There is an influential current of thought in right-of-center America flying under the banner of libertarian populism, which holds that a free market agenda can be framed as a fight for the interests of the little guy. The Export-Import Bank is a great example of the kind of thing a libertarian populist might oppose. That’s because the bank is a pretty textbook example of the government stepping in to arbitrarily help certain business owners.
The way it works is that the Ex-Im Bank guarantees loans extended by private financial firms to foreign companies that want to buy certain US-made products. The main beneficiaries of this scheme are a handful of large American manufacturing companies — Boeing, GE, and Caterpillar prominent among them — who are in effect receiving a subsidy. Secondary beneficiaries include the private financial firms whose loans are guaranteed and the foreign customers who get access to discount loans via the Ex-Im Bank.
If you want an example of big government stepping in to help out some favored businesses, you’re not going to find a much better example.
Alex Rogers adds:
The bank [is] supported by the White House, the Democratic-controlled Senate, the business community and at least 41 House Republicans… . Its supporters credit it with supporting about 205,000 American jobs, while opponents say it could easily be replaced by the private sector. Congress must renew the Ex-Im bank’s charter by Sept. 30 or it will be unable to back new loans.
How Rebecca Robins distills the dilemma for both parties:
The Ex-Im Bank debate has splintered the Republican Party between those concerned about corporate welfare and those committed to upholding traditional allegiances to big business. Meanwhile, Democrats have found themselves allied with large corporations in the fight to keep the Ex-Im Bank alive.
Danny Vinik wants it dead:
Already liberals are unsure about whether to support the bank or not. In the New York Times, Joe Nocera professed his support for the bank. But Jared Bernstein, the former chief economist for Vice President Joe Biden, was less sure. At his blog, he noted the benefits of the bank, but also explained that “the Brat’s of the world [sic] have a point in that for politicians to pretend otherwise, invoking red-meat slogans like ‘free trade,’ ‘the government doesn’t create jobs,’ ‘the government doesn’t pick winners,’ and then support institutions like the XMB is nonsensical.” Ultimately, the Ex-Im bank does pick winners and losers.
That’s where the investigations reported by the Wall Street Journal become so damaging: If they prove true, then officials are choosing winners and losers based on kickbacks. And that should make the decision easy for liberals: Join with conservatives and oppose the reauthorization of the Export-Import bank.
Killing Ex-Im is basically a conservative hobbyhorse, but plenty of lefties have weighed in too. Dean Baker points out that an interest rate subsidy is basically the same as a tariff, so if you’re in favor of free trade you should be opposed to Ex-Im. Paul Krugman admits that Ex-Im is mercantilist and therefore a bad idea—except when the economy is weak and monetary policy is up against the zero lower bound. Which it is, so Ex-Im acts as an economic stimulus, more or less, and we should probably keep it around for now.
Edward Alden is aligned with Drum:
The Export-Import Bank’s role is a small one, helping less than two percent of all U.S. exports. For a certain class of exports to developing countries–mostly aircraft and large infrastructure projects such as mining, telecommunications and oil and gas development–the bank offers various kinds of loans, insurance and loan guarantees to ensure that U.S. companies get paid. These are transactions that private sector banks are reluctant to finance completely because of the risks involved. Yet the Export-Import Bank, because it is backed by the full credit of the U.S. government, is able to do so. And its track record is impeccable–in the past five years it has actually earned $2 billion for the U.S. Treasury.
If the bank is shuttered, it’s not like those projects will disappear. Instead the contracts will go to European or Canadian or Chinese companies that are getting the same sort of export credit support from their governments (indeed, often more generous) that the Export-Import Bank currently offers. If American companies want to compete they will likely move production to other countries to become eligible for that financial support. Jobs will move with them.