Rep. Jeb Hensarling, R-TX, Chairman of the House Financial Services Committee, is a leading congressional critic of the Export-Import Bank of the United States, and is using committee hearings this summer to examine the case for not re-authorizing the Bank.
The Tea Party’s efforts to kill the Export-Import Bank of the United States may be the very thing that assures the agency’s survival. And that would be a shame.
The Ex-Im, as it is known, was established 80 years ago as the Export-Import Bank of Washington. Its raison d’etre was to finance the sale of American goods to the Soviet Union, whose economic commissars were not interested in facilitating trade with Western capitalists. Two years later, the agency was merged with a similar bank, this one created to foster trade with Cuba. Considering how long ago the Soviet Union collapsed and the state of our commercial dealings with Cuba since Fidel Castro came to power in 1959, the Ex-Im can lay claim to being the poster child par excellence for mission creep. In 1968, the enlarged entity was given its current name, which appears to be a half truth, a misnomer, or both, as the bank does not seem to play any role in encouraging imports (at least it has that in its favor).
Today, the bank serves as the official export credit agency of the United States. Much of its work involves making loans to foreign customers of U.S. companies so that they can purchase the American firms’ goods or services, extending export credit insurance for such loans, and providing U.S. exporters with working capital. The terms of these loans and guarantees typically feature rates modestly below market norms. While the Bank touts its support of small business, studies have concluded that in recent years the great majority of its loan guarantees – 82 percent in 2012 – went to overseas customers of Boeing, America’s largest exporter. Many of those studies were conducted by critics of the bank, but the studies have not been definitively refuted.
Congress has re-authorized the Ex-Im 16 times. The Tea Party, its financiers, and limited-government, libertarian advocacy groups and think tanks such as the Heritage Foundation are determined to prevent a 17th renewal between now and September 30, when the agency’s current authorization expires.
Those right-wing groups argue that the Export-Import Bank is not necessary, that it fulfills a role properly played by the private sector, and that by guaranteeing or providing loans that involve below-market rates, the bank is interfering with the free play of market forces, engaging in crony capitalism, and picking winners and losers by giving some American companies and their customers terms favorable relative to those of competitors who have to pay the going rate charged by private financial institutions.
The arguments are compelling, but their provenance has assured them a tepid reception among audiences that otherwise would be quick to endorse killing the Ex-Im. An unwillingness to be associated with the Tea Party in any way, much less helping it achieve a victory in its campaign to limit the size of government, effectively has silenced Democratic lawmakers who typically chomp at the bit when there’s a chance to criticize “corporate welfare” — a term then-Senator Barack Obama employed when discussing the Ex-Im in 2008. (President Obama now supports re-authorizing the bank.) Progressive economists who rail against government subsidies to American corporations apparently have decided to sit out this fight. So have free trade advocates, who usually oppose any government involvement in subsidizing, penalizing or encouraging specific international commerce. And in late June, no less an antagonist of corporate interests than The New York Times editorialized that Tea Party members’ efforts to scuttle the bank represented “one of their odder quests.” It called on Congress to re-authorize the bank, warning that the allowing the agency to close its doors might induce American companies to “decide to move their operations to other countries that provide generous export financing.” By this logic, The Times should support the repeal of environmental and worker-safety laws lest those strictures prompt U.S. firms to relocate their manufacturing operations to countries with a more-relaxed regulatory environment. Instead, liberal lawmakers, economists, and editorial writers find themselves keeping company with such unfamiliar allies as the U.S. Chamber of Commerce and the National Association of Manufacturers.
The bank defends its continued existence by noting that since 2009 it has supported 1.2 million private-sector jobs, generated $2 billion for U.S. taxpayers, and financed exports worth more than $188 billion. That may be true (and I say “may” because the jobs numbers are based on extrapolations), but it’s a far cry from saying that were the bank not in existence during that period, those jobs and exports would have been lost. The 5:48 p.m. commuter train may carry 500 workers home to the suburbs each evening, but if it were discontinued, those people would not be stuck in the city overnight. The Transit Authority would add more cars to the trains leaving earlier and later. Some displaced commuters would take the bus, and others would drive their own cars. The bank may have filled a need that the private sector would not or could not when it came to exporting to the Soviet Union in the 1930s, but does anyone really believe that Boeing can’t get a loan from the banks in 2014? And if it can, why shouldn’t it pay the going market rate, like every other business? If the bank goes away, its function will be filled by private-sector firms operating in accord with market dynamics, thus eliminating the possibility for economic distortions that accompany government involvement with financial functions.
In late June, economist Veronique de Rugy of George Mason University’s Mercatus Center laid out the “damned if you do, damned if you don’t” case for letting the Ex-Im die a long overdue death. If the government agency is generating a profit, she explained, that is an argument for its functions being privatized. And if it is running at a loss, that is an argument for closing it.
You don’t have to have drunk the tea to oppose the continued existence of the Ex-Im, much less be anti-trade or an inveterate foe of Big Business. You just have to survey the current state of affairs to realize that an agency created to serve a specific purpose has morphed into a government entity carrying out tasks that can be performed by the private sector – tasks that in a free-market economy are squarely in the domain of the private sector.
The natural opponents of the Export-Import Bank who are remaining silent due to their aversion to the Tea Party should remember that even a stopped clock is right twice a day, and that there’s ample reason to let the clock run out on this federal agency.
