Should We Let The Tea Party Kill The Export-Import Bank?

Dave Johnson

A fight in Congress over the Export-Import Bank has broken out between U.S. businesses that export goods and “small government” tea party Republicans who believe government shouldn’t do anything to help American-based businesses export to the rest of the world, regardless of the help other governments give to their own companies.

The Export-Import Bank is a government export credit agency that finances, guarantees and insures foreign purchases of made-in-America exports from American companies. The idea is to help boost U.S. jobs by providing credit – $37.4 billion in 2013 supporting 205,000 export-dependent jobs – to non-U.S. buyers of U.S. goods when they otherwise have difficulty getting the needed financing.

Uncertainty over the continuation of the bank is supposedly already hurting U.S. companies in their effort to sell their products to customers outside of the country.

Bank Pays For Itself And Makes Money For Taxpayers

The Ex-Im Bank, as it is often called, pays for itself and returns a profit to the taxpayers. In 2012, David Ickert, vice president of finance at Air Tractor, Inc. of Olney, Texas (which makes crop dusters and firefighting aircraft) testified on behalf of the National Association of Manufacturers (NAM) before the Senate Banking, Housing and Urban Affairs Committee, making the case by saying, (emphasis added):

We believe that the Export-Import Bank is essential to exports of U.S. products. For instance, in FY2011, Ex-Im was involved with 3,751 transactions that supported nearly $42 billion in exports from more than 3,600 U.S. companies. Of those transactions, 3,247 – 87 percent – were with small-business exporters. All of those transactions added up to $6 billion in Ex-Im financing in FY2011. The Ex-Im Bank pays for itself (through the fees it charges to foreign buyers) and – above and beyond that – returns money to the U.S. Treasury. From 2006 to 2010, Ex-Im Bank returned $3.4 billion to the Treasury. Ex-Im is a net gain for the federal government and for the taxpayer. Furthermore, the Bank has maintained its incredibly low default rate (1.5 percent) through the recession and through several years of record growth.

Also, according to the Congressional Budget Office, the Ex-Im bank is expected to return a profit of $14 billion over the next 10 years.

According to Michael Hiltzik at the Los Angeles Times, the Ex-Im Bank “helps preserve or create 1.3 million American jobs.”

So the bank not only helps fund to the government, it also helps companies export, which means they are making more money and paying more taxes, both of which boost our economy. It helps create and preserve U.S. jobs, which means people are shopping, paying mortgages, paying taxes and are not depending on the government “safety net.”

Business Groups Want Ex-Im Bank

The U.S. Chamber of Commerce on Monday released a letter from 865 business groups saying that ending the Export-Import Bank would kill jobs and hurt the economy. While the Chamber always says this about things it wants, in this case there is merit. The Hill, reporting on this letter in “Business demands vote from House on Export-Import Bank,” notes that NAM’s CEO Jay Timmons also supports continuing the Ex-Im Bank. The Hill article quoted the Chamber’s CEO Tom Donohue as saying the Chamber will be putting pressure on Republicans to continue the bank. “‘The thousands of small businesses that depend on the bank to be able to access foreign markets are stunned at the threat that Washington could let its charter lapse. We’re not going to let that happen,’ he said.”

Donohue also argued that without the bank, business would shift to U.S. competitors.

“What do we want to do, give this business to the Europeans or the Chinese?” he said.

… Donohue and Timmons also warned a short-term extension would pose problems by keeping the bank from making any long-term commitments.

Bank Of Boeing

Some call the Ex-Im Bank the “Bank of Boeing” because the high cost of its airplanes make the financing of their sale a large percentage of the bank’s financing amount. But there are thousands of companies whose non-U.S. customers get smaller amounts of financing.

U.S.-based airlines have objected to the government providing financing of Boeing airplanes to non-U.S. airlines. The U.S. airlines say it gives foreign airlines an unfair competitive advantage. Richard Anderson, the CEO of Delta Airlines, demanded “reforms” to Ex-Im Tuesday. On Wednesday he was scheduled to testify before the House Financial Services Committee. In prepared testimony, he said, “That fight is heavily tilted in favor of foreign airlines receiving government subsidies, both from those airlines’ home governments, and, amazingly, from our own.”

He asked for reforms to stop Delta’s competitors from getting Ex-Im help when buying Boeing aircraft if they are otherwise able to get financing.

Other large companies that Ex-Im helps export include Caterpillar, General Electric, Bechtel and Lockheed Martin. So the bulk of dollars goes to support the huge exports of a few, companies the bulk of transactions involve small businesses. More than 3,000 other U.S. businesses receive export assistance from the Ex-Im Bank.

If Congress ends the Ex-Im bank, the beneficiaries would of course include Boeing competitor Airbus and Chinese companies that make products that compete with companies like General Electric and Caterpillar.

Another Shutdown Over Ex-Im Bank?

Some tea party Republicans are even threatening another government shutdown over the bank. Brett Logiurato of Business Insider, in “People Are Seriously Talking About The Possibility Of Another Government Shutdown This Year,” quotes Guggenheim Securities analyst Chris Krueger, who

“…wrote in a research note that the “ultimate trump card” for defenders of the bank is the potential for another government shutdown, since the Ex-Im Bank’s charter’s expiration on Sept. 30 coincides with the need to pass a new government-funding bill.

“We do not believe the government will again shut down on October 1, but if House Republicans make a serious effort to close Ex-Im it is conceivable that Senate Majority Leader Reid and the White House could line-up an FY15 [continuing resolution] with an Ex-Im Bank reauthorization and we return to a game of chicken in late September just like last year (just replace Ex-Im with ObamaCare) – only this time it is right before the midterm elections,” Krueger wrote.

… One Senate Democratic aide told Business Insider it could be a legitimate possibility.

“Yes, I do see it getting that far,” the aide said. “The Kochs have been on this campaign for years, and they are successfully recruiting Republican lawmakers into their ranks.

Crony Capitalism/Corporate Welfare

Conservatives charge that the Ex-Im Bank is “corporate welfare” and “crony capitalism” because it helps companies to export their goods. These are just not accurate descriptions of what this bank does when it operates as intended, and openly and transparently with proper oversight. It does not provide special favors, subsidies or tax breaks to corporations at the expense of the rest of us – the usual description of “corporate welfare.” In fact, the bank returns money to the Treasury. And it is “crony capitalism” only if it is benefiting cronies. In this case all companies are eligible, not just companies that have special connections to insiders – a k a “cronies.” It’s “shared prosperity capitalism” if all companies are given equal opportunity for this credit assistance, and when workers benefit as well as owners.

There is nothing wrong with the American government doing what it can to help American businesses and citizens in general when this is done in an open, transparent manner under proper oversight. There are alway problems defining what is considered “American-made,” and interest groups are always trying to get the rules changed in their favor. People will always try to get an edge, taking or giving bribes, etc. There will always be questions about whether non-U.S. customers could have gotten financing elsewhere. These problems are solved (or at least mitigated) by clear rules, openness, transparency and proper, sufficiently funded oversight, and an active and free press. It is better to solve these problems of government than to just decide to get rid of government because it can have problems.

The United States unfortunately does not really have a national economic/industrial strategy to help American companies compete in the world for the benefit of our citizens and our balance of trade and our economy. (See: deficit, trade.) It does, however, try to provide this minimal assistance to exporters by helping their customers arrange financing for their purchases. The Export-Import Bank is one example of our country trying to help American businesses provide good American jobs.

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