Abolish the Ex-IM Bank Already

by Veronique de Rugy

There is an intense battle going on in Washington right now over the re-authorization of the Export-Import Bank (Ex-Im Bank). President Obama recently announced his support for the program (even though he was against it during his 2008 campaign when he said that the Bank had become “little more than a fund for corporate welfare.”) But he isn’t alone. Many Republicans are lending their support to Democrats in opposing the termination of this unjustified and wasteful economic subsidy.

Thirty years ago, David Stockman, president Reagan’s budget director, wrote extensively about the abuse of the Ex-Im Bank. He rightfully described the Bank, and any export subsidies for that matter, as:

a mercantilist illusion, based on the ideological position that a nation can raise its employment and GDP by giving away its goods for less than what it costs to make them.

In 1981 when he was fighting to get rid of the Bank, he documented that its practice was to bestow about two-thirds of its subsidies on a handful of giant manufacturers, including Boeing, General Electric, and Westinghouse. Little has changed since then, and what has changed has been mostly for the worst. Today, Boeing is still receiving the lion’s share of the Ex-Im subsidies.

#more#Obviously, the Ex-Im subsidies may seem a trivial piece of corporate welfare. However, the Bank is as deeply embedded in the system as are the bigger subventions and unseemly gifts (think about bank and auto bailouts or Solyndra) to the organized clients of Republican and Democrat lawmakers.

We can’t continue this way. Lawmakers will have to realize at some point that they can’t keep spending on every single program that the federal government currently funds. Moreover, the continuation of the Ex-Im Bank and programs like it perpetuates government funding to the politically connected. Eventually our representatives will have to pick their battles and define their priorities.

As George Will in a recent piece states, “Favor-dispensing institutions such as the Export-Import Bank are dispensing incentives for private interests to develop lucrative political connections.” Here is a good analysis and my recent post about why the Ex-Im Bank needs to go.

Incidentally, the Ex-Im Bank is the same type of program as the Small Business Administration (SBA) (which as you know I would happily abolish too). They essentially serve the same function (the only difference between the SBA and Ex-Im Bank are the interest groups they cater too), and their advocates use the same rationales for their existence. But we can’t afford such spending.