Jared Bernstein, who was Vice President Joe Biden’s chief economist from 2009 to 2011, has a new post on the Export-Import Bank — he’s previously noted that fans of free trade and opponents of crony capitalism have to think carefully about whether they can support reauthorizing the bank this summer. Now he argues it’s looking increasingly likely to be doomed:
Brat and the Tea Party are by no means alone in their opposition to the bank’s reauthorization. From what I’ve seen in recent days, punditry opposition from left, right, and center is outpacing support by a wide margin. At this point, I’m not sure if even Tim Howard could save the bank.
I’m not quire sure his political prognosis is correct — there are plenty of strong political interests in favor of Ex-Im, and some reasonable strategic trade arguments — but he goes on to suggest that the case against the bank is convincing, though not so convincing as to justify immediately ending it. This seems to fall in line with the sentiments of a range of left-of-center economists and policy pundits; Bernstein’s former boss and President Obama are still fighting for reauthorization.
Ex-Im opponents, he points out, often contend that most of the deals Ex-Im supports could happen on the private market anyway — the international credit market is vastly deeper and more developed than it was when the bank was chartered in the 1930s, former Bush-administration economist Keith Hennessey points out. But, Bernstein says, if that’s the case, why don’t we see what happens while shielding beneficiaries from an abrupt cut-off?
I join the opposition in their major critiques: it’s not clear why Boeing, GE, and other large American exporters need the subsidy, nor why rich countries need the USG to backstop their loans.
But assertion is not proof, and it would be better to test the international credit waters rather than do an experiment with full withdrawal, especially at a time when we very much need the labor demand generated by exports–and remember, we’re talking manufactured goods.
Maybe Bernstein is correct, but I’m not sure letting the bank’s funding expire this September would be quite as devastating as he suggests: Ex-Im mainly finances huge, long-term contracts for companies like Boeing and Caterpillar to sell large manufacturer products, and for firms like Bechtel to provide services for large engineering projects. If Ex-Im can’t make a loan for these firms for, say, a year, it doesn’t seem like they’re going to go under or start shutting down lines of business. Now, it’s possible their financial picture will be harmed by losing out on the deals on offer that year to firms from countries that do provide export financing. But it seems like these export deals are elaborate, and long-term — that’s one of the arguments in favor of Ex-Im, that private financing won’t tolerate the time frame of these deals, etc. Would seeing what happens with a one-year complete suspension of new Ex-Im loans — one year in which Ex-Im beneficiaries have to seek private capital for new contracts — really risk disaster?