“NO” on Reauthorization or Extension of the Export-Import Bank (H.J. Res. 124)
Last night, the House released text of the Continuing Appropriations Resolution (H.J. Res. 124), which would fund the government through December 11, 2014. Despite widespread calls for a “clean” continuing resolution, the proposal would also reauthorize the Export-Import Bank, as President Obama requested, until June 30, 2015.
Despite his current affinity for the Ex-Im Bank, President Obama once denounced the bank, saying it “has become little more than a fund for corporate welfare.” That characterization is undeniable — participating banks call it “free money” and multinational conglomerates like Boeing, Caterpillar and General Electric account for the bulk of the bank’s financing. Boeing, for example, received roughly two-thirds of the bank’s loan guarantees in 2013.
Although proponents claim the expiration of the bank amounts to unilateral disarmament because other countries have export credit agencies, less than one-third of the bank’s activity supposedly “levels the playing field” against “competition from a foreign, officially sponsored export-credit agency.” That is just 0.5-percent of America’s $2.3 trillion in exports in 2013.
For its part, Boeing predicted “The 2014 aircraft finance markets should be healthier and more balanced.” As the Wall Street Journal reported thirteen months ago, a managing director of Boeing’s finance arm said the company “could find alternative funding for customers that wouldn’t require it to boost its support of aircraft sales” if the bank expired. Late last week, Reuters confirmed “Emirates, Dubai’s flagship airline, would not have trouble buying planes from Boeing Co. even if the U.S. Congress fails to renew the U.S. Export-Import Bank’s charter.”
Frequently missed in the debate is the harm done to domestic companies. While Delta’s objections have been well chronicled, less attention has gone the impact of a $694 million loan to Australia’s Roy Hill mine, which is owned by that country’s richest person. As reported by the Duluth News Tribune (MN) in 2013, the deal was “strongly criticized by Minnesota mining interests and some members of Congress who say it’s helping an Australian mine gain a foothold in the global iron ore trade that could hurt” jobs in Minnesota and surrounding states. Similarly, thousands of Tampa-area jobs will soon be competing with a foreign, state-owned fertilizer company in Morocco because of a $117 million loan guarantee from Ex-Im.
Economists have long understood export subsidies do not actually create jobs. A 1981 Congressional Budget Office report explained: “Subsidized loans to exporters will increase employment in export industries, but this increase will occur at the expense of non-subsidized industries.” A 2011 Congressional Research Service report was equally blunt: “Subsidizing export financing merely shifts production among sectors within the economy, but does not add to the overall level of economic activity, and subsidizes foreign consumption at the expense of the domestic economy.” Even the American Action Forum, which supports the bank, agreed: “Export financing merely redistributes jobs across the economy rather than create more overall jobs.”
The case against the Export-Import Bank is crystal clear, and Heritage Action agrees with Majority Leader Kevin McCarthy’s comment in June: The bank should be allowed to expire in September because the private sector can do it.
In terms of politics, there will be some who profess opposition to Ex-Im while publicly worrying that President Obama and Senate Democrats will consider an extension of the bank as a prerequisite to fund the federal government. Ironically, it is the inclusion of Ex-Im in the CR that continues to feed the partisan brinksmanship narrative they argue is detrimental ahead of an important national election. Ex-Im is the poster child for cronyism and corporate welfare, and conservatives cannot shy away from the national spotlight or allow others to muddle what should be a clear, anti-cronyism, anti-corporate welfare message. The conservative-led demise of the Export-Import Bank would allow America’s supposedly conservative party to shed the ugly and poorly fitting clothes of cronyism that it has worn for far too long.
Heritage Action opposes H.J. Res. 124 because it reauthorizes the Export-Import Bank and will include it as a key vote on our legislative scorecard.