Ex-Im Bank Shutdown Would Allow Republicans to Prove Free-Market Credentials
The Export-Import Bank is everything that Republicans should stand against. It is crony capitalism at its worst. It is corporate welfare, taxing American families to boost corporate profits. It ever forces firms to potentially subsidize a competitor. There is simply no need for this government agency. Republicans in Congress should make a stand and show voters that Republicans believe in free markets and small government, even if some big businesses complain. The Ex-Im Bank should not be reauthorized.
The Export-Import Bank exists to provide loans to foreign companies or countries that want to buy goods and services from American companies. It claims not to compete with the private sector, but it must either be making loans in place of ordinary banks or be making loans that private sector banks know better than to make. Either way, that does not seem to be something the government should be doing.
Over the past seven years, the Ex-Im Bank has made loans equal to $264 billion so that the borrowers could buy American products. Considering that in a single recent month, June 2014, U.S. exports were $196 billion, it looks like the Ex-Im Bank is involved in about 1 or 2 percent of all U.S. exports. Thus, it is not as if the economy would take a major hit if the Ex-Im Bank suddenly disappeared. Apparently, many of the buyers of our products have the money to make their purchases, either with cash or private sector financing.
So why do we need the Ex-Im Bank? Well a little research on the Ex-Im Bank's own web page reveals that almost one quarter of all the credit extended in the past seven years has been to companies in the state of Washington. A little more digging shows that over $56 billion, or about 21 percent of all of the bank's business, has been loans to help Boeing sell airplanes or airplane parts. More loans went to other Washington state businesses in the aviation industry.
Amazingly, the number one customer for these loans (and exports) is the United Arab Emirates. While the UAE certainly has an airline which is highly regarded, it is hardly poor. Why exactly are U.S. taxpayers providing subsidies to Boeing so that one of the wealthiest countries in the world can buy Boeing airplanes at a slightly lower cost?
The answer is that this is what the Ex-Im Bank does. Their role is to help American companies close deals and Boeing is locked in a fierce battle with Airbus, the European airplane maker which receives subsidies from several European Union member governments. Boeing has consistently lobbied for reauthorization of the Export-Import Bank, claiming it is vital to its winning contracts for new aircraft.
It so happens that the Export-Import Bank operates under authorization from Congress and that its latest such authorization is about to expire. Boeing spent over $4 million lobbying Congress for a reauthorization of the Ex-Im Bank just between April and June of this year. Clearly, Boeing is profiting considerably more than that amount due to the Ex-Im Bank's subsidies or it would not be spending so much on lobbying.
Over the last decade or so, the Democrats have increasingly become the party of big business, stealing that crown away from Republicans because of the Democrats' willingness to engage in crony capitalism and actively pick winners and losers in our economy. While Republicans are still thought of as the pro-business party, and other actions by the Democrats are clearly anti-business (Obamacare, environmental over-regulation), large multinational corporations like Boeing and GE have donated money to Democrats and generally profited from their political alliances with them.
If Republicans want to make gains among (lower) middle-class voters, one of the things that could help is to convince voters that they are on the side of the people and not big corporations. The Ex-Im Bank reauthorization is a perfect opportunity to do just that. Let Republicans ask the question: why is there a government agency that devotes over one-fifth of its resources to helping a single company?
If Republicans want to be the party of free markets, let them stand against crony capitalism. Income redistribution is wrong especially when the money is going to big and profitable companies. Boeing does not need these subsidies to survive, and if it did then it would not deserve to survive. Nations are always worse off when the subsidize what should be private sector activities because by so doing you get more of something that the market does not want and, thanks to the resulting resource misallocation, less of something that the market does want.
Boeing's problem is not signing contracts to sell planes; it is actually delivering the planes. Boeing has orders on its books for planes that will take it at least seven years to build. This fact should make life even easier for those in Congress who wish to stop reauthorization of the Ex-Im Bank. Let's try to live without it for a while. Congress should not reauthorize the Ex-Im Bank. If the sky starts to fall, we will know it long before Boeing can work through its order backlog.