WSJ: AN OPEN LETTER TO REPUBLICANS ON THE EX-IM BANK
Where is the justice in risking the taxes of average Americans to fatten the coffers of a moneyed elite?
The 80-year old Export-Import Bank will begin to wind down on June 30, unless Congress renews it again. Republicans in the House and Senate need to let it expire—and as chairman of the House Financial Services Committee, I am helping lead the charge to see that we do.
Ex-Im arranges taxpayer-backed financing to foreign businesses and governments that agree to buy selected U.S. products. This financing largely benefits a handful of Fortune 100 companies here in America, including General Electric, Boeing, and Caterpillar. The companies keep the profits if sales go well; taxpayers bear the risk of loss if not. The bank is a small-scale example of a larger and more dangerous threat: the shrinking of the free-market economy and the rise of a progressive welfare state—with its attendant cronyism, public-private partnerships, and spreading government economic controls.
Commercial activities today are increasingly driven neither by customer wants nor by entrepreneurial judgments but by bureaucratic directives and political preferences. Businesses, workers, investors and consumers, the notion goes, don’t have the knowledge to make rational choices on their own. Instead, government experts—typically unelected and unaccountable—are necessary to push the economy toward politically favored and less risky outcomes.
But when governments decide who wins and loses, success increasingly depends less on how hard you work and more on who you know in Washington. And big business is often all too willing to enter into alliances with big government to play this game.
The results? Stunted economic growth, anti-competitive directives pushed by special interests at the expense of the commonweal, and corrosive public cynicism.
The Democratic Party promotes this approach to economic policy-making. This may seem surprising, since much of its members’ rhetoric fixates on corporate greed. Yet many Democrats support corporate welfare in order to control what they subsidize. And so almost every Democrat in Congress supports renewing the Ex-Im Bank. It helps advance their agenda. Ex-Im has a government-imposed green energy quota; it is required to expand financial commitments in sub-Sahara Africa; it unilaterally adopted a policy significantly restricting financing for coal-related exports.
At the deepest level, the progressive welfare state subverts the moral logic of freedom. It severs the link between incentive, effort and reward that is central to justice. When government redistributes their earnings to corporate entities seeking privileges and special benefits, the American people see a toxic confluence of power and money and unfairness that outrages and frightens them. Social trust breaks down.
Corruption and cronyism are not bugs in a government-driven economy; they are intrinsic features. Thus, it’s no surprise to learn that Ex-Im’s inspector general is investigating more than 30 cases of fraud involving the bank. Last month former Ex-Im employee Johnny Gutierrez pleaded guilty to accepting bribes on 19 separate occasions. In 2009 Congressman William Jefferson was convicted of taking bribes in an Ex-Im related deal, leading to a 13-year prison sentence.
The Ex-Im Bank defends itself, first, by claiming credit for supporting American jobs. But when the bank’s financing purportedly supports jobs at Boeing—which last year alone accounted for 40% of Ex-Im’s total $20 billion in financing— Delta Air Lines and the Air Line Pilots Association point out they are harmed because foreign carriers benefit from unfairly subsidized prices.
Ex-Im also claims it has generated profits for taxpayers. It does so using an accounting scheme mandated by the Federal Credit Reform Act. But according to the Congressional Budget Office, using fair-value accounting methods adopted by nearly all other businesses, Ex-Im will cost the taxpayers $2 billion in losses over the next decade.
Yet a quarrel over accounting standards begs the central issue: Where is the economic justice in risking tax dollars paid by average Americans to fatten the coffers of a moneyed elite? With more than $90 billion in revenue last year, Boeing surely can finance the sales of its fine aircraft to foreign buyers on its own balance sheet or arrange the financing elsewhere.
Ex-Im Chairman Fred Hochberg recently claimed the bank is crucial for U.S. exports and jobs. Yet Commerce Department and Ex-Im data show that almost 99% of all U.S. exports are financed without the bank’s help.
To Republicans who feel we must assist U.S. exporters, I could not agree with you more. But consider: The Manufacturing Institute reports that U.S. corporate taxes accounted for over half of the structural cost advantage foreign competitors have over U.S. manufacturers. The U.S. Chamber of Commerce’s Institute for Legal Reform notes that the U.S. has the highest liability costs as a share of the economy—2.6 times the average of eurozone countries. Thanks to the escalating regulations from the Environmental Protection Agency, the Dodd-Frank Act, etc., the burden on all employers has never been greater.
The most effective way to assist exports is through fundamental tax, tort and regulatory reform. This is where, and how, the Republican Party must lead.
Our party must quit any support of corporate welfare dependency with its safety net of subsidies for the privileged. Most Americans don’t look to Washington for privileges or bailouts. They want only to be treated equitably and fairly by their government.
If Republicans can’t stand up to corporate interests in this skirmish, how will we ever stand up to the myriad special interests warring against adoption of a simplified, pro-growth tax code? How will we earn the moral authority to reform the social welfare state unless we first reform the corporate welfare state? Let the Democrats own corporate welfare by themselves.
Mr. Hensarling is a Republican congressman from Texas.
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