It's Time to Let the Crony Export-Import Bank Die
The Export-Import Bank – the poster child for corporate welfare – was due to expire at the end of September. But it has been given a temporary reprieve while congressional leaders plot to renew it on the sly by attaching it to a must-pass spending bill, meaning the bank will never get the scrutiny taxpayers deserve.
Ex-Im subsidizes export transactions using sweetheart terms – including below-market-rate loans – that are backed by the American taxpayer. According to the bank’s website, the agency provides financing when “private sector lenders are unable or unwilling to” and “assumes credit and country risks that the private sector is unable or unwilling to accept” [emphasis added].
In making these riskier loans, Ex-Im rigs the game in favor of a few well-connected companies, both here and abroad, at the expense of their competitors and taxpayers. Indeed, the lion’s share of Ex-Im subsidies go to a handful of the biggest corporations in America, including Boeing and General Electric, and their equally large foreign customers in places like China, Mexico and Saudi Arabia. If Ex-Im loans go bust, taxpayers pick up the tab.
The continuing resolution currently funding the government through Nov. 21 also extended the Ex-Im for the same time period. This allows the bank to continue functioning until a long-term renewal can be passed as part of whatever yearend spending package the two sides dream up.
With a lending limit of $135 billion – that’s your tax dollars at risk – you might think Congress would take a sharp look at the agency before renewing it. But no.
In June, the House Financial Services Committee held a single hearing on renewing the bank’s charter with a witness table stacked with Ex-Im backers. It stayed dormant until recently when Committee Chairwoman Maxine Waters (D-Calif.) strong-armed it through a contentions and combative markup by a narrow margin, despite all of the committee’s Republicans and a few Democrats -- including Alexandria Ocasio-Cortez (D-N.Y.) – voting “no.”
The full House will attempt to pass it this week. In the Senate, there hasn’t even been a hearing, much less a committee vote on Ex-Im.
That’s too bad, because a frank appraisal of the bank’s record raises troubling questions about its usefulness and management.
Bank supporters claim American corporations cannot successfully compete for international contracts without Ex-Im assistance and that U.S. manufacturing jobs depend on it. Indeed, Rep. Denny Heck (D-Wash.) went so far as to suggest in 2014 that Boeing couldn’t survive without the bank.
But we know exactly what would happen to Boeing if the bank went away, because it pretty much already happened. From July 2015 to May 2019, Ex-Im could not make loans of more than $10 million because its board of directors lacked a quorum. If bank supporters are right, that nearly four years should have been a dark time for companies like Boeing and for Americans working in manufacturing.
Over that time, Boeing and other big companies did just fine without taxpayer help. Indeed, Boeing last year set a record with over $100 billion in revenue and more than $10 billion in profit. Commercial lenders stepped up to provide access to plenty of capital, so much so that in December 2018 – over three years into Ex-Im’s large lending halt – Boeing reported:
“The aircraft financing market remains healthy, with adequate commercial liquidity, providing a wide range of efficient options available for our customers,” said Tim Myers, president of Boeing Capital Corporation. “We expect another year of balanced funding for commercial airplane deliveries in 2019, mirroring the broader industry, primarily split between bank debt, capital markets and cash.”
Why are we putting taxpayer dollars at risk to subsidize an activity that doesn’t need it?
As for jobs, since July 2015 America has added about 500,000 manufacturing jobs. In fact, according to the National Association of Manufacturers, solid job growth in manufacturing is “actually exacerbating an existing challenge in the industry: a lack of enough skilled workers.”
And even when Ex-Im was operating with virtually uncapped loan authorizing capacity, its financing accounted for just 2.3% of the value of all U.S. exported goods.
The Export-Import Bank is part of government’s long, sad history of picking winners and losers in the economy through subsidies, special tax breaks, regulatory barriers and protectionist policies that prevent competition. Bank supporters deny the bank is corporate welfare (Rep. Heck: “It is not taxpayer subsidized! Stop saying that! It’s not true!”), but what else would you call giving a select few companies taxpayer-backed loans with terms not available in the private market and not available to the vast majority of American businesses?
Meanwhile, those same American businesses are put at a competitive disadvantage when taxpayer dollars are used to subsidize foreign competitors. For example, Delta Airlines has long complained that Ex-Im subsidies used by foreign airlines to purchase U.S.-made aircraft put them at a competitive disadvantage because Delta does not have access to the same financing deals.
And it’s not just airlines that are put at a competitive disadvantage by Ex-Im financing. A Cato study found that from 2007 to 2013, the bank imposed a net cost of $2.8 billion per year on companies across multiple industries – everything from textiles, food and paper to machinery, computers and electronics – that got no subsidies.
And if all that isn’t enough, there are serious questions about how Ex-Im has been managed. A General Accountability Office study found that, between 2014 and 2016, $1.7 billion was awarded to 32 companies that may have been delinquent on their federal debts – a violation of federal law. Another GAO report found the bank has no framework to deter fraud and needs substantial fraud risk management reform. As a consequence, the bank poses significant risk of loss to taxpayers.
The Export-Import Bank is government favoritism masquerading as government investment. It’s a raw deal for U.S. taxpayers and U.S. companies. Congress should let it die. But unless members on both sides begin raising a public stink, it will be renewed for several years without anyone but insiders even knowing.