Ten Weak Reasons to Support Ex-Im

Rep. Carolyn Maloney supports reauthorizing the Export-Import Bank, whose charter lapsed on June 30. She recently took to the Huffington Post to give 10 reasons to support Ex-Im. Here’s reason 1:

Exports play an important role in the U.S. economy, supporting nearly 12 million jobs in 2014.

Ex-Im did about $27.5 billion worth of business last year, amounting to about 1.2 percent of America’s $2.35 trillion in total 2014 exports, and less than one-sixth of one percent of America’s $17.7 trillion 2014 GDP. From this, Rep. Maloney concludes that Ex-Im supports nearly a tenth of the entire U.S. workforce!

Also note the clever use of phrasing here. Rep. Maloney and other Ex-Im supporters always talk about jobs “supported,” and never jobs “created” or “saved.” This is on purpose. Such phrasing is vague enough to make Ex-Im look good without having to prove that it’s actually doing good. This is important, since every time Ex-Im helps Boeing sell a jet to a foreign airline, it hurts domestic airlines and eliminates jobs there. I am not aware of any official Ex-Im statistics on how many jobs the agency has un-supported.

Reason 5 is similar, and reads in part:

Since 2009, our Ex-Im Bank has supported an estimated 1.3 million jobs.

That averages out to 260,000 jobs supported per year (again, note the phrasing), or about one-sixth of one percent of the total year-end 2014 labor force, according to theBureau of Labor Statistics. Since Ex-Im’s annual support is equivalent to only $2,300 per job supported, most of those jobs would still exist without Ex-Im—in fact, since Ex-Im is largely redundant with private sector financing, its actual amount of net support created is far smaller than even its own meager statistics show. Factor in the jobs Ex-Im unsupports, and Ex-Im is almost certainly a net drag on the U.S. economy.

Rep. Maloney’s other reasons are of similar strength.

Reasons 2, 3, 4, and 7 are all variations of the “but other governments do it, too” fallacy and the unilateral disarmament fallacy.

Boeing’s own CEO debunked reason 6 in a recent shareholder call. Maloney argues the private sector will be unable to step into any void Ex-Im leaves. Boeing, which receives 40 percent of Ex-Im’s business, publicly disagrees.

The Congressional Budget Office also publicly disagrees with Rep. Maloney on reason 8, even though it answers in part to her. The facts require it to do so. Maloney argues that Ex-Im is costless to taxpayers. Using the same standard accounting rules most government agencies and nearly the entire private sector use, Ex-Im loses millions of dollars each year. It only appears profitable when using Ex-Im’s in-house accounting methods, which are, ahem, rather different.

Reason 9 correctly argues that many Republicans support Ex-Im. For Democrats like Rep. Maloney and independents like myself, if the GOP supports something, that alone is often reason enough to oppose it. And Maloney also fails to mention President Reagan’s vocal opposition to Ex-Im (video evidence here and here), as well as the fact that he cut the agency’s portfolio cap in real terms.

Finally, Maloney’s reason 10 is that a lot of pro-business groups support Ex-Im. Of course they do! Ex-Im is a welfare program for businesses. Consumers would be better served if the government would follow pro-market policies, not pro-business policies. There is a world of difference between the two.

Instead of seeking cogent arguments from Ex-Im supporters, it is better to simply recognize that they wish to continue benefiting from the extensive lobbying, cronyism, and favor-making that institutions like Ex-Im make possible. One should also recognize their creativity in creating cover stories for their cronyism. For a more convincing top ten list of reasons to oppose Ex-Im, see my paper, and keep an eye on this blog for more.

CEI’s Battered Business Bureau: The Week in Regulation

The Dodd-Frank financial regulation bill turned five years old this week (see CEI analysis here, here, and here). Other than that, it was business as usual, with 44 proposed regulations and more than 60 final regulations covering everything from bigeye tuna to heat pumps.

On to the data:

  • Last week, 65 new final regulations were published in the Federal Register, after 78 the previous week.
  • That’s the equivalent of a new regulation every two hours and 35 minutes.
  • So far in 2015, 1,801 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,171 new regulations this year, which would be several hundred fewer rules than the usual total of 3,500-plus.
  • Last week, 1,540 new pages were added to the Federal Register, after 2,764 pages the previous week.
  • Currently at 44,209 pages, the 2015 Federal Register is on pace for 77,833 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Sixteen such rules have been published so far this year, none in the past week.
  • The total estimated compliance cost of 2015’s economically significant regulations ranges from $1.32 billion to $1.41 billion for the current year.
  • 150 final rules meeting the broader definition of “significant” have been published so far this year.
  • So far in 2015, 313 new rules affect small businesses; 46 of them are classified as significant.

Highlights from selected final rules published last week:

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.

Revealing Quotes

From a Politico story on the U.S. Chamber of Commerce possibly gearing up to oppose politicians with certain pro-market stances in future primary elections:

Chamber spokeswoman Blair Holmes said the group supports “pro-business candidates in every election, regardless of whether they are a Republican, Democrat, incumbent or challenger.”

The distinction between pro-business and pro-market is important; for one example, see here. Never confuse the two.

And as Holmes correctly points out, the divide does not respect party lines. Both parties have largely pro-business leadership. It’s some of their upstart underlings, and much of the public, who are pro-market. Hence the Chamber’s primary threats.

New York State Mulling Minimum Wage Increase

A few weeks ago, the New York Times ran an article asking, “It’s Summer, but Where Are the Teenage Workers?” It’s a good question:

Since 2000, the share of 16- to 19-year-olds who are working has plummeted by 40 percent, with fewer than a third of American teenagers in a job last summer. Their share of the overall work force has never been this low, and about 1.1 million of them would like a job but can’t find one, according to the Bureau of Labor Statistics.

The next paragraph begins, “Experts are struggling to figure out exactly why.” Over the course of more than 1,300 words, the article doesn’t once mention a major culprit: the minimum wage.

The article even features a chart showing a pronounced decrease in teen employment closely tracking the most recent federal minimum wage increase, which phased in from $5.15 to $7.25 from 2007 to 2009. The start of the increase and its impact on teen employment began before the financial crisis made job-hunting more difficult for everyone else, too. In recent years, some cities and states have begun raising their local minimum wages above the federal minimum, helping to keep teen employment at historically low levels.

The Times should look into commissioning a follow-up story for next summer, because the paper is now reporting that New York State is considering implementing a$15 hourly minimum wage for fast food restaurant chains, which heavily employ teens. Increasingly, they are also “employing” automated kiosks.

New York State currently has a statewide $8.75 minimum wage. If the state legislature were to adopt the study committee’s recommendations, the $15 minimum wage would phase in through 2021 throughout the state, and 2018 in New York City, where living costs are higher.

The increase would not affect restaurants with fewer than 30 locations, or other teen-heavy employers, such as retailers.

That means it would disemploy fewer people than would a blanket increase. But while some teens will get hefty raises, othes will be unable to find a job at all.

Advocates of the increase should look not just at the beneficiaries, but at the people it would hurt, too. As Henry Hazlitt points out in Economics in One Lesson:

The art of economics consists… in tracing the consequences of that policy not merely for one group but for all groups.

Iain Murray and I compiled a few other possible unintended consequences of minimum wage increases:

Workers are fired, hours are cut, jobs are not created, non-wage perks, including insurance, free parking, free meals, and vacation days evaporate, annual bonuses shrink, prices rise, (squeezing minimum wage earners themselves), big businesses gain an artificial competitive advantage over their smaller competitors, and crime rates rise. It is a bleak litany.

Many willing workers could be denied a chance to get that first job that could help them gain the experience and skills they need to start to climb up the economic ladder. It’s a lesson more well-meaning people need to learn if they are to reduce poverty outright, rather than help some at the cost of hurting others.

Slow News Day

The Hill: Obama lost $3 to lawmakers on the golf course

Dodd-Frank Is Five Years Old

On July 21, 2010, Congress passed the Dodd-Frank financial regulation bill. Today, that bill turns five. It is not a happy anniversary.

As CEI’s John Berlau points out in a new paper, Dodd-Frank has actually reduced competition in the financial sector. By codifying too-big-to-fail and adding in price controls and other regulatory hoops—27,669 total regulatory restrictions and counting—Dodd-Frank insulates incumbent banks from pesky upstart competitors. In fact, in the last five years, precisely one new bank has opened for business. This stagnation is not healthy for innovation or for competition—or for capital-hungry entrepreneurs throughout the economy.

A few other Dodd-Frank facts worth pondering:

  • The original bill text is 848 pages long. The edition of Herman Melville’s Moby Dick on my bookshelf is 602 pages long.
  • Dodd-Frank requires regulatory agencies to issue 398 regulations. Five years later, many of them have yet to be issued. Hopefully they stay that way.
  • Since each of those regulations contain multiple regulatory restrictions (some of the rules are hundreds of pages long and are extremely detailed), the actual number of regulatory restrictions Dodd-Frank enacts could eventually top 40,000, or even 50,000. Nobody knows yet.
  • Its price controls on debit card interchange fees have raised the cost of banking for small businesses and the poor (See Iain Murray’s new paper).
  • Dodd-Frank does not address the root causes of the 2008 financial crisis—banks took on too much risk, especially in the housing sector. Instead, by codifying government bailouts for major financial institutions, Dodd-Frank reduces incentives for financial institutions to keep their risk at manageable levels. Whatever its stated intentions, Dodd-Frank potentially sets the stage for another financial crisis and more bailouts.

For more, see John’s extensive Dodd-Frank research.

CEI’s Battered Business Bureau: The Week in Regulation

It was a busy week for the Federal Register, which included a 629-page proposed regulation from the EPA for greenhouse gas emissions and fuel economy for cars and trucks, as well as final regulations covering everything from finishing wood to inspecting tunnels.

On to the data:

  • Last week, 78 new final regulations were published in the Federal Register, after 56 the previous week.
  • That’s the equivalent of a new regulation every two hours and nine minutes.
  • So far in 2015, 1,736 final regulations have been published in the Federal Register. At that pace, there will be a total of 3,168 new regulations this year, which would be several hundred fewer rules than the usual total of 3,500-plus.
  • Last week, 2,764 new pages were added to the Federal Register, after 1,647 pages the previous week.
  • Currently at 42,669 pages, the 2015 Federal Register is on pace for 77,864 pages.
  • Rules are called “economically significant” if they have costs of $100 million or more in a given year. Sixteen such rules have been published so far this year, one in the past week.
  • The total estimated compliance cost of 2015’s economically significant regulations ranges from $1.32 billion to $1.41 billion for the current year.
  • 145 final rules meeting the broader definition of “significant” have been published so far this year.
  • So far in 2015, 298 new rules affect small businesses; 46 of them are classified as significant.

Highlights from selected final rules published last week:

  • There is some controversy over whether or not a new Affordable Care Act regulation is economically significant. The Office of Management and Budget argues that the rule meets the broader definition of “significant.” That much we’re sure about. But even though OMB expects the rule to have annual impacts greater than $100 million, it does not call it “economically significant.” The Treasury Department, meanwhile, conducted its own analysis and argued that the rule does not even qualify as “significant,” and that “a regulatory assessment is not required.” Whatever the rule’s actual significance and cost, the Treasury Department’s lack of commitment to transparency is troubling. For out tally’s purposes, I am not counting this rule as economically significant, so its costs do not factor into our running cost tally.
  • An economically significant EPA regulation for underground storage tanks will cost an estimated $160 million per year.
  • A new HUD regulation hope to reduce neighborhood segregation.
  • If you want to use heavy elements to finish wood, read this regulation first.
  • Energy efficiency standards for commercial-grade HVAC systems and water heaters.
  • Tunnel inspection standards.

For more data, see Ten Thousand Commandments and follow @10KC and @RegoftheDay on Twitter.