Welcome to Washington — where programs that should have died years ago get a chance to stay around essentially forever. A new bipartisan bill to save the Export-Import Bank has been introduced by Representative Maxine Waters of California, the top Democrat on the House Financial Services Committee and a former opponent of the bank, and Representative Gary Miller of California, a senior Republican on the committee.
While the bill doesn’t immediately increase the Ex-Im Bank’s lending authority, it would ask the bank to tell us how much they think would be a reasonable increase in the future. Considering that the bank’s interest is not only to stay alive but to extend as much credit to as many companies as possible, this is a terrible idea — it’s equivalent of me asking my children to set the level of their allowance and their dessert-to-vegetable ratio.
The bill would extend the bank’s charter for five years (it’s due to expire this spring) in exchange for promises that it will bolster its risk and fraud protections. But the Ex-Im Bank has never been transparent about its default rate and hasn’t followed past inspector-general recommendations about its flawed accounting practices, so there’s little reason to believe they’ll follow the rules this time.
The bill would also try to encourage private financing of export transactions. But as I mentioned last week, private financing has been growing consistently for a while. In other words, the case of for a reformed Ex-Im is quite weak.
The case for killing it, on the other hand, is straightforward: The government shouldn’t be in the business of allocating capital to promote exports, develop green energy, drill for oil and gas, or do anything else in particular. When it does, it creates capital distortions, promotes corruption, and exposes taxpayers to large potential losses.
Lawmakers are often late in adopting policy positions that have grown popular among outside thinkers — but the chorus outside of Congress for ending Ex-Im has grown significantly. Just a few examples:
Back in July, AEI economist and Corner contributor Michael Strain came out against the bank’s reauthorization, noting that “Ex-Im is the very definition of corporate welfare — it helps foreign buyers to purchase U.S. goods by offering favorable financing for those deals.” Then it was journalist Michael Grunwald, no great friend to conservative causes, who endorsed ending the bank. “Republicans may be hypocrites,” he wrote, “but they’re right to take aim at the Ex-Im Bank.”
More accomplished liberal and conservative economists have joined in: The former director of George W. Bush’s National Economic Council, Keith Hennessey, supports ending Ex-Im. Far on the other end of the spectrum, some of the most compelling pieces written against Ex-Im have come from left-leaning economist Dean Baker. Among other things, Baker produced a solid takedown of the “American firms need Ex-Im to compete against subsidized foreigners” argument. He’s also pointed out the hypocrisy of the so-called “free traders” who support the Ex-Im Bank (I’m talking about you, Joe Nocera); debunked the notion that Ex-Im is a profit-making enterprise; and noted that the bank hurts consumers and non-subsidized firms.
Shall I go on? More experts who oppose it: Salim Furth and Diane Katz at the Heritage Foundation, Ryan Young at the Competitive Enterprise Institute, Dan Ikenson at Cato, Matt Mitchell at Mercatus, and Don Boudreaux at George Mason University. They’re not calling for fixing Ex-Im — they want it ended.