Category Archives: Export-Import Bank

Ex-Im Bank Revival?

Next week the Senate is expected to vote on new board members for the Export-Import Bank, which gives favorable financing terms to foreign governments and businesses when they buy U.S. products. This is a bigger deal than it sounds. Ex-Im’s charter requires a quorum of three members to authorize any transactions larger than $10 million. It has lacked that quorum since 2015 due to expiring board member terms. As a result, Ex-Im has been doing just a fraction of the business it used to do. Its financing projects declined from $21 billion in 2014 to $3.6 billion in 2018.

Sen. Pat Toomey (R-Penn.) and other members have been blocking board member confirmation votes in order to keep Ex-Im to returning to its former “Bank of Boeing” status—when Boeing alone accounted for nearly half of its business in most years. A literal top 10 list of large businesses captured as much as 80 percent of Ex-Im largesse before the big 2014-2015 reauthorization and board quorum battle.

The current board quorum fight is the first act in a larger fight. Ex-Im’s charter expires on September 30. If Congress does not reauthorize it, Ex-Im would close its doors to new projects, wind down its portfolio, and then disappear entirely. This nearly happened in the 2014-2015 reauthorization cycle, when Ex-Im’s authorization lapsed for more than six months. It has lacked board quorum for much of the period since.

CEI has signed on to a coalition letter opposing Ex-Im’s reauthorization. We also hope the Senate declines to give the Ex-Im board a quorum. As the Mercatus Center’s Veronique De Rugy and Justin Leventhal point out in a recent study, Boeing and other major Ex-Im beneficiaries are doing just fine without Ex-Im. They have had no trouble finding private financing, and Boeing even set new profitability records.

Total U.S. exports have increased by $266 billion since 2014. The most recent GDP growth and employment rates are both stellar, despite four years of limited Ex-Im activity. Estimated GDP growth was 3.2 percent in fourth quarter 2018, and Friday’s employment report estimated an employment increase of 263,000 jobs and a 3.6 percent unemployment rate.

Given that the prelapsarian was Ex-Im operating at a loss of $2 billion per decade under conventional accounting standards (the Bank uses unconventional methods to show a $14 billion profit instead), it is time to close Ex-Im. Congress can do that simply by doing nothing. It can also limit Ex-Im’s cronyism by doing nothing to vote on new quorum-restoring board members.

For more on the case for closing Ex-Im, see my paper “Ten Reasons to Abolish the Export-Import Bank.”

Republican Study Committee Releases 2020 Budget Proposal

Congress is supposed to pass an annual spending budget, though it rarely gets around to it. Instead, the government is usually funded through a mashup of individual appropriations bills, omnibus appropriations bills, and continuing resolutions. This makes government spending less transparent and less accountable. It also leaves the federal government vulnerable to shutdowns during political fights, which happened in January of this year.

Fortunately, the Republican Study Committee (RSC) has just issued a proposed budget. It is likely the only budget that will be introduced in Congress this year, though unlikely to pass a Democratic House. As with any issue-spanning document, one can quibble with its contents regardless of political persuasion. Still, the RSC deserves a great deal of credit for at least putting something out there.

Other parts of the GOP should also issue their own proposed budgets; unlike The Highlander, there can be more than one. Across the aisle, a Democratic budget(s) would face similar obstacles in a Republican Senate and White House. They still should release their own budgets to make their policy priorities more concrete.

The whole RSC FY 2020 Budget is here. The document cites CEI sources on a variety of issues:

  • Regulatory Reform. The budget gives an entire chapter to regulatory reform, beginning on page 17, and cites Wayne Crews’s Ten Thousand Commandments annual report—the 2019 edition of which will be released soon.
  • Energy and Environment. The budget’s recommendations for increasing North American energy production draw on the energy and environment chapter in CEI’s Agenda for the 116th Congress.
  • Export-Import Bank. On page 25, the budget would abolish the Export-Import Bank, citing my paper “Ten Reasons to Abolish the Export-Import Bank.” Ex-Im’s charter expires this September 30, and will close if Congress declines to reauthorize it.

Kudos to the RSC for putting out a tangible document that should serve as a starting point for debating federal priorities for the next fiscal year—and for attempting to fix a broken budget process. They also have excellent taste in finding sources for many of their ideas; interested readers can find more in CEI’s Free to Prosper: A Pro-Growth Agenda for the 116th Congress.

Export-Import Bank Drama Continues

The Senate’s main business right now is the annual Defense Appropriations bill. The Export-Import Bank, or Ex-Im for short, might become part of that bill. Ex-Im caused one of the most contentious political fights in recent years. While the fight seemed over when Ex-Im re-opened last December after a five-month shutdown, there is still one more bit of drama to be resolved. That might happen this week.

Ex-Im is currently unable to make transactions larger than $10 million—essentially neutering an agency that does nearly 80 percent of its business in big deals with a literal top-ten of big businesses such as Boeing, General Electric, Caterpillar, and a handful of others. But Sen. Lindsey Graham (R-S.C.), who counts Boeing as a constituent, is trying to restore cronyism as usual at Ex-Im.

A bit of background: Ex-Im offers loans and loan guarantees to foreign buyers of U.S. products. For example, Ex-Im will guarantee loans that a foreign airline takes out—if the airline buys its jets from Boeing instead of Airbus.

For a number of reasons, free-market activists want to permanently close Ex-Im. These range from numerous corruption scandals to the harm Ex-Im does to other U.S. businesses, such as domestic airlines that compete with Ex-Im-subsidized foreign airlines.

Last year Congress refused to renew Ex-Im’s charter, which expires every few years. Ex-Im actually closed for five months, able to do nothing more than maintain its existing portfolio. It reopened when Ex-Im’s supporters succeeded in placing its reauthorization in a must-pass spending bill.

But their victory was a partial one. Ex-Im has a five-member board of directors that must approve any transaction larger than $10 million. As directors’ terms expired during the shutdown, the board was down to two members.

Here’s where the fun begins: Any vote on a $10 million-plus transaction has a quorum requirement of three members—meaning Ex-Im, though open for business, can only perform relatively small transactions until it gets more board members. These require Senate confirmation, and the Senate has shown no interest in considering any nominees.

Enter Sen. Graham, and the current controversy. He is threatening to create a loophole large enough to drive a truck through. If the president decides a $10 million-plus Ex-Im project has national security implications, Sen. Graham proposes giving the president the power to override Ex-Im’s quorum rule, allowing Ex-Im’s current diminished board to approve it.

We all know how creative politicians can be when it comes to tying anything and everything to national security. No doubt Boeing, which typically receives about half of Ex-Im’s business, will work very hard to push as many of its potential loan guarantees as possible through that loophole.

The worst part is that Sen. Graham isn’t pushing this idea as a stand-alone bill that could succeed or fail on its own merits. He is trying to fold it into the must-pass Defense Appropriations bill, which even Ex-Im’s fiercest opponents have to vote for.

What to do about it? Sen. Graham’s proposal is in an amendment he is offering to the defense bill, which is still in the Committee phase. So either the amendment must fail, or another senator must offer a counter-amendment to nullify the Graham amendment. The defense bill is in markup this week, so we could find out soon if Ex-Im’s cronyism will return to its previous vast scale.

Ex-Im Revival Passes the House

The House has passed Rep. Stephen Fincher’s Ex-Im revival bill, by the margin of 313-118. Senate Majority Leader Mitch McConnell has publicly said the Senate will not act on the bill, so last night’s vote was more of a public statement than anything else. While the statement might be unpleasant, the public now has a much better idea of which Congressmen are pro-business, as opposed to pro-market—an important distinction. So at the very least, voters now have a better idea of who to hold accountable, and who they might support in primary elections.

With no stand-alone vote, Ex-Im reauthorization will instead be folded into an upcoming must-pass transportation bill. A Senate vote on that could happen as soon as next week.

Both parties share blame for Ex-Im’s possible revival. Nearly all Democrats voted in favor of reviving Ex-Im—a curious reversal of decades-long opposition. Rep. Alan Grayson (D-Fla.) is the only one to stay consistent. Progressives have been Ex-Im’s traditional opponents, not just on corporate welfare grounds, but on human rights grounds—Ex-Im subsidizes many governments with checkered human rights records, and helps to keep them in power. See for example, this Mother Jones article from 1981, this one from 1992, and another from as recently as 2011, which is based on environmental grounds.

The GOP’s small pro-market wing began actively opposing Ex-Im in 2012, so Mother Jones therefore changed its stance around that time; see here and here. See also a thoughtful piece at Salon on this curious role reversal.

So Democrats deserve criticism for abandoning principle, seemingly for no reason other than to take the opposite stance from Republicans. “If you say X, therefore I saynot X” is hardly a sign of intellectual rigor, but such is the nature of partisan politics.

But the goal here isn’t to pile shame on just one party. Both parties deserve it. The traditional pro-business Rockefeller Republican mindset—recall the famous slogan “what’s good for GM is good for America,” as well as a certain bailout from a few years ago—is the party’s traditional stance, and one for which it is often rightly criticized. Republicans are a major reason why Ex-Im was able to survive for more than 80 years, and Republicans are why it is on the brink of revival.

By the time Ex-Im’s 2012 reauthorization came up, a small GOP minority rejected pro-business thinking in favor of pro-market thinking. Rather than making sure to help GM or Boeing or some other specific business, their priority is to maintain an open competitive process under which any entrepreneur with a good idea and a good product can succeed.

These free-marketers raised a bit of a stink about Ex-Im, catching a sleepy Washington by surprise. Then the alarm went off, leading to a pitched intra-party fight that has been raging ever since, with major Ex-Im beneficiaries and traditional pro-business groups adding to the decibel level.

This culminated in the most recent Ex-Im vote. As mentioned above, Democrats deserve criticism for abandoning long-held principles on corporate welfare, international human rights, and clean government (Ex-Im is a well-known hotbed of corruption), seemingly for no reason other than to oppose the other party.

Republicans deserve criticism for their long-standing milquetoast pro-business mindset. Their pro-market minority deserves praise on the Ex-Im issue, but pro-market thinking sadly remains a minority stance in both parties. Hopefully Boeing’saggressive lobbying push doesn’t have too much to do with it.

In fact, corporate welfare issues like the Export-Import Bank provide a wonderful opportunity for progressives and free-market-oriented conservatives to work together. So why aren’t they?

In politics, the minority party’s job is to deny the majority party any possible political victories, even when they agree. At least that’s my theory for Democrats’ sudden, and nearly uniform Ex-Im reversal.

But if members of both parties could put principle ahead of politics, then progressives and the GOP’s free-market wing, and hopefully some others, could very likely cobble together a majority on several issues on which they agree. They can change the country for the better, even as they continue to disagree on other issues. Ex-Im andOPIC could serve as starter issues. There are many more.

I conclude with a small public service: a list of all 127 Republicans who made a public statement by voting in favor of reauthorizing the Export-Import Bank:

Brady (TX)
Brooks (AL)
Brooks (IN)
Carter (GA)
Collins (NY)
Costello (PA)
Curbelo (FL)
Davis, Rodney
Ellmers (NC)
Graves (LA)
Graves (MO)
Hurd (TX)
Jenkins (WV)
Johnson (OH)
Kelly (MS)
Kelly (PA)
King (NY)
Kinzinger (IL)
McMorris Rodgers
Miller (MI)
Murphy (PA)
Poe (TX)
Rice (SC)
Rogers (AL)
Rogers (KY)
Rooney (FL)
Smith (MO)
Smith (NJ)
Thompson (PA)
Walters, Mimi
Weber (TX)
Wilson (SC)
Young (AK)

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.

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.