Nancy Pelosi said Democrats have broken through “the wall of obstruction” in the House on the reauthorization of the Export-Import bank and she’s proud to say she won.
The export/import bank is a giant gift to certain political donors. It is the definition of crony capitalism and allows the government bureaucrats to pick winners and losers.
The Export-Import bank, Ex-Im as it is known, is a U.S. government agency that provides low-interest loans to exporters and guarantees to foreign buyers of American goods.
It is coming up for reauthorization September 30th.
The Ex-Im Bank’s supporters include the U.S. Chamber of Commerce, the National Assn. of Manufacturers and many Republicans and Democrats in Congress. Conservative Republicans and the Heritage Foundation are opposed.
Ex-Im is government interference in the private-sector lending market, providing welfare for big corporations like Boeing.
It barely helps small to medium-sized businesses.
Some of the airlines complain that the Export-Import Bank is subsidizing its global competitors by financing their cheap purchases of American airplanes.
If Delta buys an American plane, they don’t get the export-import subsidy. They’re competing with a Virgin or an Emirates or another global airline that does get access because they are buying it in the export market.
Nicole Gelinas, the Searle Freedom Trust Fellow at the Manhattan Institute, believes it distorts the marketplace.
John Murphy, the U.S. Chamber of Commerce senior vice president for international policy, says it gives U.S. businesses an opportunity to bid competitively and in some cases, they would not have been able to bid at all.
However, 98% of all U.S. exports are made without Export-Import financing and we are keeping Ex-Im going for the other meager 2% that the private sector could meet.
Ironically, we are subsidizing fossil fuels throughout the world through Ex-Im while refusing to approve the KeystoneXL pipeline or open up more government lands to drilling. More government lands have been shut down under this president than any president who preceded him.
A total of 5.87 million metric tons a year will be authorized as U.S. exports from four new fossil-fuel power plants, 3.67 million metric tons will be produced at natural gas-fired plants in Spain, Russia, and Israel, and 2.2 million metric tons will be produced by a coal-fired plant related to a copper-mining project in Mongolia.
The bank provided $494.5 million for exports to the project in Mongolia and $32.3 million in “engineering services” for a petroleum refinery in Russia (2013 report, page 26 at Heritage).
In 2011, billions of dollars were slated to go to Brazil so they could build a refinery, something we haven’t done since 1976, according to CNS News. The money went to Reficar, a wholly owned subsidiary of Ecopetrol, the Colombian national oil company.
“This is part of a $5.18 billion refinery and upgrade project in Cartagena, Colombia supplying petroleum products to the domestic and export markets,” the Export-Import Bank said in a statement.
The largest project Ex-Im supported was $3 billion in financing for a liquid natural gas project in Papua New Guinea,” according to ihatethemedia.
Alan Greenspan, former Federal Reserve chairman, was asked if he supports renewing the bank’s authorization by the hill.
He said, “As an economist, no. But if I were a politician running for office, I suspect I might.”
“The Export-Import Bank is fundamentally a subsidy for American exporters,” Greenspan said. “But the other question you have to ask is, ‘Does international competition and global economic activity do better if no country subsidizes its exports?’ My answer is yes.”
“There is just no doubt that, from a political perspective, all that is visible is the immediate subsidy advantage,” Greenspan said. “Foreign competition’s response is never considered. In politics, it’s the short term that regrettably sets policy, and that is what accounts for an overwhelming backing of the Export-Import Bank.”
Asked whether the economy would be hurt if the bank disappeared, Greenspan said it would “in the short term, probably — but not over the long term.”
“If no country artificially boosted their exports, the global economy would function better,” he said. “In the end, it’s a zero-sum game. To be sure, in the short run, those offered export subsidies gain an advantage until foreign competitors counter the subsidy.”
Therein lies a problem – other countries won’t cooperate and will continue to subsidize.
The Ex-Im bank sends huge amounts of assistance to foreign corporations, buyers, and companies that are hostile to our economic and security interests, but can afford armies of lobbyists to get backing from American taxpayers.
We lend to vicious and cruel dictatorships in Congo and Sudan. We finance countries working against our interests.
In 2013, the Export-Import Bank was rebuked by a federal court for failing to fully consider that the support it sent to a state-owned Indian airline was undercutting Delta, putting up to 7,500 American jobs at risk.
Democrat Senators Amy Klobuchar, Al Franken, and Carl Levin sent a letter of concern to the Export-Import Bank’s Chairman in 2013, noting that the Bank’s subsidy of earth-moving equipment for an Australian mining company would hurt their American competitors in Michigan and Minnesota, ultimately leading to an estimated loss of over $1 billion in domestic sales of iron ore.
Cato Scholar Sallie James pointed out that in FY 2010 the top ten beneficiaries of Bank loans and guarantees — those with combined revenues of over $382 billion — received over 92% of those bank services.
The borrowers don’t need subsidized loans.
A 2012 report by the Bank’s own Inspector General found that it lacks a systematic approach to managing its risk, with an alarming concentration of its risks in only a few industries, particularly the airline industry. It doesn’t understand its risks and doesn’t know where its money is coming from — and we worry about too big to fail stateside.
The bank has been cited for fraud a number of times.
Those who back Ex-Im support lobbyists, cronies and foreign corporations and those who oppose support the American worker.
This is only one small piece of the corporate welfare pie. If we can’t even cut this, what can we cut?