A vote on the Continuing Resolution, which includes the controversial Export-Import Bank reauthorization was originally scheduled for today, but has been pushed back to next week. So the combat continues over how long the Ex-Im reauthorization will last, and what other conditions might included as part of the deal. In today’s Washington Times, National Association of Manufacturers President Jay Timmons and I have dueling op-eds, with Timmons favoring reauthorizing Ex-Im, and me wanting to end it. The Wall Street Journal also weighed in with an editorial this morning, sharing my skepticism of Ex-Im.
Timmons makes three points in his piece that deserve a response. First, he argues that Ex-Im fills in gaps in private financing:
Ex-Im Bank provides financing that is critical to fill gaps when private-sector financing for small and large manufacturers is not available.
If Ex-Im makes a profit, as Timmons argues it does, then surely private banks would welcome an opportunity to make money for themselves by lending to more exporting businesses and their customers. If Ex-Im loses money, as the Congressional Budget Office convincingly argues, then there is no financing gap to be filled, and Ex-Im is financing too many insolvent projects.
Second, Timmons commits the “but other governments do it, too” fallacy:
Foreign competitors are stepping up their game. In fact, China provides at least five times the assistance that Ex-Im Bank does. If the United States fails to back up its exporters, our exporters and hundreds of thousands of jobs are at risk.
This is equivalent to saying the U.S. government should stop ripping off its citizens only when foreign governments stop ripping off their own citizens. Foreign Ex-Im Banks also cause a regressive income transfer: If we import artificially cheap goods, our consumers benefit at their taxpayers’ direct expense. For China and many other countries, this is literally a cash gift from the global poor to wealthier Americans. I oppose regressive wealth transfers, and I imagine Timmons does, too. But the solution is not to counter other governments’ policy mistakes with our own mistakes. It is for China and other countries to end their Ex-Im programs. This is one area where we can lead by example.
Third, Timmons argues that Ex-Im is a small businesses program at heart:
Thousands of companies — the majority of them small ones — use Ex-Im Bank when they have no other options in terms of lending, guarantees and insurance.
For one, the federal government already has a Small Business Administration to subsidize small businesses. And according to data from Ex-Im’s own annual report, Ex-Im actually behaves more like a Big Business Administration. More than 80 percent of its financial products, measured in dollars, go to big firms. Moreover, this proportion is in direct violation of its charter, which requires at least 20 percent of its financial products to go to small businesses (having up to 1,500 employees, which is a pretty big definition of small).
Timmons and NAM do a lot of good work, including a just-released update of Nicole and Mark Crain’s estimate of federal regulatory costs, which Wayne Crews wrote about yesterday. But they have it wrong on Ex-Im. As I point out in my piece, Ex-Im is pro-business, not pro-market. The short-term help it gives to individual businesses causes long-term harm to the competitive market process that capitalism depends on, and gives companies an incentive to compete in Washington instead of the marketplace. I gave nine other reasons to oppose Ex-Im here. That makes ten; there are more.