July 17, 2014 | Commentary on Economy
You can tell a lot about a piece of legislation by looking at who is for it and who is against it. The battle over whether to keep the Export-Import Bank alive is a case in point.
The Ex-Im Bank was established during FDR's administration to encourage more trade with the Soviet Union. The Soviet Union is no longer, but — like most government programs — the Ex-Im Bank lives on. Today, the Ex-Im Bank gives loans at discount rates to foreign companies worldwide to buy products and services from U.S. companies.
The problem? It creates an unfair playing field for American companies.
Take Delta Airlines, which pays full price for the planes it purchases from Boeing, yet has to compete with Air China, which buys planes from Boeing with subsidized loans through the Ex-Im Bank. Airlines for America estimates the Ex-Im loans to foreign airlines have killed 7,500 jobs at domestic airlines in the U.S. And Ex-Im even subsidizes loans to companies in nations hostile to the U.S., such as Russia and Venezuela.
But there's an additional problem: If a foreign company defaults on its loan, it is American taxpayers who are on the hook. Remember Fannie Mae and Freddie Mac?
Those in favor of Ex-Im give example after example of "small" businesses that benefit from Ex-Im. They suggest that all this commerce would dry up if Ex-Im did not exist to make the loans and credit guarantees. Here's the reality: Of the $2.2 trillion export business that takes place in the U.S. economy each year, only 2% is made possible by the folks at Ex-Im.
That means 98% of export loans take place without any help from Ex-Im. Seems the majority of U.S. companies in the export business are successful without handouts from Washington.
One of those two-percenters, a business owner in Texas who benefits from Ex-Im loans, recently said, "As a business owner, it's easier to sleep at night knowing that if something were to happen, I could have Ex-Im Bank help me out." Yes, it must be nice knowing that if you make business deals that go belly up, you aren't on the hook; the taxpayer is.
Additionally, just last month, the Congressional Budget Office reported that Ex-Im credit programs are operating at a deficit that will cost taxpayers close to $2 billion over the next 10 years. But, wait; Ex-Im supporters say the bank is contributing to the U.S. economy. What's the back story?
The accounting folks at Ex-Im aren't using the same accounting standards all private banks and lenders are required to use. When they are forced to run their numbers through fair-value accounting analysis, like everyone else, guess what? There's a deficit. But no one should be surprised. Ex-Im and its supporters are of Washington, where they believe they don't have to follow the same rules as everybody else.
So, who are the supporters of the Export-Import Bank? Those who kowtow to the wishes of Big Business and somehow believe companies such as Boeing, General Electric or Caterpillar won't make it without a little help from their friends in Washington. We're talking about business lobbyists such as the Chamber of Commerce and National Association of Manufacturers, establishment Republicans, most Democrats in Congress and President Barack Obama. Of course, Obama believes companies such as Solyndra won't make it without government help. (The fact is, the company couldn't make it, period. But that's another column.)
Who opposes Ex-Im? Groups that believe government should get out of the corporate welfare business and that don't think taxpayers should be on the hook for companies that default on their loans. Here you have conservatives in Congress, tea party organizations, Americans for Tax Reform, Citizens Against Government Waste, my colleagues at Heritage Action and a host of other groups representing taxpayers and a level playing field for all.
This is a battle between those who support Washington as usual vs. those who think it's long past time for cronyism and special favors to stop — especially when it is taxpayers who foot the bill when things go wrong.
- Genevieve Wood is a senior contributor to the Daily Signal, a publication of the Heritage Foundation.
Originally appeared in the Milwaukee Journal Sentinel