Yesterday, the Senate confirmed three of President Trump’s nominees to the Export-Import Bank (EXIM). EXIM is the poster child for corporate welfare, as the vast majority of its loan guarantees benefit large, politically-connected corporations. In fact, 70% if all EXIM loan guarantees went to Boeing!
Sadly, President Trump has come out for expanding EXIM on the grounds that it "enhances America’s international competitiveness." But the real way to increase American productivity is to get rid of all market-disrupting subsidies like the Export-Import Bank.
Programs like EXIM divert resources from the private sector and redirect them to the government which is intent on helping those who benefit from more government rather than the people. This means resources will go to companies able to manipulate the political process, instead of those best able to meet the needs of consumers.
So instead of renewing the Export-Import Bank’s ability to make loans, Congress and President Trump should get behind Representative Justin Amash’s Export-Import Bank Termination Act (H.R. 1910). As the title suggests, this bill abolishes the Export-Import Bank.
You can see the roll-call votes on President Trump’s nominees here, here, and here. The nominations passed with an overwhelming majority. The only opposition came from a handful of Republicans. Bernie Sanders (I-VT) voted “no” on two of the nominees, which is not surprising. When he served in the House, Sanders joined Ron Paul in opposing corporate welfare.
Sens. Kamala Harris (D-CA) and Elizabeth Warren (D-MA) both voted against former Representative Spencer Bachus. This is likely because, as Ranking Member and the Chair of the Financial Services Committee, Bachus was a leading opponent of Dodd-Frank and the creation of the Consumer Financial Protection Bureau (CFPB). The CFPD was Warren’s brainchild, and it was the fight over its creation that brought her to national prominence.
For more on EXIM, see this must-read piece by Tom Carney here and the following coalition letter cosigned by Campaign for Liberty:
May 2, 2019
Dear Members of Congress:
On behalf of our groups and organizations, which collectively represent millions of Americans across all 50 states, we urge you to oppose the reauthorization of the Export-Import Bank, which is slated to expire on September 30, 2019. The Ex-Im Bank, as it is informally known, administers corporate welfare loan programs that grant unfair advantages to a few domestic companies at the expense of many others, all the while putting billions of taxpayer dollars at risk and fostering a danger of internal corruption that has too often materialized. Despite arguments from the Bank’s supporters that Ex-Im doesn’t spend taxpayer dollars, a 2014 CBO estimate revealed that, if the bank were to use generally accepted accounting principles, the bank would cost taxpayers $2 billion over a decade.
The core of the Export-Import Bank’s business is to back loans made to foreign customers of a handful of U.S. businesses, which tilts the playing field in favor of well-connected businesses and to the detriment of everyone else. Before losing its quorum in 2015, 65 percent of the Export-Import Bank’s activities benefited just 10 large and already successful domestic firms. Despite claims that 90 percent of the businesses to which it provides support are small businesses, recent analysis from Veronique de Rugy of the Mercatus Center at George Mason University shows that Caterpillar and Boeing were included as the first- and fourth-largest beneficiaries of “small business” funds.
But the Export-Import Bank doesn’t stop at picking dubious winners and losers at home or pitting domestic industries and firms against each other. Internationally, a handful of state-owned firms such as Ethiopian Airlines, China Air, and PEMEX, the Mexican oil and gas company, are consistently among the top foreign beneficiaries of the bank’s activities. By handing out taxpayer backed loans to favored companies, the Export-Import Bank distorts the free market at the expense of the larger U.S. economy. The Air Transport Association has estimated that the bank’s loans to foreign airlines have killed as many as 7,500 jobs for domestic airlines in the United States. Ironically, this is while Boeing racked up 70 percent of all Export-Import Bank loan guarantees and the benefit of 40 percent of its total activities.
Furthermore, a 2014 report from the Cato Institute found that of the 225 domestic non-aircraft manufacturing industries that received a collective $50 billion in financing from the bank, 189 of them incurred higher costs from Ex-Im’s activities than benefits. That is because for every time Ex-Im picks a “winner” by authorizing a loan, there are many more losers throughout the broader economy. Eliminating the Export-Import Bank would end this harmful practice and instead allow businesses to compete on a more level playing field, focused on creating value for their customers rather than vying for special treatment from government agencies.
Harms aside, de Rugy finds that even without a quorum to approve larger loans, the U.S. export market is “on par with the one that prevailed when the agency was functioning at full capacity.” This is because even during its most active year, 2012, over 97% of exported goods never received the benefit of the Bank’s largesse.
Making matters worse, it is no secret that the Export-Import Bank, like all corporate welfare programs, has been a petri dish of fraud, bribery and corruption. Many employees have been investigated, accused, and indicted over the years; a notable recent example of graft was found to have cost taxpayers almost $20 million. Taxpayer support of such deplorable and criminal behavior is simply unacceptable.
To reauthorize a government loan program which has, time and again, been shown to be a breeding ground for corruption and as well as a wellspring of handouts for a few well-connected businesses at taxpayer expense, would be an insult to the hardworking Americans whose tax dollars are put on the line with each loan authorization. We, the undersigned organizations, urge you to oppose the reauthorization of the Export-Import Bank.
Brent Wm. Gardner
Chief Government Affairs Officer
Americans for Prosperity
Club for Growth
Campaign for Liberty
Andrew F. Quinlan
Center for Freedom and Prosperity
Center for Individual Freedom
Vice President for Strategy and Senior Fellow
Competitive Enterprise Institute
Executive Vice President
Freedom Partners Chamber of Commerce
Heritage Action for America
Heather R. Higgins
Independent Women’s Voice
Institute for Policy Innovation
National Taxpayers Union
Republicans Fighting Tariffs
Rio Grande Foundation
William Whipple III
Secure America’s Future Economy
Taxpayers for Common Sense
Jenny Beth Martin
Tea Party Patriots Action