All lawmakers make campaign promises to fight Washington’s culture of corruption. Here’s some good news for them: They can show their constituents they fulfilled that pledge by allowing the U.S. Export-Import Bank to expire.
A relic of Franklin Delano Roosevelt’s New Deal, Ex-Im is a blatant example of the corrupt political system that plagues Washington today. It operates by giving below-market financing — in the form of direct loans, insurance and guarantees — to foreign companies that pledge to buy American products. While this pads the bottom lines of companies making those products, it harms the U.S. businesses that must compete with those foreign purchasers in global markets.
The good news for taxpayers is that the bank’s charter is set to expire on June 30. True to form, however, Ex-Im and its supporters have begun making exaggerated and discredited claims about the potential for thousands of lost jobs, business closures and economic calamities that could cripple America’s international competitiveness.
What will actually happen if the Export-Import Bank expires? The short answer: essentially nothing.
Start with concerns over jobs: The only way Ex-Im can label itself a “job creator” in the first place is by ignoring the jobs it destroys by giving foreign companies an advantage over their U.S. competitors. The Government Accountability Office concluded that the bank’s ultimate effect is to “shift production among sectors within the economy rather than raise the overall level of employment in the economy” — read: It simply picks winners and losers.
Several examples illustrate this reality: When the bank touted job gains at Boeing after financing aircraft purchases for foreign airliners, it neglected to count the resulting loss of 7,500 U.S. airline-industry jobs. Another example is a recent deal with an Australian iron-ore producer owned by the country’s richest citizen. Four Democratic senators explained that Ex-Im’s subsidy would “injure American iron ore and steel producers and their employees that are competing in the same global marketplace.”
Claims of economic catastrophe are similarly overblown. Overall, Ex-Im supports less than 2 percent of all U.S. exports. Of that amount, the overwhelming majority benefits just a handful of companies. In 2013, nearly two-thirds of Ex-Im’s total financing supported just 10 large corporations, while more than 90 percent of its loan guarantees benefited just five.
Far from eliminating thousands of jobs and killing the economy, allowing Ex-Im to expire will simply level the playing field for the other 98 percent of U.S. exports that have to compete without help from Ex-Im.
As for the technical details of expiration, there’s not much drama here, either. According to the Congressional Research Service, expiration wouldn’t jerk the rug out from under current beneficiaries. Instead, Ex-Im may continue “administering its assets and collecting any obligations it holds.” All current Ex-Im commitments will be fulfilled, giving beneficiaries plenty of time to find alternative financing when their agreements expire.
Ex-Im claims it deserves special treatment because it provides financing that private banks won’t. Yet at the same time, it claims the bank turns a profit for taxpayers. Both claims can’t be true. If Ex-Im is truly profitable, there will be private-sector banks champing at the bit to get a piece of its $112 billion book of business.
The more likely scenario is that neither claim is true. Applying fair-value accounting to the bank’s operations — the same standard used by the private sector — the Congressional Budget Office estimates Ex-Im will cost taxpayers roughly $200 million per year, or $2 billion over the next decade.
And there already are a number of private-sector banks willing and able to take Ex-Im’s place. Speaking to reporters at Ex-Im’s annual conference last month, an American International Group banker called Ex-Im a “competitor,” while another called it “outlandish” to argue otherwise. The message from this is clear: Current Ex-Im beneficiaries will be just fine if Ex-Im expires.
But it’s more than just corporate welfare with Ex-Im — it’s also the bank’s track record of bribery, federal criminal investigations and sweetheart deals that have more to do with favors than merit. In the past five years alone, 47 people have been convicted of defrauding Ex-Im, while there remain 31 ongoing investigations of fraud and corruption.
There’s simply no defense for reauthorizing the Export-Import Bank. Despite the claims of the corporations and lobbyists who benefit from it, expiration will trigger a smooth and orderly wind-down that doesn’t threaten the economy or American jobs. Allowing Ex-Im to expire will prove this Congress is serious about honoring its commitment to ending Washington’s culture of corporate welfare and corruption.
Andy Koenig is a senior policy adviser at Freedom Partners Chamber of Commerce.