Raising Ex-Im From the Dead
Perhaps you haven’t heard that the charter for the Export-Import Bank ended on June 30. That’s right, a New Deal-era program has expired, and almost no one noticed. Pity, then, that some Republicans are working to resurrect this unnecessary subsidy for business.
President Obama tried to overcome the public’s non-interest in Ex-Im on Wednesday by predicting economic doom. But by now the fight over its continued existence has come down to a symbolic power play. The Obama Administration and many Republicans backed by the business lobbies want to jam it through Congress by attaching it to a highway bill. The forces of limited government, led by Texas Rep. Jeb Hensarling but outmanned as usual, are trying to stop it as a statement that the GOP stands opposed to corporate welfare.
Opponents have the better arguments on policy and politics. Ex-Im sells taxpayer-backed loans, guarantees and insurance to the customers of U.S. companies to promote exports. The claim is that it fills what Ex-Im calls “gaps” in export financing that commercial lenders are “unable or unwilling to provide.”
But Ex-Im has been subsidizing credit for so long that it’s impossible to know if those “gaps” would be filled if Ex-Im went away. Everything we know about markets says they largely would. Boeing, Ex-Im’s biggest beneficiary, has already said it can secure alternative financing. General Electric doesn’t lack for bankers. The Government Accountability Office (GAO) looked at Ex-Im in 2013 and said the bank “cannot answer the question of what would have happened without Ex-Im financing.” Maybe that’s because it didn’t want to.
As always with politicized credit, Congress has imposed mandates on the bank that should offend GOP principles. There are quotas for businesses owned by women and minorities, as well as for sub-Saharan African companies. The bank adopted guidelines in December 2013 to limit lending to coal and support “President Obama’s goal of reducing carbon pollution.” This might explain why Elizabeth Warren is a big Ex-Im fan, but it’s a wonder why Republicans would want to finance her priorities.
Ex-Im’s supporters say the bank is profitable and has a minuscule default rate, ignoring that Ex-Im uses government accounting. Ex-Im estimates that its six largest credit programs will yield a $14 billion surplus from 2015-2024. But the Congressional Budget Office projects that if Ex-Im used fair-value accounting as private companies do, those six programs would cost taxpayers $2 billion.
Ex-Im’s financial exposure ballooned to $112 billion in 2014, up from $75.2 billion in 2010. The Heritage Foundation’s Diane Katz has documented a litany of bad bets and fraud, including a $3 billion deal in Papua New Guinea that lost track of $577 million. Ex-Im’s Inspector General found in May that the bank’s “risk assessment for FY 2014 reporting provided limited insight into the actual risk of significant improper payments.”
Ex-Im’s cheerleaders say that’s no big deal and, besides, the bank claims its guarantees support “good-paying, export-backed American jobs”— “approximately 164,000” in 2014. That’s a remarkably specific jobs estimate considering that the bank can’t even keep track of its lending. Maybe too specific. GAO has found that Ex-Im can’t distinguish “between jobs that were newly created and those that were maintained,” and that the data “are a decade old,” among other flaws.
Not that any of this will matter in Congress. The Chamber of Commerce and Business Roundtable are pushing for a vote to resurrect the bank, and House Speaker John Boehner is on their side. Most of Mr. Boehner’s fellow Republicans are opposed, so he’s banking on a Senate assist.
As part of the trade bill jostling, Majority Leader Mitch McConnell promised Democrats a vote on renewing Ex-Im. If that passes the Senate, as expected, the plan is to attach it to the highway bill in the next few days and send it to the House. If Mr. Boehner brings it to the floor, Ex-Im will rise from the dead with the votes of nearly all Democrats and a rump group of Republicans.
This is a vote on which we hope Mr. Boehner gets rolled. If the GOP is going to have any credibility reforming welfare for individuals, it will have to show it is willing to cut welfare for business. Republicans have already done yeoman work for business by passing the trade bill, and they may do so again by repealing the medical device tax, increasing highway spending and maybe even cutting corporate taxes. If the business lobbies want to make Ex-Im their litmus test of support, let’s see how they like cohabiting with Sen. Warren.
Ronald Reagan used to say that the closest thing to eternal life is a government program. The Ex-Im Bank has already died. All Republicans have to do is let it stay dead.
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