One of the least discussed important issues in Washington today is the bill that would reauthorize the Export-Import Bank. There are not many Americans who understand or even care much about this issue, but the should be. It is a major question that will affect the US economy for years to come.
Let's start with what the Ex-Im Bank is and what it is not. The bank was first authorized as a way to help American companies export their products to other nations. The idea was that the Ex-Im bank would make low cost loans to foreign buyers who would use the funds to buy American products. If that is all one knows about the Ex-Im bank, it sounds like a great idea. After all, since the government can borrow at lower interest rates than any foreign buyer, the loan from the Ex-Im bank lowers the cost of buying American goods and that should mean more sales by American firms and more jobs in the USA. Like most schemes that involve the government meddling in the market, however, the Ex-Im Bank has as second side, those pesky unintended consequences that always appear when the market gets distorted. The problem is that the loans made by the Ex-Im Bank give the foreign buyer an advantage over its American competitors. The most visible example of this is the purchase of aircraft by foreign airlines. If United or Delta buy planes from Boeing, they have to come up with the purchase price on their own. On the other hand, if Singapore Airlines wants to buy the same jets for the same price, it can get a low cost loan from the Ex-Im Bank. On a large purchase of aircraft, that could amount to lower costs for Singapore Airlines of something like twenty or thirty million dollars per year compared to United or Delta. The American taxpayer is actually subsidizing the foreign airlines that compete with American firms. Over time, the net effect of that subsidy is that foreign buyers can grow more quickly than American firms and the USA loses jobs. Obviously, the balance between creating and destroying jobs is a difficult one to figure out, but the key point is that there are both plusses and MINUSES for the Ex-Im Bank.
Beyond the mere economic effect of the Ex-Im Bank, there is also the question of corruption. President Obama never seems to see corruption in government. (Remember how Obama famously told and interviewer that there was not even a smidgeon of corruption at the IRS? That's the same IRS that recently confessed illegal conduct in releasing confidential taxpayer information about the National Organization for Marriage, which admittedly targeted countless Tea Party, conservative and Christian groups because of their political beliefs, and which now is covering up the facts regarding this mess with ridiculous claims of seven computers crashing simultaneously just ten days after the start of an investigation into scandal.) Corruption, however, is an everyday fact of life at the Ex-Im Bank. That reality ought not surprise anyone. The Ex-Im Bank exists principally to provide loans that help the very biggest American companies. Something like two thirds of all loans help sales of only ten companies. Indeed, the nickname for the Ex-Im Bank is the Bank of Boeing because of all the airline sales that get financed. So we have very, very large companies that can make very, very large sales all due to the decisions of bureaucrats at the bank who are supposedly not getting "favored" as part of the decision making process. One need only take a look at the investigations that have been undertaken in the last five years which found wrongdoing at the bank to understand the magnitude of the problem of corruption.
There is no need for the Ex-Im Bank to continue to function as it has in the past. Right now, interest rates around the world are extremely low. Ending the role of the Ex-Im Bank in world trade would have a much reduced effect since most buyers can get rather inexpensive credit from other sources. There are plenty of other means to help promote American competitiveness in the world aside from subsidizing loans. Reducing needless government regulations and lowering the corporate tax rates would do much, much more to help American exports than the Ex-Im Bank ever could. Congress ought to let the Ex-Im Bank die.
Let's start with what the Ex-Im Bank is and what it is not. The bank was first authorized as a way to help American companies export their products to other nations. The idea was that the Ex-Im bank would make low cost loans to foreign buyers who would use the funds to buy American products. If that is all one knows about the Ex-Im bank, it sounds like a great idea. After all, since the government can borrow at lower interest rates than any foreign buyer, the loan from the Ex-Im bank lowers the cost of buying American goods and that should mean more sales by American firms and more jobs in the USA. Like most schemes that involve the government meddling in the market, however, the Ex-Im Bank has as second side, those pesky unintended consequences that always appear when the market gets distorted. The problem is that the loans made by the Ex-Im Bank give the foreign buyer an advantage over its American competitors. The most visible example of this is the purchase of aircraft by foreign airlines. If United or Delta buy planes from Boeing, they have to come up with the purchase price on their own. On the other hand, if Singapore Airlines wants to buy the same jets for the same price, it can get a low cost loan from the Ex-Im Bank. On a large purchase of aircraft, that could amount to lower costs for Singapore Airlines of something like twenty or thirty million dollars per year compared to United or Delta. The American taxpayer is actually subsidizing the foreign airlines that compete with American firms. Over time, the net effect of that subsidy is that foreign buyers can grow more quickly than American firms and the USA loses jobs. Obviously, the balance between creating and destroying jobs is a difficult one to figure out, but the key point is that there are both plusses and MINUSES for the Ex-Im Bank.
Beyond the mere economic effect of the Ex-Im Bank, there is also the question of corruption. President Obama never seems to see corruption in government. (Remember how Obama famously told and interviewer that there was not even a smidgeon of corruption at the IRS? That's the same IRS that recently confessed illegal conduct in releasing confidential taxpayer information about the National Organization for Marriage, which admittedly targeted countless Tea Party, conservative and Christian groups because of their political beliefs, and which now is covering up the facts regarding this mess with ridiculous claims of seven computers crashing simultaneously just ten days after the start of an investigation into scandal.) Corruption, however, is an everyday fact of life at the Ex-Im Bank. That reality ought not surprise anyone. The Ex-Im Bank exists principally to provide loans that help the very biggest American companies. Something like two thirds of all loans help sales of only ten companies. Indeed, the nickname for the Ex-Im Bank is the Bank of Boeing because of all the airline sales that get financed. So we have very, very large companies that can make very, very large sales all due to the decisions of bureaucrats at the bank who are supposedly not getting "favored" as part of the decision making process. One need only take a look at the investigations that have been undertaken in the last five years which found wrongdoing at the bank to understand the magnitude of the problem of corruption.
There is no need for the Ex-Im Bank to continue to function as it has in the past. Right now, interest rates around the world are extremely low. Ending the role of the Ex-Im Bank in world trade would have a much reduced effect since most buyers can get rather inexpensive credit from other sources. There are plenty of other means to help promote American competitiveness in the world aside from subsidizing loans. Reducing needless government regulations and lowering the corporate tax rates would do much, much more to help American exports than the Ex-Im Bank ever could. Congress ought to let the Ex-Im Bank die.
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