Conservatives have been disappointed with the track record of Republicans in Congress since their 2010 takeover of the House. There have been a few bright spots—the cuts in domestic discretionary spending brought about by the sequester, for instance—but from Obamacare to Iran to taxes to financial services regulation, President Obama and the left seem to retain the upper hand. Yet there is one issue percolating in Congress that could provide a rare victory. Conservatives are working hard to take down the Export-Import Bank, and they might succeed.
The Export-Import Bank is a New Deal-era relic whose purpose is to facilitate American trade. According to William Becker and William McClenahan, authors of a major study of Ex-Im, the bank has been an “entrepreneurial” institution that has evolved over the years to retain the favor of the nation’s foreign policy establishment and top economic policymakers. Today, its main role is to provide credit to foreign purchasers of American manufactured goods, especially heavy equipment and airplanes. Last year it authorized about $21 billion in government-backed loans. Few of these loans go bad, so Ex-Im has little budgetary impact, but then its critics don’t base their opposition on grounds of budget busting.
So what is their complaint? First, the bank is grossly inefficient. To support American businesses, Ex-Im extends credit to foreign governments and enterprises. Surely there is a less roundabout way to promote domestic business than to subsidize foreign business! The Ex-Im Bank’s defenders retort that foreign governments already do precisely this, so Uncle Sam must respond in kind to protect American jobs. Even if this is true (and many experts raise doubts), it does not justify wasteful inefficiency. While some exporters might be hurt if the Ex-Im Bank were decommissioned, its credit could be redirected in ways that bring more bang for the buck.
In addition, Ex-Im creates distortions within domestic industries because its subsidies benefit certain American companies over their domestic competitors. Worse, who wins and who loses is determined by the preferences of foreign companies or governments, which may be susceptible to cronyism and other illiberal impulses. Moreover, Ex-Im plays favorites across domestic industries, favoring certain types of businesses over others. For instance, guaranteeing foreign loans for new airplanes may be great for Boeing, but it creates more competition for domestic carriers like Delta, a staunch opponent of Ex-Im.
At present, Ex-Im’s benefits flow overwhelmingly to big corporations. Many of its loans go to foreign-owned airlines seeing to purchase U.S.-built planes, making Boeing far and away its biggest beneficiary. In 2013, 30 percent of the bank’s benefits flowed to Boeing. General Electric took another 10 percent, while Bechtel received 7 percent, and Caterpillar took 5 percent. This runs contrary to the claim that Ex-Im favors small business, a group that is politically sacrosanct.
Finally, the bank is a breeding ground for cronyism. Major corporations are deeply invested in politics, but not out of civic duty. In 2013, Boeing received about $8 billion worth of benefits from Ex-Im; during the 2013-14 election cycle, it spent about $35 million on lobbying, in part to keep the bank afloat. From Boeing’s perspective, its lobbying investment brought a fantastic return. However, this is inconsistent with republican government. Ex-Im survives not because it enhances the general welfare, but because its clients lobby the government aggressively.
Unsurprisingly, all that corporate cash has purchased some very powerful supporters. Barack Obama opposed the Export-Import Bank when he ran for president in 2008, but now he supports its reauthorization. The bank enjoys support from almost all Democrats and many Republicans. Normally, that would ensure survival, but this time conservatives have the upper hand in Congress. The charter for the Ex-Im Bank expires on June 30. If Congress does not act, the bank will die.