The Moment of Truth on Corporate Welfare

by John Fund
By choosing to end the Export-Import Bank, the GOP can zero out a destructive government program.

It seems like decades since Republicans have been able to permanently zero out a government program of any size. The tea-party base often doesn’t take seriously the GOP’s commitment to shrinking government and has accused the GOP of ladling out benefits to the elite and well connected.

If Republicans in Congress simply do nothing, the New Deal–era Export-Import Bank, which guarantees loans so that American multinationals can sell products overseas, will vanish at the end of September. Last year, the bank backed $37.4 billion in loans, loan guarantees, working-capital guarantees, and export-credit insurance, the vast majority of which went to mega-companies such as Boeing, General Electric, and Caterpillar.

Despite Ex-Im’s protestations that it has programs to help women, minorities, and small businesses, the bank is essentially a form of corporate welfare for giant multinationals. As the Wall Street Journal puts it: “If a private bank won’t do an export-financing deal, why should Congress put taxpayer money at risk to clinch the deal? In today’s global financial markets, companies large and small can access trade financing, either in the capital markets or from lenders.” Indeed, Standard & Poor’s has figured out that Boeing would do just fine without the bank, even though Boeing made up more than one-third of the bank’s loan portfolio from 2007 to 2013. “We don’t believe that the expiration of Ex-Im’s authorization in September would hurt Boeing’s credit quality or ability to make planned deliveries in 2014 and 2015,” S&P analysts wrote.

Of course, the Ex-Im Bank claims that it has recently made money for the taxpayers. True enough, but there have been years where it suffered losses. By a “fair value” accounting approach, meanwhile, the system recommended by the Congressional Budget Office (but not used by Congress), Ex-Im will cost billions over the next ten years.

The bank’s authorization to exist goes away at the end of September, and if the Republican House simply does nothing, it can demonstrate that it has some backbone when it come to reining in corporate welfare, political favoritism, and taxpayer risks. That’s why new House majority leader Kevin McCarthy, House Financial Services chairman Jeb Hensarling, and House Budget chairman Paul Ryan all support giving the bank a decent burial. The trio is is opposed by the Chamber of Commerce and the National Association of Manufacturers, who are teaming up with GOP senators such as Mark Kirk of Illinois and Rob Portman of Ohio to try to save it.

Democrats, enjoying the spectacle of a GOP civil conflict, have shown their true colors on corporate welfare and joined the fight to prop up the Ex-Im. The Hill reports that Democrats “see a chance to cozy up to the business community.” Democratic champions of Ex-Im include such self-proclaimed tribunes of the poor as Senators Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio. The latter touts the Ex-Im as “something we’ve done for decades on a bipartisan basis.”

That kind of bipartisan cooperation is what’s gotten us into our current economic mess, as special interests co-opt both political parties, blur the ideological differences between the two, and create an ever-expanding government that chokes off economic opportunities for the middle class and those who aspire to it.

Morton Blackwell, a member of the Republican National Committee for Virginia, says that the drive to dismantle the Ex-Im Bank should be a no-brainer for congressional Republicans — who have trouble retaining the enthusiasm of their voting base. “In an election year, to actually have a chance to zero out a special-interest welfare program and show taxpayers they can mean what they say is a no-brainer,” Blackwell told me. That said, he acknowledged that congressional Republicans might yet again ignore the opportunity and proceed with the business-as-usual approach that has helped keep their approval ratings in the polling basement.

— John Fund is national-affairs correspondent for NRO.

Did you like this?