To understand how unnecessary the Ex-Im Bank has become in the 21st century global economy, consider its miniscule role in the marketplace. U.S. goods and services exports last year totaled $2.1 trillion, meaning the Bank’s overall contribution is negligible at most. It’s questionable financial management practices and lack of congressionally-mandated internal controls have also made the program a liability to taxpayers. Loans, guarantees and insurance that the Ex-Im bank finances have risen from $12.6 billion in 2007 to $32.7 billion in 2011. Yet the reserves on hand to cover potential losses is actually $1 billion less over that period of time, declining from 6.8 percent of total exposure to only 4.6 percent. Our risk exposure has exponentially grown at the worst possible time given the world economy’s overall poor health and credit exposure.
The Ex-Im Bank enables foreign airlines to secure planes at a discounted rate, which in turn allows these companies to cut costs and airfare rates. American companies are not given access to these same loans and guarantees so foreign airlines get an intrinsic competitive advantage against their American counterparts. Because of something called the Home Market Rule, American carriers are not able to access the same below market rate financing when buying aircraft.
A recent study found U.S. airlines lost up to 7,500 jobs and nearly three quarters of a billion dollars due to this deeply unfair system. With American companies forced out of the market due to the flood of airplanes by international carriers, our economy suffers and a federal agency manipulating the marketplace is to blame.
In recent years, the Ex-Im Bank has also erringly tried to broaden its political support by venturing into questionable solar projects, exports to sub-Saharan Africa and giving some help to small businesses. The half-billion dollars lost through the Solyndra scandal, the Fannie and Freddie-induced subprime mortgage crisis and the Citizens Property Insurance exposure in Florida are evidence that the government should steer clear of assuming risk that the private sector is unwilling to accept. Daniella Markheim of the Heritage Foundation has accurately noted the danger of the Ex-Im Bank’s approach as “privatizing gains while potentially socializing losses.”
The Ex-Im debate does, however, raise the very real questions of how we compete with the subsidies other countries engage in, and what policies are in the best interest of our private sector. The American Conservative Union supports smarter, pro-growth ways to increase our global competitiveness, like executing stalled free trade deals, combating unfair trade practices overseas, and reducing the heavy regulatory and tax burden that sits on American businesses now.
There are a lot of right paths to increase American exports, but using a federal agency to pick winners and losers in the marketplace is the wrong one. The Export-Import Bank of the United States was the product of an economic era gone by and should be allowed to expire. The American Conservative Union is proud to stand with unwavering conservatives like Sen. Jim DeMint and his allies in both chambers in opposing reauthorization of this antiquated agency.
Cardenas is the Chairman of the American Conservative Union. He is a former Chairman of the Republican Party of Florida.