September 10, 2014 | Commentary on Economy
In recent months, an obscure but controversial federal agency called the Export-Import Bank has made headlines across the country. The 80-year-old, taxpayer-funded institution unexpectedly finds itself fighting for its life.
The Export-Import Bank (Ex-Im for short) was created during the Depression to make loans to the Soviet Union so it could buy American products. This obsolete business model has stayed essentially the same, and the customers can still be oppressive. Ex-Im currently subsidizes loans and other financing to encourage Russia, China, and other countries to do business with a select group of American exporters.
The bank's charter is set to expire at the end of September. Advocates for reauthorizing it - ranging from Big Government fans in Congress to Big Business fans in the U.S. Chamber of Commerce - are trying to convince us that Ex-Im is vital to lots of different people, and small businesses in particular. But the facts don't stack up that way.
Massive corporations like Boeing, GE, and Bechtel are the primary beneficiaries of Ex-Im subsidies; 75 percent of the bank authorizations benefited a mere 10 multinationals in 2013. That's billions of taxpayer dollars being put at risk to help out some very large businesses that do not lack access to financing.
Ex-Im proponents raise the specter of lost sales abroad causing lost jobs at home if Congress lets the Ex-Im charter expire. But it's absurd to argue that exports would cease without Ex-Im. Many of the companies that now benefit from Ex-Im's taxpayer-subsidized lending were exporting before they secured bank assistance.
And frankly, if a company couldn't exist without floating on our tax dollars, then maybe it shouldn't.
To top it off, the Ex-Im Bank is an incubator for mismanagement and fraud. Heritage Foundation scholar Diane Katz has traced 74 cases of "integrity" investigations at the bank since 2009, based on reports by Ex-Im's inspector general. Dozens of fraud cases have been referred to the Department of Justice, and some of these fraudulent loans have been linked to illegal enterprises here and in other countries. In a recent six-month period (October 2013 to March 2014), 47 criminal judgments were rendered against Ex-Im beneficiaries.
It's interesting to watch so-called populists, who came to prominence denouncing crony capitalism and Wall Street excesses, struggle to explain their support for Ex-Im's corporate welfare, which is unfair to most American exporters and small-business owners. To echo the Mercatus experts, railing against the "1 percent" seems to be easier for some politicians than helping the 99 percent.
I used to run a small business, and I understand why businesses would like the idea of getting a leg up from Uncle Sam. But Ex-Im financing for a favored few is just another example of Washington picking winners and losers in the marketplace. It's farcical for the bureaucrats doling out taxpayer money and the large companies reaping the benefit to pretend that small businesses are the winners here.
All businesses, no matter their size, deserve a fair shot at success, and there are many ways the federal government can step out of the way to let them flourish. We can achieve this by eliminating burdensome taxes and all the unnecessary regulations that hinder trade, investment, innovation, and job creation. That way, all Americans will benefit - not just the big guys. Pennsylvania and New Jersey deserve better than the Ex-Im bank.
- Jim DeMint, a former small-business owner and U.S. senator, is president of the Heritage Foundation.
Originally appeared in the Philadelphia Inquirer