The Corner

Economy & Business

Republicans Once Again Reveal Their Support for Cronyism

It is old news that Republicans often confuse being pro-business for being pro-market. The latest incarnation of that mistake can be seen in some of congressional Republicans’ sneaky attempts to revive the mother of all crony programs, the Export-Import bank. On the House side, they used an unusual and very problematic move called a “discharge petition” to force an Ex-Im vote by going above Financial Services Committee chairman Jeb Hensarling’s head. Then, leadership let them attach this crony program’s reauthorization to a House highway bill. And don’t even get me started about what went down on the Senate side where Ex-Im was reauthorized despite a majority of the majority’s being against it. 

Fortunately, thanks to Chairman Richard Shelby and a few others in the Senate, Ex-Im had been unable to engage in the most crony of its activities: backing deals for the biggest of big companies like Boeing. Shelby has been opposing the confirmation hearing of a third board member the board of director of Ex-Im preventing the agency from authorizing deals above $10 million.

Of course, the biggest Ex-Im beneficiaries, companies like Boeing with market caps above $82 billion, don’t like losing government handouts they have learned to count on even if they don’t need them. They have been lobbying hard to get their perk fully restored. Sadly, they always seem to find a Republican lawmaker or a hundred to oblige even though this reinforces the image of the GOP standing only loosely for free-market principles.

I will grant them that I didn’t see this coming. In order to restore full subsidy powers to Ex-Im, a group of Republicans have attached an amendment to a spending bill to allow the Bank to back big deals with only two board members:

Lawmakers in the House of Representatives, including Rep. Kay Granger, R-Texas, moved Tuesday to assist the embattled federally charted bank for U.S. exporters. The House Appropriations Committee approved an amendment to a funding bill that effectively will enable the bank to approve loans of more than $10 million again.

The bank board, with only two members, has been unable to get a quorum of three members out of five positions – as required by its charter – in order to approve large loans.

The amendment in question was introduced by Representative Charles Dent of Pennsylvania and, worst of all, the rule was adopted by the full committee. Here is how it reads:

Rep. Dent – The amendment modifies the quorum requirement for the Export-Import Bank Board through September 30, 2019. This is needed for the Bank to approve certain transactions as three of the five Board positions are currently vacant. The amendment was adopted on a voice vote. 

Freedom Partners added this about comes next:

If passed, the adopted amendment, sponsored by U.S. Rep. Charles Dent (R-Penn.), would change the rules of the bank’s quorum requirement, loosening an important check on corporate welfare and giving Ex-Im Chairman Fred Hochberg, a political appointee, even more unaccountable control over the bank’s subsidy authority.

What? Speaker Ryan, call your office! Seriously, in the last month, with great fanfare, Paul Ryan told us that the old way of doing business by violating the House rules and allowing problematic provisions to be snuck through without a vote and attached to a funding bill was over. In fact, in a document called “A Better Way,” the House claimed it would commit to “not business as usual” and to abiding by the rules and by this little document called the Constitution of the United States. Here is is on page 17 on this document:

Another useful legislative tool is the Armey Protocol, which allows the chair of the committee of primary jurisdiction to request that the Rules Committee leave a specified provision in an appropriations bill exposed to a point of order under clause 2 of rule XXI (unauthorized appropriations or legislating). If the Rules Committee leaves such a provision exposed to appoint of order on the House floor, any Member may raise the point of order and, up on a ruling by the Chair, strike the provision from the bill without a vote. Because of the collaborative relationship between the Appropriations Committee and authorizers, which has substantially improved in recent years, the Armey Protocol has only been invoked 13 times since the beginning of the 112th Congress. The Armey Protocol allows the Rules Committee to ensure that the jurisdictions of House committees are respected, while also allowing important legislative initiatives to proceed. With the growing interest in reducing the number of unauthorized programs, Members should work closely with the committee chairs to address their concerns. The Congress as a whole, and the House in particular, must rededicate itself to renewing authorizing legislation that allows programs to continue.

This amendment clearly legislates changes to the law that are unrelated to the scope of an appropriations bill. As such, this is a clear and direct violation of rule XXI which the Speaker just rededicated the House to respecting. 

The bottom line is that it looks that not all of the House committees under Ryan’s watch agree with his vision.

And let’s not forget what this would mean in term of policy. As Freedom Partners’ Andy Koenig notes:

“Chairwoman Granger and Rep. Dent are sidestepping the law and opening the floodgates to billions of dollars in more corporate welfare. This irresponsible amendment would effectively provide the Obama administration with a new Ex-Im czar with near-unilateral control over billions of dollars in foreign subsidies.

“You would expect this type of political maneuver from President Obama or Nancy Pelosi, but not from Republican policymakers. As the nation heads for another unnecessary budget crisis this fall, and the Republican House is helping Hillary Clinton put the Ex-Im Bank on steroids.”

And some wonder why some of us don’t trust the GOP to be the party to fight for small government and free-market. Also, it is worth noting that on the Senate side the ones really pinning for the return of Ex-Im full lending powers are the Democrats. 

Now, what happens if the Rules Committee doesn’t respect the Armey Protocol? It will likely be heading into an omnibus bill, which means that this particular funding bill will never get any floor time. 

And that’s where, once again, Chairman Shelby becomes a key player in the fight against cronyism. ​As someone explained to me recently, the only way this provision makes it into an omnibus is if Senator McConnell cut Senator Shelby out of the negotiations on the Omnibus. My friend adds, “This would be the leader using his privilege to overrule the chairman of the committee who has directly chosen not to act on this issue.”

So let’s assume (without any evidence to the contrary) that this is not going to happen. It means that if Senator Shelby is not shut out of the negotiations on the omnibus, he will likely be the loudest voice opposing the change to the quorum. He has been strongly committed to fighting against cronyism (thank you!) and I believe he will continue to fight. 

While this may seem like small potatoes compared to what else is happening in the U.S., it’s not. Remember when Iran Air was added to the Department of Treasury’s list of companies complicit with terrorist activities? Well, as it happens Boeing, which got over $16 billion in contracts from the federal government last year and is the biggest Ex-Im beneficiary, is in the process of selling many planes to Iran. Is Iran counting on some direct or indirect subsidies from the U.S., whether through Ex-Im or other venues? It could be. Make sure you read Diane Katz’s pieces, here and here, on this issue.

However, the House is trying to block this from happening. 

No wonder the House moved last week to try to block Boeing’s tentative agreement to sell 80 passenger jets to Iran’s government-owned airline, Iran Air. Congress is rightly concerned about what could be a $25 billion deal with an Iranian aviation industry that has been complicit in Iran’s weapons proliferation and support for terrorism.

The amendments, attached to a financial-services spending bill, would in effect prevent the Treasury Department from granting or funding export licenses for commercial aircraft, parts or services, and ban the participation of any U.S. financial institution in a deal to export passenger aircraft to Iran. The amendments are unlikely to become law. President Obama will probably threaten to veto any legislation that would dent his nuclear agreement with Iran. But they are a sign of mounting concern on Capitol Hill about the implications of the plane sale.

The truth of the matter is that giving Ex-Im its full lending power back, either through the nomination of the third board member or through the illegal change to the rule, would mean that we are a step closer to our tax dollars backing the sale of Boeing planes, a company that already gets lots of taxpayer dollars, to Iran. Who knew that when I wrote this post a few months ago more as a joke, it could actually become reality? 

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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