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ICYMI: “Raising Ex-Im From the Dead”

Congress should administer last rites to a corporate welfare relic.


Washington, Jul 24 -


 
CLICK HERE TO READ THE FULL EDITORIAL


Perhaps you haven’t heard that the charter for the Export-Import Bank ended on June 30. That’s right, a New Deal-era program has expired, and almost no one noticed. Pity, then, that some Republicans are working to resurrect this unnecessary subsidy for business…
 
Opponents have the better arguments on policy and politics. Ex-Im sells taxpayer-backed loans, guarantees and insurance to the customers of U.S. companies to promote exports. The claim is that it fills what Ex-Im calls “gaps” in export financing that commercial lenders are “unable or unwilling to provide.”

But Ex-Im has been subsidizing credit for so long that it’s impossible to know if those “gaps” would be filled if Ex-Im went away. Everything we know about markets says they largely would. Boeing,Ex-Im’s biggest beneficiary, has already said it can secure alternative financing. General Electric doesn’t lack for bankers. The Government Accountability Office (GAO) looked at Ex-Im in 2013 and said the bank “cannot answer the question of what would have happened without Ex-Im financing.” Maybe that’s because it didn’t want to.

As always with politicized credit, Congress has imposed mandates on the bank that should offend GOP principles. There are quotas for businesses owned by women and minorities, as well as for sub-Saharan African companies. The bank adopted guidelines in December 2013 to limit lending to coal and support “President Obama’s goal of reducing carbon pollution.” This might explain whyElizabeth Warren is a big Ex-Im fan, but it’s a wonder why Republicans would want to finance her priorities.

Ex-Im’s supporters say the bank is profitable and has a minuscule default rate, ignoring that Ex-Im uses government accounting. Ex-Im estimates that its six largest credit programs will yield a $14 billion surplus from 2015-2024. But the Congressional Budget Office projects that if Ex-Im used fair-value accounting as private companies do, those six programs would cost taxpayers $2 billion.

Ex-Im’s financial exposure ballooned to $112 billion in 2014, up from $75.2 billion in 2010. The Heritage Foundation’s Diane Katz has documented a litany of bad bets and fraud, including a $3 billion deal in Papua New Guinea that lost track of $577 million. Ex-Im’s Inspector General found in May that the bank’s “risk assessment for FY 2014 reporting provided limited insight into the actual risk of significant improper payments.”

Ex-Im’s cheerleaders say that’s no big deal and, besides, the bank claims its guarantees support “good-paying, export-backed American jobs”— “approximately 164,000” in 2014. That’s a remarkably specific jobs estimate considering that the bank can’t even keep track of its lending. Maybe too specific. GAO has found that Ex-Im can’t distinguish “between jobs that were newly created and those that were maintained,” and that the data “are a decade old,” among other flaws.

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