At a House hearing on the the Export-Import Bank kicking off the debate over whether to reauthorize it before its funding expires this September 30, as Veronique noted yesterday, it seemed like Democrats were fairly eager to defend the federal lender and its largely big-business clients. But liberal intellectuals and economists don’t seem nearly as enthusiastic about this fight.
Here’s Matt Yglesias of Vox, responding to the idea that in our current economy, Ex-Im might be creating jobs:
Given that the Fed’s key interest rate is already at zero and can’t go any lower, the Bank is arguably a form of short-term zero cost stimulus. On the other hand, if the Ex-Im Bank went away maybe the Fed would do more Quantitative Easing or other unconventional stimulus.
But more to the point, this argument is too easy. In the somewhat upside-down world of a depressed economy with near-zero interest rates, all kinds of bad ideas are short-term stimulative. When congressional Republicans propose large regressive tax cuts, liberals writers don’t pipe up talking about how it’s short-term stimulus. They talk — rightly — about how it’s poorly targeted and bad long-term public policy. The Export-Import Bank is the exact same way — a small upward redistribution of wealth from normal people to a handful of companies. It was true when liberals were the ones complaining about it ten and twenty and thirty years ago, it was true when Obama was campaigning in 2008, and it’s still true today — even if the Tea Partiers are the ones making noise about it.
The current-credit-conditions defense of Ex-Im came from fire-breathing Hayek fan Paul Krugman, who says the bank doesn’t really make economic sense in normal circumstances:
It looks quite likely that the Tea Party will claim a scalp from the business lobby, and kill the Export-Import Bank. And there is a case for doing away with the lender – except that this is the worst possible time for it.
Under normal circumstances, we can argue that ExIm neither improves the US trade balance nor creates jobs. Even if it does succeed in increasing some exports, the standard view would be that any expansion of the US economy would be choked off by a rise in interest rates as the Fed tries to prevent overheating, which would lead to a rise in the dollar, which would lead to a fall in other exports and/or a rise in imports. So you can claim that ExIm is mercantilist trade policy, and counterproductive.
Against this you can make various strategic trade policy arguments, but the case for a special export lender is weak at best.
Right now, however, we’re at the zero lower bound, which means that the Fed won’t raise rates. As I’ve said a number of times, under current conditions mercantilism works – so this is exactly the moment when ending an export-support program really would cost jobs.
As Vero mentioned yesterday, David Dayen wrote a piece for Salon about how liberal intellectuals have made an issue of Ex-Im for years. Dean Baker, a prominent economist who started the quite-liberal Center for Economic Policy Research, told Dayen he considers Ex-Im “just one more example of how the rich and powerful have no interest in the free market when circumventing how the market works to their benefit.”
Jared Bernstein, Vice President Biden’s former top economic adviser, who’s now a fellow at the liberal Center for Budget and Policy Priorities, also thinks the arguments against Ex-Im are quite strong: “[Politicians'] invoking red-meat slogans like ‘free trade,’ ‘the government doesn’t create jobs,’ ‘the government doesn’t pick winners,’ and then support[ing] institutions like the [Ex-Im Bank] is nonsensical.” (Bernstein doesn’t think the bank should be ended, though — he recommends that it be reformed and diversified, which I think is unrealistic and impractical for a number of reasons.)
And, of course, there’s the epitome of the liberal-intellectual politician himself, President Obama, who decried the bank on the 2008 campaign trail as wasteful and “little more than a fund for corporate welfare.”
I’m really not sure how I come down on Ex-Im, and far be it from me to recommend that Congress read more Salon, but it’s certainly interesting to see some intellectual consistency on the left. Will House and Senate Democrats feel compelled by that, or will they fold to the Obama administration’s wishes to protect and defend just about any federal institution that can meddle in the economy (a very modern-American-liberal instinct)?