Export-Import Bank represents crony capitalism

The Export-Import Bank is up for renewal. Its charter expires on September 30. In my opinion, it should be dumped because it does not help American business in general, only a few favored cronies.

The Heritage Foundation has an in-depth article on the Export-Import Bank. You can read the entire essay here. The abstract says:

“The primary activity of the Export-Import Bank of the United States is to provide export subsidies to buyers and sellers of U.S. exports. Its goal is to shift global market share to U.S.-based corporations and away from corporations headquartered in other countries. However, ample research by academic economists found that in most cases, export subsidies reduce the total income of the country paying the subsidies. In all cases, export subsidies reduce global income, and benefits accrue only to those who are subsidized—at the expense of other exporters and taxpayers. Most of the arguments in favor of the Export-Import Bank recast the bank as having a primary function other than providing export subsidies—such as small-business lending or global diplomacy. But theory and practical reality both show that the bank does not, and should not, engage in other activities. Since the bank’s main function is harmful to the U.S. economy, and it is not designed to carry out other functions, its charter should not be renewed.”

On Monday, the Arizona Daily Star ran a pro-con pair of articles on the editorial page of the print edition. Strangely enough, the “con” article did not appear online (except in the e-newspaper replica). I’ve emailed the Star editor asking why that is, but have not received a reply so far. However, the “con” article appeared online on Tuesday afternoon after I asked why it was missing Monday. I will summarize the competing articles just in case you don’t read the Star anymore.

On the pro side is an article by Thomas J. Donohue of the U.S. Chamber of Commerce. This article claims:

“In 2013, the Ex-Im Bank provided financing or guarantees for more than $37.4 billion in
exports by 3,400 U.S. companies. These sales in turn support more than 200,000 American jobs.”

And:

“The bank’s support is especially important to small- and medium-size businesses, which account for nearly 90 percent of its transactions.”

On the con side is an article by Veronique de Rugy of the Mercatus Center of George Mason University.

She suggests we follow the money to find the truth: “…economists have repeatedly shown that export subsidies never boost the net level of exports. Rather, these subsidies redistribute sales away from unsubsidized exporters and toward those who curry favor with the right bureaucrats. In the case of Ex-Im Bank, the winners are obvious. While the bank backs only 1.9 percent of all U.S. exports, a stunning 76 percent of Ex-Im Bank’s portfolio directly benefits fewer than 10 massive multinational corporations, including Boeing, General Electric and Caterpillar. Indeed, the bank earned its D.C. nickname: ‘Boeing’s Bank.’”

Rugy goes on the write: “Corporate Ex-Im Bank supporters warn that millions of American jobs could be destroyed. The bank itself claims to have supported 1.2 million jobs over the past five years. Yet it’s worth noting that the federal government’s nonpartisan Government Accountability Office disputes this figure and the sloppy methodology that produced it. But even if one assumes that Ex-Im Bank’s questionable figure is accurate, this amounts only to some 2 percent of all export-related employment and a measly 0.01 percent of all U.S. jobs. Most of these jobs come from the largest corporate beneficiaries like Boeing and Caterpillar…Data from the U.S. Census Bureau show that Ex-Im Bank backs less than 0.3 percent of all small-business jobs and less than 0.04 percent of all small-business establishments.”

She concludes: “The justifications for extending the Export- Import Bank’s charter keep changing, but the winners and losers remain the same. Ex-Im Bank is a corporate welfare program that benefits manufacturing conglomerates involved with fewer than 2 percent of exports at the cost of everyone involved with the other 98 percent.”

I agree with her conclusion. This is similar to the extensive subsidies necessary to sustain solar and wind power projects, many of which would not exist without government subsidies. Let the free market reign.

Additional resource CATO report here

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