One of the most formidable lobbying forces in Washington is the U.S. Chamber of Commerce. Unsurprisingly, the Chamber is putting its arm-twisting and favor-seeking skills to work to try to save the Ex-Im Bank. Among other activity, it’s been circulating a 1984 letter signed by President Reagan praising the bank — apparently intended to convince wavering conservatives that because their conservative hero used to support the agency back then, so should they.
Appeals to authority on a policy issue shouldn’t really convince anyone. But in case some need a little convincing, here it is: First, while Reagan was a great man, he wasn’t always right. There were a number of cases where he defended policy positions that were not very “conservative,” such as the tax hikes he pushed to make Social Security into the system we have today. If he supported the Ex-Im Bank, he was wrong.
But was he really such a big fan of Ex-Im? His administration, under the influence of budget director David Stockman, managed to cut the bank’s lending budget by 40 percent. Stockman was a staunch advocate of getting rid of the bank altogether, and I assume had some support from the president for the policies he pursued.
Third, the bank under Reagan was tiny in size – and hence in the distortions it could introduce — compared with what it is today. When Carter left office, he had proposed a $7 billion lending budget for the bank, and by 1986 the budget had fallen to $3.2 billion. Unfortunately, in the long run, Stockman and the Reagan administration lost ground to special interests — by 1989, Ex-Im was responsible for $12.1 billion in activity. But even then, the bank’s guarantees and insurance at any one time couldn’t exceed $40 billion, and total outstanding liabilities couldn’t exceed $58.7 billion. Today, the bank’s outstanding liability is twice that, and some members of Congress are eager to jack it up further.
Some things haven’t changed about the bank: Back then, most of its activity went to serve Boeing, and it’s mostly serving Boeing today. Back then, the bank bestowed most of its subsidies on a handful of giant manufacturers like GE and Westinghouse Electric, that’s still the case. Reagan’s Ex-Im backed a ridiculously small share of U.S. exports, and so does President Obama’s.
Back in 1986, in his book The Triumph of Politics, Stockman wrote that “the Ex-Im subsidies were a fiscally trivial but symbolically important piece of corporate welfare.” They still are today. Eighty years of this is enough — no matter what President Reagan said.