With Ex-Im, pols cave to cronyism

Does anyone believe that politicians care about average Americans and oppose cronyism? If you’re one of the few people who is still on the fence, look to the recent Export-Import Bank reauthorization for the sad answer: They don’t. 

127 Republicans joined forces with Democrats in the House to resurrect the zombie corporate welfare program from its too-fresh grave. This federal subsidy program is one of the most notorious examples of cronyism: Ex-Im inflates profits for giant, politically connected companies through cheap, taxpayer-backed loans. 

{mosads}The list of those who voted for Ex-Im is depressing. Among them are all of the contenders to replace now-Speaker Paul Ryan as the Ways and Means chairman, a Freedom Caucus lawmaker, all of your big-business, big-government Republicans (as expected), the “moderate” Republicans as the press call them, and all Democrats except for one: Florida’s representative Alan Grayson (and good for him!). 

The Republicans have been known for years to be the party of big business. While their ranks are thinning, they can rouse a sloppy kiss for an agency whose entire reason for being appears to be to promote the narrow welfare of a handful of corporations. However, it is interesting to see the unanimous support from the Democrats considering their constant complaints against corporatism. 

On the domestic side, 64 percent of Ex-Im financing benefits 10 large corporations, and 40 percent benefits Boeing. After all, there’s a reason Ex-Im is referred to as “Boeing’s Bank.”

On the foreign buyer side, the top beneficiaries include a majority of state-owned companies such as Mexican oil and gas giant Pemex and Air Emirates, the airline of oil-rich United Arab Emirates. 

Supporters deceptively claim that Ex-Im should be reauthorized because it substantially promotes exports, creates jobs, and supports small businesses. None of these arguments withstand scrutiny. 

First, the Ex-Im Bank plays a marginal role in export financing—backing a mere 2 percent of U.S. exports each year

This means that 98 percent of exports are financed without government distortion using the ample private financing available. Research by Diane Katz at the Heritage Foundation shows that the record levels of exports in recent years have been driven solely by private export financing. “Ex-Im cronies want Congress and the public to think that bank’s financing is a lifeline for American jobs, but that’s a lie.” She adds, “The empirical evidence is incontrovertible: the sole driver of export growth is private investment.”

Second, the bank claimed that if its charter expired hundreds of thousands of jobs would disappear. This has not happened. It takes credit for supporting 164,000 jobs in 2014. But the Government Accountability Office (GAO) criticized the bank’s job calculation methodology for failing to consider how many jobs would have been created without Ex-Im, among many other flaws that the bank refuses to address. Ex-Im has been dead for over three months but the wild assertions that thousands of jobs would instantly disappear have not materialized. In addition, the claims of dramatic consequences (made by Ex-Im’s main corporate beneficiaries) have not stood up to scrutiny.  

Finally, on average, less than 20 percent of the bank’s activities have benefited “small” businesses, which Ex-Im liberally defines as companies with fewer than 1,500 employees and $21.5 million in revenues. Many of these activities are still often for the indirect benefit of Boeing and GE

And what about the rampant corruption at Ex-Im? Financial Services Chairman Jeb Hensarling (R-Texas) tallied up at least  85 criminal indictments, 48 criminal judgment, 31 arrest warrants, and decades of combined prison time among Ex-Im employees over the past six years alone. 

Congress had a chance to protect the little guy, but it decided instead to succumb to the lure of GE and Boeing’s millions in lobbying dollars. Lost amid the loot are the hundreds of millions of unseen victims of this political privilege. They are the workers who lose their jobs because a competitor received a cheap government loan. They are the taxpayers who are exposed to $140 billion in liabilities for private corporations. And they are the consumers who face higher prices for the purchase of subsidized goods.  

Shouldn’t Congress be in the business of protecting these victims despite their lack of lobbyists and press offices? 

 de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Tags Alan Grayson Paul Ryan

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