For the students of public-choice economics, this week offers a great (and sad) example of the kind of pressure interest groups can exert on lawmakers to convince them to support programs that are only beneficial to them and are often hurtful to others. As the battle over the reauthorization of the Ex-Im Bank is heating up again, the agency’s beneficiaries are stepping up the propaganda.
According to Reuters, this week “more than 600 small to mid-sized exporters, manufacturers and business representatives from 41 states will descend on Capitol Hill on Wednesday to ask for Ex-Im’s mandate to be extended past the current June 30 expiry date.” The size of this group may seem impressive to those who see them march into their office. In reality, the number of businesses who are getting a federal handout in the form of cheap loans is miniscule compared with the many more thousands of exporters who will not get one and face unfair competition from those few who do.
Here is what we are talking about:
‐The Bank claims that between 2007 and today, 8,973 businesses have used Ex-Im financing to facilitate export sales, including 5,813 small businesses.
‐In 2012 alone, some 305,000 U.S. companies exported, including 297,995 small and medium-sized businesses. That means that since 2007, over 2.4 million U.S. businesses have been exporting their products, most of them without the help of Ex-Im.
I have said it over and over again: The Ex-Im Bank is irrelevant in the world of exports. No matter what the Bank likes to say, most of the Ex-Im backed exports that took place in 2014 would still have happened even absent the Bank. That’s because its beneficiaries may enjoy the handouts, but they don’t need them:
‐A vast majority of Ex-Im assistance benefits some of the largest, richest, most politically connected corporations in the world — like Boeing, General Electric, Bechtel and Caterpillar.
‐In 2013 over half of Ex-Im’s financing went to a handful of Fortune 500 companies.
‐In 2013, 60 percent of the Bank’s activities benefited ten companies.
‐In 2013, 33 percent of all Ex-Im activities benefited Boeing alone (which helped Ex-Im earn its D.C. nickname: “Boeing’s Bank”).
‐Big Wall Street banks and international banks benefit as well. They benefit by extending billions of dollars in loans and collecting large fees at no risk to themselves, since taxpayers will shoulder the default. Last year, a former JP Morgan and Citigroup banker said of Ex-Im’s credit guarantees, “It’s free money.”
But, of course this week the Ex-Im Bank is parading small-business owners, rather than Boeing and Caterpillar. That’s because everyone loves small businesses and wants to help them. But we shouldn’t be fooled. Small-business lending is not what the Bank business model is about, as the numbers above revealed.
Finally, these businesses will put pressure on Congress by using propaganda like this. Never mind that every single one of their talking points has been debunked over and over and over in the past few years. That they would continue to use these misleading and outright false “facts” shows that the pro–Ex-Im advocates feel they can continue to mislead the public and Congress without any consequences. (On that point read this piece by Ken Blackwell called “Nations Mayors Drink The ExIm Kool-Aid.”)
Do I need to remind Congress that they are supposed to represent the American people, all of them, and not just a few business owners?
Do I need to remind Congress of all the groups who are affected by Ex-Im activity that have gone ignored? I know that these people don’t have connections in Washington, and they don’t have access to press offices and lobbyists. But they matter, too.
It takes courage and leadership to stand up and represent the forgotten firms, workers, taxpayers, and consumers whose voices are so easily drowned out by the corporate beneficiaries of government privilege. Chairman Hensarling is doing just that this week with a letter that summarizes the issue and reminds his colleagues who the Ex-Im losers are. I truly hope that his colleagues will remember and protect them as they should even in the face of incredible corporate pressure to reauthorize the Ex-Im Bank.