Are you wondering whether the new Republican Congress will make good on their promises about small government and free markets, or whether they’ll sell out for the usual corporate interests? We’re coming up on a great chance to find out.
The Export-Import Bank’s charter is set to expire in June. For Republicans, making the principled choice is involves doing nothing — just letting the charter expire. Should they fight to preserve it, we’ll know where their true loyalties lie.
The institution is the epitome of the toxic marriage between large, politically connected corporations and their buddies in government. How awful and pointless is Ex-Im? Let me count the ways.
The bank doesn’t promote overall U.S exports. The bank’s own records show that fewer than 2 percent of all U.S. exports benefit from Ex-Im privileges. The other 98 percent of exports, unsubsidized, are penalized in the process.
The academic literature is united in its finding that subsidies in general, and export subsidies in particular, are detrimental to the overall economy. Accordingly, the bank is not the net job creator it claims to be and has ignored Government Accountability Office criticisms about its misleading jobs claims for years now. Nor is it a savior of small businesses, even as the bank manipulates the data to make it look like it is.
And Ex-Im doesn’t just fail as a policy matter — it’s also home to real corruption. The bank has been exposed for its corruption, fraud, and carelessness with taxpayers’ money time and time again. Diane Katz at the Heritage Foundation documented many of these incidents in a recent testimony. It includes frauds like these:
From April 2004 through November 2007, Jose Velasco and others prepared and submitted false commercial invoices, bills of sale, and bills of lading for goods purportedly purchased and shipped using the proceeds of 13 Ex-Im loan guarantees. The bank subsequently paid $17.9 million in claims on the defaulted loans.
In June, the Wall Street Journal published a piece announcing that some top officials at the bank were being investigated for “gifts and kickbacks as well as attempts to steer federal contracts to favored companies.” It’s serious stuff that fundamentally undermines the Bank’s alleged purpose. Here is what the Journal had to say:
Of the four employees, Mr. Gutierrez’s responsibilities were most central to the agency’s core mission of financing exports. Two of the others are being investigated over allegations of improperly awarding contracts to help run the agency; the third is being investigated over allegations of accepting gifts on behalf of a company seeking financing, according to people familiar with the matter. The identities of the three couldn’t be fully corroborated.
So why in the world would small-government, pro-competition Republicans even dream of lifting a pinky finger to keep this mess alive?
House Financial Services Committee chairman Jeb Hensarling has been a fervent advocate of closing down the bank, which he says is nothing more than corporate welfare. In June, the new House majority leader Kevin McCarthy announced that he too was in favor of closing down Ex-Im; Representative Paul Ryan, now chairman of House Ways and Means, has said he agrees.
Unfortunately, these principled voices may not represent the whole Republican party.
Just last week, Banking Committee chairman Richard Shelby also acknowledged that Ex-Im was corporate welfare. But he’s still entertaining the notion of just “reforming” the bank rather than ending it. Sadly, Shelby isn’t alone: Last Wednesday, Republican congressman Stephen Fincher introduced his first piece of legislation for the 114th Congress — a bill to renew Ex-Im along with some reforms to the institution. (I wrote about Fincher’s bill in the past, here and here).
Does he really believe that there’s a way to make Ex-Im distortions go away? Make Ex-Im waste go away? The bank’s charter has already been extended “with reforms” for the past decade, and nothing has changed.
And these congressmen have the gall to promise constituents that they will “eliminate uncertainty in the economy by helping to curb federal spending on wasteful projects”? (I’ve written about the Fincher bill in its previous iterations here and here.)
As Tim Carney notes at the Washington Examiner, Fincher’s timing would be embarrassing to a Congress that was serious about using taxpayers’ money properly. He writes:
On the same day, Boeing — easily the biggest beneficiary the agency’s taxpayer-backed financing — announced $1.47 billion in fourth-quarter profits, 19 percent higher than last year, along with a record backlog of airplane orders that stretches eight years.
Carney notes: “Fincher got 57 co-sponsors for his Ex-Im bill, all of them Republicans.”
57 Republicans? A principled party sure is hard to find. Even the stalwart vanquishers of corporate cronyism may be buckling under the pressure. CQ Roll Call reports that a bill regarding Ex-Im could still come out of Hensarling’s committee.
Considering that doing nothing puts an end to Ex-Im, the only bill that should come from Hensarling’s committee regarding this topic is one that’s better than doing nothing: a bill that puts an end to Ex-Im and all other corporate welfare.
Ending the bank, come to think of it, could be the start of a new area for Republicans — a era that says “we believe in small government and free-markets, we truly believe in opportunity for all, favoritism to none.”