Category Archives: Export-Import Bank

Signs of Life for Ex-Im?

Last night the House of Representatives voted on a rare discharge petition, under which a controversial bill can skip the usual committee process and go straight to a floor vote. In this case, the discharged bill is Rep. Stephen Fincher’s Export-Import Bank revival bill. It passed, 246-177, with 62 Republicans joining nearly all Democrats. It was the first successful discharge petition since the McCain-Feingold campaign finance regulation bill. For more on discharge petitions, see my earlier post.

So what happens now? On Tuesday, the House will hold further procedural votes on the Ex-Im bill, which will almost certainly pass. Then it’s off to the Senate, which is unlikely to act on the bill.

So crisis averted? Not quite. Because Senate Majority Leader Mitch McConnell is unlikely to allow a vote on the Fincher bill, reauthorization will instead likely be folded into a must-pass transportation bill. So while Fincher’s discharge petition will likely amount to nothing, it does give Ex-Im beneficiaries a backup plan if they have trouble getting Ex-Im reauthorization into the transportation bill.

For more on why Ex-Im is bad policy, bad politics, and bad economics, see my paper.

Finally, for all the sky-is-falling hyperbole coming from Ex-Im beneficiaries, regular readers will remember that Boeing alone receives nearly half of Ex-Im’s business. Despite Ex-Im’s closure, they recently announced that their earnings were up 25 percent in the third quarter. More than 98 percent of U.S. exports happen without Ex-Im assistance. As with many other companies, Boeing will be just fine without Ex-Im and corruption it enables.

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Latest Ex-Im Revival Tactic: The Discharge Petition

One of the classic lines from the 1990 novel and 1993 movie Jurassic Park is that “life finds a way.” As with dinosaurs, so with government programs. The Export-Import Bank expired on June 30, and has been in liquidation ever since. But Ex-Im’s supporters may have found a way to bring it back to life. Just as frog DNA implanted in Jurassic Park’s all-female cloned dinosaurs allowed them to reproduce by causing some of them to switch genders, Rep. Stephen Fincher (R-Tenn.), who once opposed Ex-Im, has found a way to get Ex-Im past its own obstacles in the House: a discharge petition.

In the House of Representatives, a bill must typically be approved by a Committee before it moves to a full floor vote before all 435 members. A successful discharge petition circumvents Committees and brings a bill straight to a floor vote, but it is rarely used. The last time a discharge petition succeeded was in 2002—ironically, in Fincher’s case, for the McCain-Feingold campaign finance regulation bill.

Fincher’s re-election campaign has received about 150 donations totaling a little more than $250,000, as of the most recent campaign finance disclosures. Two of those donations come from his home state of Tennessee, totaling $750. As journalist Tim Carney puts it, this “rounds to 0 percent of his money raised.” In total, “More than 99 percent of the money powering Fincher’s re-election bid comes from political action committees (almost all of them corporate PACs) and K Street lobbyist types.” Among those corporate PACs are all of Ex-Im’s biggest beneficiaries, including Boeing, General Electric, and other large firms.

This does not make Rep. Fincher unique. It merely makes him conventional. But so far, his decidedly unconventional political strategy is working. Fincher’s Ex-Im revival bill is being held in purgatory in the House Financial Services Committee, where Chairman Jeb Hensarling is one of Ex-Im’s strongest opponents. Since Hensarling has no intention of moving on Fincher’s bill, Fincher countered with a discharge petition. Nearly all House Democrats joined about 40 Republicans in signing it, giving Fincher the 218 signatures he needs to force a floor vote (here’s the full signatory list from October 9).

Under House rules, the soonest a floor vote can happen is October 26. Then, assuming it passes, Fincher’s Ex-Im bill moves to the Senate.

Since the bill is unlikely to pass the Senate, Fincher’s gambit may not matter too much in the end. But it is appearing likely that an Ex-Im revival will be folded into an upcoming must-pass transportation bill. That opens up a whole new set of negotiations, but Fincher’s cronyist quest may well succeed, even if its path is long and indirect.

Dinosaurs were around for nearly 200 million years. So long as people like Rep. Fincher are in Congress, government agencies can expect similar longevity.

GE’s Outsized Reaction to Ex-Im Expiration

General Electric recently announced it would not move its headquarters to Cincinnati. The reason for this earth-shattering news is that some members of Ohio’s congressional delegation oppose reauthorizing the Export-Import Bank. GE is a major beneficiary of Ex-Im financing.

The announcement costs GE nothing to make, as the top contenders for relocation apparently include New York and Georgia. It expects to reach a decision by year’s end. GE, currently headquartered in Connecticut, is mulling a move as it sells off most of GE Capital, its financing arm. Connecticut’s high taxes and unfavorable business climate are also factors in GE’s relocation decision, though apparently GE only pays the state minimum in corporate tax–$250 (GE and its employees pay plenty of other taxes, though). Most of GE’s Connecticut employees work for GE Capital, whereas most of its other operations are elsewhere—including, ironically, Ohio.

GE also announced that, because of Ex-Im’s uncertain future, it is moving 500 jobs overseas. Then again, this isn’t exactly big news, either. GE has roughly 307,000 employees, so this is equivalent to about one sixth of one percent of its workforce. GE’s natural turnover from retirements, hirings, and firings is orders of magnitude higher. Also worth pointing out: about 55 percent of GE’s employees are already overseas.

Rep. Jeb Hensarling, one of the House’s leading Ex-Im opponents, made the astute point that GE “is leaving Connecticut because the state’s taxes are too high and is choosing to send jobs overseas because U.S. taxpayer-provided subsidies are too low.” In short, GE is making dire-sounding but insignificant announcements to make a political point. GE wants special government treatment that most other companies don’t get. Since some of those favors are being threatened, the company is throwing a tantrum.

Most congressmen are skittish creatures, eager to avoid angering large companies and their public relations departments. GE’s chest-beating may well throw many members back into line. But at least some members are willing to call shenanigans in this case. But are there enough backbones in Congress to prevent Ex-Im’s upcoming reauthorization attempt? Time will tell.

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.

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.

Ex-Im Is Expired: Now What?

Two weeks ago, the Export-Import Bank’s authorization lapsed. The agency remains open, but is not allowed to consider new loans or other projects. It may only maintain its existing portfolio, which will wind down over a period of several years.

In an op-ed over at Inside Sources, I take a look at what’s next for Ex-Im:

Rarely does a federal agency shut its doors — the Civil Aeronautics Board closed in 1985, and the Interstate Commerce Commission followed suit in 1995, but that’s about it. Twenty years later, will Ex-Im add its name to this short list? What will happen then? Should the agency be revived?

The short answers are that nobody knows if it will actually close, not much will happen in the short run either way, and the agency should not be revived.

In the time since I wrote the piece, it’s begun to look like Ex-Im reauthorization will be folded into the big highway bill Congress will consider later this month, but nothing is concrete yet.

Read the whole thing here.

Five Reasons to Abolish Ex-Im

ex-im-2

I meant to post this here earlier, but my CEI colleagues recently put together some excellent Ex-Im graphics explaining why the agency should close.

See them all here.