergalactic bailouts?"

But I noticed some tension between the economists and the Republicans on some of the main points. The panel, including Carnegie Mellon professor Marvin Goodfriend and Carlyle Group economist Randy Quarrells, generally agreed that a bailout of Greece encouraged bad behavior. But they did not think American taxpayers would be on the hook for funds.

"The risk of our share of an IMF package not ultimately being repaid is quite low," said Quarrells. "But it's not free for you guys to enforce this."

"I was grateful for their candor," said Pence after the event, "but what I also heard was the unanimous opinion that Greece would default on the loans and the fact that these particular IMF loans may or may nor have some preferred status as creditors. The facts are the facts. They believe Greece will default, and they believe this would prevent the actions necessary for Greece to put its fiscal house in order."

Pence, who has introduced legislation that would prevent America from participating in the bailout, was making an argument that he and other conservatives made in 2008 -- that the pain of an economic crisis is less harmful in the long term than are rescue packages that try to maintain a troubled, overstretched system. But as with TARP, I think the likelihood that American money wouldn't disappear -- would be paid back -- is hard to overcome.

By David Weigel  |  May 19, 2010; 6:16 PM ET
Categories:  Congress , Conservatives , Financial reform  
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