Category Archives: Export-Import Bank

Export-Import Bank Reauthorization Update

It is a busy time right now in the Export-Import Bank reauthorization battle. Rep. Maxine Waters (D-CA) introduced a new bill to reauthorize the Export-Import Bank for the next 10 years. It would attempt to improve Ex-Im’s image not by reforming the agency, but by changing its name. Her bill for the proposed Export Finance Agency was marked up in committee on Tuesday, but is unlikely to pass. Ex-Im’s charter is currently set to expire on November 21, when the current Continuing Resolution (CR) ends.

Waters’ bill ran into bipartisan opposition. Republicans such as Rep. Patrick McHenry (R-NC) want Ex-Im reauthorization to be tough on China. He cosponsored a previous version of the bill that contained such language. Its removal in the new version caused him to withdraw his support, and to call the bill “weak sauce.”

Some Democrats such as Rep. Denny Heck (D-WA), worry that the tough-on-China language would limit Boeing’s ability to get Ex-Im financing. China is Ex-Im’s largest foreign beneficiary, and state-owned Air China, a Boeing customer, is Ex-Im’s single largest foreign client. Boeing is one of Heck’s constituents.

Other Democrats, including Rep. Rashida Tlaib (D-MI) and Aryanna Pressly (D-MA), oppose Ex-Im financing being used for fossil fuel projects. Pemex, Mexico’s state-owned oil company, is another major Ex-Im client.

Neither party seems much interested in critiques against Ex-Im’s cronyism, corruption, and ineffectiveness.

What are the likely next steps for Ex-Im? The Waters bill could possibly pass the Democratic House, but not the GOP Senate. A similarly awful Ex-Im bill from Sens. Kyrsten Sinema (D-AZ) and Kevin Cramer (R-ND) similarly lacks traction. Meanwhile, Congress has more pressing matters on its plate. Besides the impeachment investigation taking up much of leadership’s attention, a new CR needs to pass by November 21 to avoid another federal shutdown. Congress is out of session until November 12, making for a tight time frame. Neither the Waters bill nor the Sinema-Cramer bill will likely be able to go through the full legislative process by then.

That means Ex-Im will likely get a short-term extension in the new CR, similar to what happened in September. Though both parties want to reauthorize Ex-Im, they currently disagree too much on the particulars to fold a full reauthorization bill into a must-pass CR. Neither party sees any advantage in a shutdown, so where possible they’ll keep anything controversial out of the CR to keep the process smooth. Simply continuing Ex-Im’s funding as-is for a short time will give Congress some time to hash over details and pass a full reauthorization bill before the new CR expires.

The Sinema-Cramer bill is a reformless disaster. The Waters renaming bill is no better. Both bills would extend Ex-Im for another 10 years, increase its portfolio cap to $175 billion, and end its board quorum requirement for funding projects over $10 million in size. Absent a new, better bill, the best feasible option for Ex-Im reform is to amend whatever legislation that reaches the floor with substantive reforms to limit Ex-Im’s cronyism, internal corruption, and dealings with shady governments. Several ideas are in my recent paper. Moreover, not all of them require Congressional action. There is much Ex-Im can do internally to improve its business model, and there is much the White House can do if it is interested in reform. The best policy, of course, is to close Ex-Im.

Ex-Im Bank Reauthorization: Lesson in Institutional Design

For all its flaws, the Export-Import Bank’s charter gets an important thing right: the agency must be reauthorized every few years, or it will close. This makes Ex-Im an important case study in institutional design. Its reauthorization requirement should be applied to nearly every government agency. Reauthorization offers regularly scheduled opportunities for Congress to enact possible reforms, or close an agency entirely. It also adds a level of democratic accountability to agencies that mostly lack it.

The executive branch has long since become too powerful. The other branches have too few meaningful checks on executive power. The result has been that agencies often face no consequences for abusing their authority, wasting resources, corruption, or ineffectiveness. If an agency has to face reauthorization every so often, it gives agencies more incentive to self-police against problems and reform them proactively, so emerging problems do not metastasize.

More to the point, the burden of proof properly lies on agencies for justifying their existence. If they are going to command resources rather than other agencies or taxpayers, they should have good reasons. If the federal government really needs an Economic Development Administration, a Hass Avocado Board, or a U.S. Board on Geographic Names, that agency should have no problem making its case every few years to Congress. If it has compelling arguments, the agency can continue on. If it does not, reauthorization provides regular opportunities to reform or end wasteful or harmful policies. This is an important part of governmental hygiene. Reauthorization allows Congress to enact reforms an agency cannot, or will not enact on its own.

Reauthorization also means that an agency’s window for reform never fully closes. Sometime soon, depending on how the current federal funding fight goes, the Export-Import Bank’s charter will almost certainly be renewed. Some needed reforms might even be part of the deal. Usually, a minor agency like Ex-Im will only garner congressional attention once every few decades, if at all. But charter reauthorization guarantees regular opportunities to enact reforms, or discipline the agency where needed. As happened temporarily in 2014-2015, Congress was able to close Ex-Im by simply declining to vote on reauthorization.

The only agencies that should fear a reauthorization requirement are the ones that do not deserve reauthorization. Policymakers and the public can identify them by their reaction to a potential requirement.

For more on reauthorization and other lessons from Ex-Im’s last five years, my new paper is here. For a short summary of the main findings, a press release is here.

Export-Import Bank Fight Not Over Yet

The Export-Import Bank’s charter is currently set to expire on September 30. If authorization lapses, the agency will shut down. On Thursday, the House passed a continuing resolution (CR) to fund the government through November 21—specifically including Ex-Im. The Senate will likely pass it next week. This means the Ex-Im fight could drag on for an additional seven weeks, and possibly longer. Here is a breakdown of the current situation.

The most likely reauthorization vehicle is a bill from Sens. Kevin Cramer (R-ND) and Kyrsten Sinema (D-AZ). It contains no positive changes and several bad ones. It would do away with board approval for large projects, increase Ex-Im’s portfolio cap to $175 billion, and would last for ten years, more than double the usual period. It would mainly benefit large companies like Boeing and Caterpillar that don’t need help, plus large state-owned enterprises such as China Air.

Because the bill is so tilted against reform, it would likely have difficulty making it through the standard legislative process without significant amendments. So while an up-or-down vote on the merits is possible, Ex-Im backers will avoid one if they can. The easiest way is to fold the bill into some other piece of must-pass legislation. That way, even Ex-Im opponents will still have to vote to renew Ex-Im on Cramer-Sinema’s terms, possibly without amendment.

The continuing resolution that passed the House yesterday is clean, in that its only Ex-Im language is extending it through November 21. It does not contain Cramer-Sinema or any of its provisions. This will likely remain the case when the Senate takes it up next week.

But—when November 21 approaches, Congress might well punt again and pass a second CR that goes until early next year. If Congress does not separately pass Cramer-Sinema by then, another Ex-Im extension is likely. Maybe it would be another clean extension until CR round 3 (and possibly beyond). Or someone could add in Cramer-Sinema to the bill text.

This complicates matters for reformers. The current 43-page CR was introduced on Wednesday night after working hours, and passed by the House the very next day. If congressional leadership pulls similar last-minute shenanigans with the next CR, Ex-Im reformers will need to have amendments ready in advance to the extent possible. Section numbers and such for amendments to refer to can only be accurately identified once the final text is available, so there would still be plenty of late-night work for reform-minded staffers.

This dynamic could repeat for any number of rounds until Congress can finally pass a budget—and even this budget could be a vehicle for Cramer-Sinema or another Ex-Im bill. Reformers’ job until then is to be both patient and persistent. There might be no rest for the wicked, but the same goes for those of us who oppose cronyism.

For positive reforms for Ex-Im, see my recent paper “How the Ex-Im Bank Enables Cronyism and Wastes Taxpayer Money.” For reasons to shut down Ex-Im entirely, see this paper from Ex-Im’s previous reauthorization fight.

Conservatives Should Oppose Ex-Im, Too

Over at CNS News, I argue that conservatives should favor closing the Export-Import Bank, even though President Trump supports the agency:

Finally, an underappreciated point is how Ex-Im can make some U.S. businesses less competitive. When Ex-Im offers favorable financing for a foreign airline to buy a Boeing plane, that airline often directly competes with U.S. airlines such as American, United, or Southwest. Often, Ex-Im can only help one U.S. business by hurting others. Besides being zero-sum, this opens up a fierce lobbying game with predictable ethical consequences. The Trump administration supports Ex-Im as part of its larger trade agenda. In practice, Ex-Im turns out to undermine it.

Read the whole piece here. My recent paper on Ex-Im is here.

Ex-Im Bank Reauthorization: Major Victory against Cronyism, Despite Setback

Nobel laureate economist Ronald Coase wrote in his 1975 essay “Economists and Public Policy” that “An economist who, by his efforts, is able to postpone by a week a government program which wastes $100 million a year (which I would call a modest success) has, by his action, earned his salary for the whole of his life.” By Coase’s measure, the Ex-Im fight that began in 2014 was an enormous success, despite the coming reauthorization setback.

Based on data available in Ex-Im’s annual reports, this fight over a relatively small agency was worth $47.9 billion of dollars in reduced Ex-Im activity from 2014-2018. This reduced taxpayer risk exposure by an average of nearly $12 billion per year. Moreover, this figure assumes Ex-Im activity would have remained constant without the shutdown and board quorum fights of the last five years. Agencies tend to grow, so $47.9 billion in savings is likely an underestimate.

By another measure, the size of Ex-Im’s total portfolio went from $112.3 billion in 2014 to $60.5 billion in 2018, reducing taxpayer exposure by a total of nearly $52 billion, or an average of just under $13 billion per year. If this much in savings can come from temporary activity reductions in one agency, savings from successful permanent reforms of larger agencies could be substantial.

The free-market movement deserves a lot of credit for one of its biggest victories in recent years. Veronique de Rugy at the Mercatus Center, Bryan Riley at the National Taxpayers Union, Daniel Ikenson at the Cato Institute, Diane Katz at the Heritage Foundation, and many others have been tireless in their advocacy against cronyism, and pushing for a pro-market, rather than a pro-business, approach to policy.

While this month’s reauthorization is a setback, there is still a chance to enact some helpful reforms. Moreover, the fight is not over. Ex-Im will also require another reauthorization in a few years’ time, which will be another opportunity to finally end an 85-year old monument to cronyism.

The whole paper is here. For a short summary of the main findings, a press release is here.

Washington Examiner: Close Ex-Im, Two-Year Reauthorization, Tops

The Washington Examiner has an excellent editorial opposing Export-Import Bank reauthorization, citing my recent paper:

Their bill would reauthorize Ex-Im for an unprecedented 10 years. This is a blatant effort to avoid reform and scrutiny from Congress. As the Competitive Enterprise Institute pointed out in a new paper on the Cramer-Sinema bill, “Ex-Im-related legislation would likely almost never appear on the congressional calendar if occasional reauthorization did not require it to.”

It also argues for a two-year reauthorization cycle, rather than 10 years–while noting that closing the bank altogether would be best. Read the whole editorial here.

Ex-Im Reauthorization in Politico

Politico’s Morning Trade newsletter has an item on my Ex-Im paper, which was released today:

EX-IM CRITICS GET VOCAL AS DEADLINE APPROACHES: The Export-Import Bank faces a Sept. 30 deadline for reauthorization and critics are making a push to either shut down the bank or significantly restrain its power. A new paper today from the Competitive Enterprise Institute, a free-market think tank opposed to the bank, argues that allowing the bank to close its doors will save taxpayer money and end cronyism. Supporters of the bank contend that the institution is self-sufficient and helps U.S. exporters remain competitive against foreign rivals.

“The Export-Import Bank should be closed for a number of reasons, including internal corruption, corporate rent-seeking, and economic inefficiency,” CEI’s Ryan Young writes.

Legislation on the table: Despite its objections, CEI acknowledges that bipartisan legislation introduced in July by Sens. Kevin Cramer and Kyrsten Sinema will likely get enough support to pass. The bill would extend the bank’s charter for 10 years, raise the bank’s financial exposure cap to $175 billion over seven years and allow for the creation of a temporary board to lead the agency if the Senate refuses to confirm board members necessary to approve large transactions. CEI argues that the terms of the bill are far too generous, warning that “fortunately, this battle is not over, regardless of how the 2019 reauthorization cycle plays out.”

Read the whole newsletter here.