With Congress back from recess, the Obama administration and some in Congress will soon commence a renewed push to restore the Export-Import Bank’s ability to spend taxpayer dollars propping up America’s biggest businesses. For the sake of those taxpayers, it’s crucial that principled lawmakers say “no.”
Just over a year ago, Congress temporarily succeeded in shutting down the Ex-Im bank, a government agency which uses taxpayer dollars to provide loans and other financial support for mostly large, well-connected American businesses and their foreign trading partners. Although the bank was officially reauthorized late last year, it lacks a quorum on its board that prevents it from doling out the biggest deals.
Right now, the bank is limited to approving comparatively small loans—those under $10 million. Loans of this size are largely the domain of small to mid-sized businesses, which is why the bank’s supporters and its chairman, Fred Hochberg, are not happy about the new limitations. Even though Chairman Hochberg said last year “the most important thing we do is … support the small business,” the truth is that the overwhelming majority of Ex-Im’s financial assistance has focused on large loans for a select few major corporations. Of the total amount of financing authorized by the Ex-Im Bank from fiscal year 2007 to fiscal year 2014, only 23 percent benefitted small businesses.
So what’s there to miss? All the plush deals for some of the world’s biggest businesses. Despite Ex-Im’s supporters’ favored claim that the bank’s role is helping the little guy, here’s what they often leave out: The bank essentially provides massive financial assistance to major, multinational corporations at the expense of American taxpayers, while simultaneously costing American jobs.
For example, it provides financing for Emirates Air, claiming it’s helping the foreign company buy more planes from Boeing. But this gives Emirates Air a competitive edge over American companies like Delta Airlines who don’t get the same assistance. As a result, Delta estimates it costs the U.S. airline industry 7,500 jobs. And that’s to say nothing of the job losses Ex-Im causes in countless other American industries.
You can see why Speaker Paul Ryan and almost every major Republican presidential candidate joined the call to abolish the Export-Import Bank last year. Even President Barack Obama once called it “little more than a fund for corporate welfare.”
In order to abolish the Export-Import Bank for good, free-market advocates will need to dispel a number of myths about the bank’s economic impact. Some are easy to debunk, such as the claim that the bank supports Hispanic and minority-owned businesses. In fact, such enterprises receive a paltry 2 percent of Ex-Im’s financial support.
Other myths are more stubborn. For example, some claim the bank’s work is necessary to offset foreign countries’ trade policies. But that argument is a non-starter. Even Ex-Im’s own reports disprove it. By the bank’s own admission, the vast majority of its activities are justified for purposes other than countering the effect of foreign subsidies. In fact, Chairman Hochberg testified in the Senate last year that two-thirds of the bank’s activities were intended to “level the playing field.” However, subsequent analysis that same day of the bank’s annual reports by Veronique de Rugy of the Mercatus Center found that less than a third of Ex-Im’s financial assistance was directed for those purposes.
But more fundamentally, even if 100 percent of Ex-Im’s assistance was allocated to combating foreign subsidies, the bank would still harm the economy. Export subsidies are known to hurt to the economy overall, with a large body of research finding that export subsidy programs like Ex-Im usually reduce a country’s total income. As U.S. GDP growth ticked down to a depressing 1.1 percent last quarter, we can’t afford any more drag on our economy.
Now that Congress has returned, the American people are watching to see who is willing to stand up to corporate welfare and the cozy relationship between government and big business. No matter what arguments Ex-Im’s advocates use to justify its continued existence, the bank is nothing more than a taxpayer-funded benefit to the wealthy and well-connected.
Instead of bemoaning the lapse in the bank’s activities, Ex-Im’s backers should keep the bank in its half-shuttered state, then let it die completely when it next comes up for reauthorization in 2019. Corporate welfare will never move the economy forward – only pro-growth policies that level the playing field will make a difference.
Payton Alexander is a policy analyst at The LIBRE Initiative.
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