Economy & Business

The Ex-Im Bank and the Essence of Socialism

Models of Boeing aircraft at Aviation Expo China 2015 in Beijing, China. (Jason Lee/Reuters)
It is a redundant reminder that the rhetorical discord between the parties exaggerates their actual differences.

Washington — Briefly suspending their warnings about the rising tide of socialism, a large majority of Senate Republicans recently joined with almost all their Democratic colleagues in affirming the essence of socialism, which is government allocation of capital. The Senate’s revival of the Export-Import Bank is a redundant reminder that the rhetorical discord between the parties exaggerates their actual differences.

The Ex-Im bank has been reauthorized 16 times since it was created in 1934 as a filigree on the New Deal’s overarching project of politicizing the allocation of financial resources. The reauthorization requirement is a way of pretending to refute Ronald Reagan’s axiom that there is nothing as immortal as a temporary government program, because programs acquire “reliance interests” the way a ship acquires barnacles.

Between 2015 and the Senate’s recent confirmation of three board members, Ex-Im has been without a quorum and hence unable to approve guarantees of large loans (those over $10 million). So, we have had a sustained test of the theory that Ex-Im is vital to U.S. exporting in general, and to the few giant corporations that get the lion’s share of benefits from Ex-Im’s subsidies of foreign entities. The theory has been slain by many facts.

Ex-Im has always been peripheral to U.S. exporting. In the four years since Ex-Im became largely dormant, the portion of American exports it subsidized fell from less than 2 percent to 0.3 percent — and exports have risen.

Ex-Im has prudently distributed subsidies to enough small businesses to blur its (accurate) reputation as primarily an ally of corporate behemoths such as General Electric, John Deere, Caterpillar, and especially Boeing. Senator Mike Lee (R., Utah), who opposes Ex-Im, notes, “When Ex-Im financing was at its peak, Boeing received 70 percent of all . . . loan guarantees and 40 percent of all Ex-Im dollars.” In 2018, deprived of subsidized Ex-Im loans, Boeing, America’s 23rd largest corporation by market capitalization ($193.58 billion as of Tuesday morning), and 27th by revenue ($101 billion), had its best year ever.

Of course, Ex-Im makes enough loans to small businesses (in 2014 about 25 percent of Ex-Im dollars went to 0.5 percent of small businesses) to purchase congressional support in the usual way: Want to build a bomber that the military does not want? Scatter subcontractors around enough congressional districts, and it will be built.

Lee says: “The No. 1 buyer of exports subsidized by Ex-Im between 2007 and 2013 was Pemex . . . . the notoriously corrupt petroleum company owned by the Mexican government. Pemex, which has a market cap of $416 billion, received more than $7 billion in loans backed by U.S. taxpayers. . . . During the same period, Ex-Im backed $3.4 billion in financing to Emirates Airlines — a company wholly owned by the government of Dubai — for Emirates’ purchase of Boeing planes.” Senator Pat Toomey (R., Pa.), identifies the second- through fifth-biggest beneficiaries of Ex-Im subsidies: (2) State-owned Kenya Airways, (3) State-owned Air China, (4) Russia’s state-owned bank VEB (currently under U.S. sanctions for bad behavior; two hands of the U.S. government, one caressing, one smiting), and (5) Roy Hill mining, owned by Australia’s richest woman, a multibillionaire.

The Trump administration trots out its usual rationale for economic irrationality: Ex-Im is a “national security weapon.” As the bank subsidizes China and Russia? In 2014, in 17 Ex-Im transactions the primary borrower was the Export-Import Bank of China. Says Toomey, “You cannot make this stuff up”: Ex-Im is subsidizing the Chinese bank that is cited as the reason we need Ex-Im.

Toomey notes that Ex-Im’s defenders argue that the bank takes risks that private lenders will not undertake — and that the bank does not risk taxpayers’ money by making unsafe loans. By picking some U.S. winners, Ex-Im makes some U.S. losers: For example, it subsidizes state-owned Air India’s purchase of Boeing jets, thereby enabling it to lower its fares on the New York-Mumbai route, where it competes against Delta Airlines.

Ex-Im, which exists to allocate credit by political criteria rather than the market’s efficiency criterion, is opposed by only 16 Republican senators — call them The Remnant — who, unlike their 37 Republican colleagues, mean what they say when praising free markets and limited government: Barrasso, Blackburn, Braun, Cruz, Daines, Grassley, Hawley, Inhofe, Kennedy, Lankford, Lee, Rubio, Sasse, Shelby, Toomey, and Young.

Republicans must repeat this dismally revealing exercise by September 30, when the bank must be reauthorized, which it will be. So, the 37 have three months in which to resume their denunciations of socialism, with which they are familiar.

© 2019, Washington Post Writers Group

Most Popular

White House

The Democrats’ Burisma Bait and Switch

Imagine you get indicted in a swindle. The prosecutors represent that they can prove you and your alleged co-conspirators planned to fleece a major financial institution. You counter that you weren’t fleecing anyone. Sure, you were asking for millions in loans, but the collateral you were prepared to post was ... Read More
White House

The Democrats’ Burisma Bait and Switch

Imagine you get indicted in a swindle. The prosecutors represent that they can prove you and your alleged co-conspirators planned to fleece a major financial institution. You counter that you weren’t fleecing anyone. Sure, you were asking for millions in loans, but the collateral you were prepared to post was ... Read More

A Nation of Barbers

It seems almost inevitable that long hair is unwelcome at Barbers Hill High School. There’s a touch of aptronymic poetry in Texas public-school dress-code disputes. When I was in school in the 1980s, at the height of the Satanism panic, the local school-district superintendent circulated a list of ... Read More

A Nation of Barbers

It seems almost inevitable that long hair is unwelcome at Barbers Hill High School. There’s a touch of aptronymic poetry in Texas public-school dress-code disputes. When I was in school in the 1980s, at the height of the Satanism panic, the local school-district superintendent circulated a list of ... Read More
Politics & Policy

15 Flaws in Adam Schiff’s Case

Adam Schiff did most of the heavy lifting for the House managers, and if he performed ably, he also relied on arguments and tropes that don’t withstand scrutiny. The Democratic case for impeachment and removal is now heavily encrusted with clichés, widely accepted by the media, meant to give their ... Read More
Politics & Policy

15 Flaws in Adam Schiff’s Case

Adam Schiff did most of the heavy lifting for the House managers, and if he performed ably, he also relied on arguments and tropes that don’t withstand scrutiny. The Democratic case for impeachment and removal is now heavily encrusted with clichés, widely accepted by the media, meant to give their ... Read More

When There Is No Normal

One of the ancient and modern critiques of democracy is that radicals destroy norms for short-term political gain, norms that they themselves often later seek as refuge. Schadenfreude, irony, paradox, and karma are various descriptions of what happens to revolutionaries, and unfortunately the innocent, who ... Read More

When There Is No Normal

One of the ancient and modern critiques of democracy is that radicals destroy norms for short-term political gain, norms that they themselves often later seek as refuge. Schadenfreude, irony, paradox, and karma are various descriptions of what happens to revolutionaries, and unfortunately the innocent, who ... Read More