When the U.S. Chamber of Commerce aligns with a disciple of Fidel Castro and hires a working-class hero to lobby Congress, when a liberal economist like Paul Krugman sympathizes with the CEOs of Boeing, Bechtel, and General Electric, it is obviously not business as usual on Capitol Hill.
Welcome to Ex-Im 2014.
For those with lives beyond the Beltway, “Ex-Im” is shorthand for the Export-Import Bank, an obscure federal agency that doles out billions of dollars in subsidies to foreign firms for the purchase of U.S. exports. Whether to reauthorize the bank’s charter, which expires Sept. 30, is the subject of unexpectedly intense debate in Congress—and the coupling of such strange bedfellows.
It has been 80 years since President Franklin D. Roosevelt created the bank by executive order, and in all that time lawmakers have embraced Ex-Im reauthorization by either unanimous consent or voice vote in all but a couple of instances. Never has there been such a concerted effort to end it.
This time around, however, critics of cronyism have seized on the bank as a practical target of attack against Big Government funneling the spoils of political power to those wielding economic power. The Export-Import Bank is hardly the biggest or worst manifestation of the problem, of course. But change in Washington rarely occurs on a grand scale, and ending Ex-Im is a scalable goal at the moment.
That leaves Ex-Im supporters such as the Chamber, the Business Roundtable, and the National Association of Manufacturers (NAM), to unite with Rep. Maxine Waters and Sen. Chuck Schumer, as well as NAM’s hiring of Dick Gephardt, the former Democratic Majority Leader-turned lobbyist, and (normally) the darling of the blue-collar set.
These and other Ex-Im proponents claim export subsidies create jobs and fill “gaps” in private financing. Neither is true. Moreover, the inspector general and the Government Accountability Office have documented a variety of problems with bank operations, including its failure to conduct economic impact analyses as required by law. Thus, bank officials are sending billions of taxpayer dollars to foreign firms without a meaningful consideration of the effects on American workers and the businesses that employ them.
In reality, the bank is beset by mismanagement and fraud, and allowing its charter to expire should be an easy call for Congress. There is no shortage of private investment: 98 percent of the estimated $2 trillion in annual U.S. exports are financed without aid from Ex-Im. Even Barack Obama, as a presidential candidate, endorsed ending it.
But the beneficiaries of Ex-Im’s largesse are loathe to relinquish access to so much cheap capital. Last year alone, bank authorizations exceeded $27 billion, bringing taxpayers’ total exposure to nearly $134 billion … at the very least. (Ex-Im’s sloppy record-keeping obscures the actual amount of outstanding commitments.)
It is perfectly understandable, of course, that businesses utilize Ex-Im financing. Corporate officers are responsible for maximizing shareholder value—including the retirement investments of millions of American workers. But it is also the responsibility of Congress to do away with preferential treatment for special interests, and to protect taxpayers from unnecessary financial risk. (Every cent of Ex–Im financing is backed by “the full faith and credit of the United States,” which means taxpayers are on the hook for any and all losses that bank reserves fail to cover.)
Many in the mainstream press are fixated on the idea that the Tea Party is responsible for this abrupt turn in Ex-Im’s political fortunes. (That’s the very same Tea Party that said press otherwise portrays as disordered and ineffectual.) But the fight actually reflects a much more generalized public vexation with cronyism. Remember Occupy Wall Street? Ever hear Ralph Nader on corporate welfare?
If bank advocates are sincere in wanting to nurture employment and economic growth, they should focus on reducing the tax and regulatory barriers that are choking investment, innovation, and job creation. Ex-Im is a New Deal relic that is both unnecessary and injurious. Notwithstanding the aggressive efforts to save it, Ex-Im reauthorization is in serious doubt. For millions of Americans, it’s about time.