Category Archives: Export-Import Bank

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.

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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.

Study on Export-Import Bank: Repeal Is Best, Other Reforms Can Help

The Export-Import Bank is up for reauthorization by September 30. It should be shut down, as I’ve pointed out before, but reauthorization will almost certainly pass. Ex-Im was either shut down or sharply limited for nearly five years, from October 2014 until May of this year.

Over that time, assuming Ex-Im would have maintained a constant activity level had it not been hampered, taxpayers were spared from $47.9 billion of risk exposure, or an average of nearly $12 billion per year. Ex-Im’s total portfolio also decreased from $112.3 billion in 2014 to $60.5 billion in 2018. This reduced taxpayer exposure by a total of nearly $52 billion, or an average of just under $13 billion per year.

These are big savings, and Congress will almost certainly end them this month. In a new study, while emphasizing that shutting down Ex-Im is the best policy option, I put forward some second-best reforms that would make Ex-Im less problematic until the next reauthorization cycle. These include:

  • Ending the bank’s reinsurance pilot program
  • Cutting the bank’s portfolio cap to $60 billion from $140 billion
  • Maintaining Ex-Im’s board quorum requirement for transactions over $10 million
  • Using the same accounting standards as other federal agencies
  • Instituting a 10 percent cap on what percentage of its business can benefit a single firm
  • Removing its quota for green projects
  • Lowering the definition of a “small business” to 100 employees from the current standard of 1,500 employees

While Ex-Im reauthorization is a setback regardless of any positive reforms it incorporates, incorporating these reforms can limit the cronyism and waste Ex-Im is capable of generating.

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

Closing the Ex-Im Bank: Quoted in the Wall Street Journal

James Freeman quotes from my Export-Import Bank paper, due out tomorrow, in his Best of the Web column in The Wall Street Journal:

An Education in Crony Capitalism

The federal government’s Export-Import Bank, which has been proudly subsidizing big business for generations, is likely to be saved by Congress before its authorization expires at the end of the month. But the Competitive Enterprise Institute’s Ryan Young, author of a new paper due out tomorrow, is urging lawmakers to consider the possibilities of slightly smaller government. Mr. Young writes:

The Ex-Im Bank is compromised by internal corruption, constantly pressured by corporations seeking special favors, and creates economic inefficiencies by distorting markets… The Bank recently emerged from a nearly five-year period of reduced activity, which saved taxpayers an astonishing $47.9 billion – an average of $12 billion per year. Shuttering the bank could save Americans billions more.

Freeman’s whole column is here. Since Ex-Im reauthorization is near-certain, the bulk of the paper is on second-best reforms that can limit Ex-Im’s harms until its next reauthorization round. Closing the agency remains the ideal. I’ll post a link when the paper is released.