By Austin Peters
For much of this past summer, politicians and policy wonks alike hotly debated the fate of the Export-Import Bank. Established during the New Deal Era, this little known government agency strives to promote United States exports through complex measures designed to boost foreign buyers’ access to credit. Since its reauthorization was coupled with an appropriation authorization, the debate over the bank’s future posed the threat of another government shutdown. However, in what has become typical D.C. style, politicians on both sides of the isle punted the issue by extending the bank’s charter for another nine months. Nonetheless, debate over the Export-Import Bank is sure to rise again in the spring and, perhaps, in a more vociferous manner since Congress will no longer be bounded by caution over the midterm elections.
To a large extent, most have (incorrectly) labeled the debate over the Export Import Bank as another battle in the intra-Republican party war between the Tea Party and the “Establishment”. However, the cleavages exposed by the controversy over the bank are far more nuanced and complex. While it is true that libertarian-leaning Republicans make a sizeable part of the bank’s opposition, establishment Republicans such as House Majority Leader Kevin McCarthy have publicly joined their ranks. Moreover, history shows that even liberal-leaning Democrats have taken issue with the bank. Before supporting EX-IM as president, Democratic Nominee Barack Obama decried the bank as “little more than a fund for corporate welfare” during a campaign speech in 2008.
Proponents of extending the bank’s charter contend that it plays a crucial role in keeping American exports competitive with other countries with similar institutions. Through issuing direct loans to American firms, backing loans by private institutions to foreign buyers, and selling insurance to foreign companies on American made goods, they argue the bank aides creates buyers of American goods that would not otherwise exist. Better yet, they proclaim the bank is projected to be deficit free and thus presents the ultimate “win-win” for taxpayers.
On the other hand, some economists and policy leaders argue that reality paints a different picture of the bank. According to Dr. Mitchell of the Mercatus Center, the argument that the bank is a key factor in US Exports is a sham; current research demonstrates that the bank is only involved in two percent of all American Export transactions. Furthermore, he contends that with sixty one percent of the bank’s subsidies going to ten large companies, it provides an unfair advantage to large scale corporations over small businesses that would otherwise compete for foreign buyers business. Outside of those directly involved in the transaction, the bank’s activities may also be facilitating transactions wrought with moral hazard. Typically the bank’s clients are creditors who could not obtain sufficient funding on the private market and consequently often are risky investments for the government to be making with the taxpayers dollar.
In sum, the politics surrounding the export import bank likely outsizes its actual effect on the global balance of trade. However, the extent to which the public and politicians weigh the reality of its policy programs versus the sure-to-come onslaught of support from corporate interests may very well determine the fate of the bank in nine months’ time.