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Shortly, Congress will be debating the fate of the U.S. Export-Import Bank (Ex-Im). Its authorization — last extended in 2012 — will expire on September 30 unless reauthorized. Ex-Im was first incorporated in 1934 by President Franklin D. Roosevelt to finance trade with the Soviet Union. Under the Export-Import Bank Act of 1945, Congress established the bank as an independent agency. It provides loans and loan guarantees (as well as capital and credit insurance) to facilitate U.S. exports. Backed up by the full faith and credit of the U.S government, taxpayers are put on the hook.
According to Katherine Rosario writing for Heritage Action on April 1, 2014, “The United States Export-Import Bank is essentially a microcosm of some of Washington’s biggest problems, from the corruption it encourages, to putting taxpayers at risk, to the cronyism it facilitates.”
An example of the cronyism facilitated by Ex-Im to advance political ideologies was in the Bank’s backing of Solyndra, the ailing solar panel company, which received an Ex-Im Bank loan guarantee of $10.3 million. As such the Ex-Im Bank made possible the exchange of political favors under the guise of boosting the economy and growing American jobs.
Those who most benefit for Ex-Im financing are multinational corporations such as the construction and engineering firm of Bechtel (ranked by Forbes as the fourth largest privately held company by revenue), Lockheed Martin, and its biggest beneficiary by far, Boeing. In the banking industry, the U.S. Export-Import Bank is commonly referred to as Boeing’s Bank. According to some estimates, Boeing receives upwards of 80-percent of the Ex-Im Bank’s taxpayer-backed loan guarantees.
The claim is made that Ex-Im financing is essential to fill “gaps” that exist in financing when the economic or political risk to garner private property is too great. This excuse is contradicted with the fact that U.S. exports hit a record high of $2.2 trillion in 2013. This was up from $1.4 trillion five years ago, thus proving that there is no shortage of private export capital.
Because Boeing does not have to compete for financing and enjoys favorable terms, Boeing is able to sell more planes overseas. The Ex-Im Bank gives money to foreign governments and airlines to buy Boeing products. In 2013 85% of the Ex-Im bank’s guarantees made to Russian companies were centered around Boeing. Specifically, $580 million was slated for the purchase of luxury airliners out of total of $639 Russia received.
Other countries like China benefited from Ex-Im bank transactions during 2013 to the tune of $636 million. Australia’s richest person (reportedly worth $17.7 billion) was more than happy to accept $700 million in American taxpayer backing via the Bank for her company.
Supporters of Ex-Im claim that the bank is necessary to create a level playing field. If so, how it is that only 2.2% of all U.S. exports last year received Ex-Im financing, while 98% of American exporter had to compete without the bank’s intervention. And what about all the other domestic businesses that don’t get any Ex-Im funding?
A debate reauthorizing the Export-Import Bank is threatening to further escalate the tension between House conservatives and the Republican leadership. Eric Cantor, who struck a deal with Democrats in 2012 to reauthorize the Export-Import Bank, is now wary of battling conservatives angered by a number of his recent legislative moves. Cantor has privately told members of the House that he does not intend to get involved this time around.
In a recent private meeting of the conservative Republican Study Committee, Paul Ryan struck the right tone when pushing for the Ex-Im Bank charter to expire. Why should Republicans support what conservatives consider corporate welfare programs, at the same time cuts are being advocated for individual welfare programs like food stamps? And what about the earmark ban which Republicans agreed to honor once again in the 113th Congress? Unfortunately establishment Republicans with upcoming primaries in Georgia, Kentucky and Mississippi seem increasingly willing to disregard the earmark ban and instead brag about bringing home the bacon.
Prior to the 2012 vote by the House reauthorizing the Ex-Im bank charter, Brian Darling set forth in writing “Top Ten Reasons to End The Export Import Bank.”In the same article Darling had the following to say why the Export-Import Bank is bad for America.
“There is nothing free market about the idea of the United States government providing loans to private companies for the purpose of completing against other private companies. Especially when these large corporations are gaming the system with teams of lobbyists pushing Members of Congress to reauthorize this taxpayer funded slush fund or big business. If the loans don’t pay off, taxpayers have to pick up the tab.”
Hear what Senator Obama had to say when on the Campaign Trail in 2008.
“I’m not a Democrat who believes that we can or should defend every government program, just because it’s there. There are some that don’t work like we had hoped…[like] the Export-Import Bank that has become little more than a fund for corporate welfare…If we hope to meet the challenges of our time, we have to make difficult choices. As President…I will eliminate the programs that do not work and are not needed.”
Corporate welfare to large private corporations is not an easy thing for Democrats to explain to their constituents in an election year, despite President Obama’s pre-election musings. As for Republicans, should corporate welfare be blessed in an election year when earmarks serving the same purpose are frowned upon and have been theoretically banned?
Instead, Republicans should enact policies that are free market in nature to produce jobs and grow the economy through cutting taxes, reforming the tax code, deregulation, and opening up energy exploration.
Congress must now decide whether it will reauthorize billions of dollars in corporate welfare on the backs of taxpayers or to allow private investors to finance U.S. exports. This is not a partisan issue. There are good reasons for both Democrat and Republican legislators to allow the crony capitalist Export-Import Bank to expire (sunset) when it comes up for re-authorization.
[Originally published at the Illinois Review]