Crony Capitalism

The Export-Import Bank Story the Post-Dispatch Refused to Print

Since the Post won’t run my reply a recent op-ed about the Ex-Im Bank, I’ll publish it here:

Huge multi-national corporations like to preach from the “small business” bible when it comes to the Export-Import bank. Unfortunately, most of the Ex-Im propaganda about how “small business” benefits crumbles under scrutiny.

Professor Stanford Levin of Southern Illinois University recently wrote an Op-Ed supporting reauthorization of the Export Import Bank. As the professor states, the Export-Import Bank provides cheap loans to foreign companies and governments with which to buy products sold by mostly large, multi-national companies with headquarters in the United States.
But the professor failed to mention the details of his various arguments for the bank. Here are some important details that might change Professor Levin’s view of the bank:
1. Stanford doesn’t mention the Export-Import Bank’s definition of “small business.” According to Ex-Im, a small business has up to 1,500 employee and revenue of $21 million. So the Ex-Im idea of small is relative. Yes, 1,500 employees looks small to AT&T and Boeing, but it looks enormous to the small business owners I know.
2. Stanford claims “90 percent of the agency’s transactions last year were for small-business exports,” but he doesn’t tell you that a “transaction” is an application processed, not the amount of financing provided. The distribution of applications to Ex-Im is a meaningless statistic that only an economist could like.
3. Stanford fails to disclose how Ex-Im allocates financing between large and “small” businesses, but I will. In 2013, “small businesses” received less than 20 percent of Ex-Im authorizations (source As Heritage Foundation Research Fellow Diane Katz found: “Multinational corporations attract the largest proportion of Ex–Im financing, including the construction and engineering firm of Bechtel, ranked by Forbes as the fourth-largest privately held company by revenue, and Lockheed Martin, valued in excess of $50 billion. But the bank’s foremost beneficiary is Boeing, the world’s largest aerospace company (with a market capitalization exceeding $91 billion). In the past five years, the company has profited from 197 Ex–Im deals totaling $48 billion. Last year alone, Boeing-related financing comprised 30 percent of all Ex–Im activity.”
4. Nor does Professor Stanford inform your readers that Ex-Im hurts American works. For example, Delta Airlines and the Airline Pilots Association sued Ex-Im last year for providing unfair competition through loans to foreign airlines for which US airlines are ineligible.
5. Sadly, Ex-Im provides a lot of funding to America’s adversaries. Last year alone, Ex-Im provided business assistance to Chinese companies worth $638 million and Putin’s Russia worth $630 million.
6. The Inspector-General of Ex-Im disputes Professor Stanford’s claim that “the Export-Import Bank exercises due diligence before issuing credit.” In its latest report to Congress, the Export-Import Banks’ IG says, “One of the consistent observations arising out of audits, evaluations, and investigations conducted by the OIG are weaknesses in governance and
internal controls for business operations.” (Source:
7. There is no evidence that Ex-Im creates American jobs, as the professor implies. According to Heritage Research Fellow Diane Katz, “the bank does not count actual jobs related to its projects but simply extrapolates numbers based on national data. This formula does not distinguish among full-time, part-time, and seasonal jobs. It also assumes that average employment trends apply to Ex–Im clients (who may not be typical).”
Clearly, the Export-Import Bank’s crony capitalist proponents like to play fast and loose with the facts. Just as clear the fact that the Ex-Im bank is a trough for feeding well-connected corporate welfare queens. It’s time to end the Export-Import Bank. 

Author: William Hennessy

Co-founder of St. Louis Tea Party Coalition and Nationwide Chicago Tea Party Persuasive design expertLatest book: Turning On Trump: An Evolution (2016)Author of The Conservative Manifest (1993), Zen Conservatism (2009), Weaving the Roots (2011), and Fight to Evolve (2016)I believe every person deserves the dignity of meaningful work as the only path to human flourishing.

3 Comments on “The Export-Import Bank Story the Post-Dispatch Refused to Print

  1. I agree that we must end the Export-Import Bank. But as long as we have RINO’s like Congresswoman Ann Wagner in power it will never end. She will vote FOR the continuation of the bank because her crony capitalists are demanding it. She will vote whatever way they tell her so she can continue to be funded by them. Right and wrong never enter into how she votes. It’s all about money and power. There are way too many Ann Wagner’s in DC.

  2. There are some other points, I would add. Sorry about the usual novella-length commentary. :-)

    8. Billions of taxpayer money, every damn year, today. Rather than talk about the “largest” beneficiaries, it is better to talk in terms of dollar-figures given out. Cutting billions per year (each!) of corp-welfare to Boeing, GE, Caterpillar, Bechtel Power, Applied Materials, and so on (plus hundreds of millions per year, to each of Ford, Komatsu, Sikorsky Aircraft, Loral Space Systems, CNH, and ‘smaller’ aerospace corps like SpaceX and Orbital Sciences and others), is nothing to sneeze at. Lockheed doesn’t make the list, unless they are the parent-company of one of those I mentioned?

    9. Picking winners and losers. But the list of names itself doesn’t matter so much; it is the picking of winners (Boeing) and losers (Delta) by the bureaucrats which is the real problem. The ex-im bureaucrats subsidize Boeing, by giving direct loans — a huge new percentage of the ex-im boondoggle since the bailouts of 2008 began — or loan guarantees (see next point). Those same bureacrats could just as easily subsidize Delta, by giving overseas travellers direct loans to fly to the USA as tourists, or by giving loan guarantees to overseas tourist agencies that use Delta flights, or whatever. Bureaucrats running the economy is inherently immoral, not to mention inefficient. It guarantees corruption, just like the STOCK act which was partially responsible for Cantor getting the boot; according to George Will, support for ex-im was a key reason Cantor lost to Dave Brat.

    10. Trillions of dollars of taxpayer money, someday real soon. Ex-im is another monster bailout, waiting to happen. People in favor of the ex-im bank like to pretend it is a BARGAIN. They will tell you, with a straight face, that the ex-im “investment portfolio” held by the feds, has in fact returned money to the treasury almost every year, averaging +400m bucks per year, and in one recent year topping a billion bucks. That means, cancelling the ex-im would *cost* the feds money. These are facts, not lies. Where is the big lie? Simple. The “investment portfolio” is generating a return, a positive cashflow to the treasury, at the moment. But they are investments, in the form of loans. What happens down the road, when the holders of those loans cannot pay the feds back? Feds pick up the tab, because Boeing/GE/Caterpillar/etc are “too big to fail” just like Citigroup/BoA/GoldmanSachs back in 2008. Those banks gave out bad real estate loans in the form of risky derivatives; when it all fell apart, we paid for it. This is how fake emergencies are created, people. What is the exposure (aka dollars-at-risk) of the ex-im boondoggle? Way over 100 billion bucks, and since 2008, heading steadily higher, adding 10 billion more bucks of exposure every year. The ex-im bank controls over 1% of our exports now. How high will the exposure be, how high will the regulated percentage of the export market be, when ex-im implodes? Better to cancel the damn thing now.

    11. The ex-im “supports” about 200k jobs, pro-pork legislators will tell you. What they fail to say, is that these jobs are only partially supported by the ex-im stuff itself, and most of them would not go away even if the ex-im were not there. What they also fail to mention, is that the vast majority of them are big-union jobs at aerospace companies and the like; there is a good reason that Pelosi and Reid back the ex-im, just as they backed the bailout of GM: they know that for now, the ex-im subsidizes massive perks for union voters, and somebody when the ex-im bailout hits, the unions will own Boeing and Caterpillar and GE. If we cancel the ex-im, we will probably lose some of the 200k “supported” jobs… but there is net *growth* of about that many jobs, every month, right now, even in the anemic Obama-economy we suffer under. Are those union jobs really worth the opportunity cost now, and the bailout later on? Bastiat also has something to say here.

    12. None of this stuff is surprising. The ex-im bank was created in 1934, under the New Deal, by executive order (cf Obama’s plans to get-r-done even if he has to do it by royal fiat). The purpose was to give loans to Stalin, the totalitarian dictator of the USSR. Later, Cuba was the next beneficiary. More recently, Enron was a recipient. See also, the TRIA, a more recent boondoggle.

    13. Last albeit not least, arguably the function of the ex-im actually *is* fully Constitutional. Functionally speaking, the ex-im is a tariff of sorts, or a trade-treaty. Those are under the control of the federal government, and during most of the 1800s, battles over the tariff (high to give pork to rich repubs versus low to give easy credit to the poor) were a staple of politics. Even if the ex-im bank itself is repealed aka not reauthorized in 2014, there will still be plenty of pork in the spending that Congress does. It is important not to mistake the ex-im bank itself as evil; Congress can simply rename the program, or repeal-n-replace it with pork in other areas. It is important to repeal the ex-im bank, as a short-term stance, because it is obviously a bailout waiting to happen, obviously picking winners & losers, plus obviously supported by estab-repubs (with dems chiming in) whilst opposed by tea-repubs and liberTea-repubs. But don’t lose sight of the long-term overall goal: cutting the size of government, and getting government out of the way of the free market.

    – – –

    So… given the political reality of the current federal legislature, what can we do? We must first be careful to separate our position-stances from our fundamental-interests, is the unfortunate answer. We also have to pay attention to what the dems will do, since they control the Senate and the Presidency and a large portion of the House.

    HuffPo says that the strategy for the dems will work like this: first, Reid will pass the ex-im bank, as part of the omnibus spending bill (with debt-ceiling debate and such). Next, the omnibus continuing-resolution will be passed to the house; Pelosi and friends will all vote in favor of it, including the ex-im bank. If repubs make an issue of the ex-im, and refuse to fund it, the dems will try to force another government-shutdown starting September 30th… not-so-coincidentally, about five weeks before the midterms elections in November. The goal will be twofold: give the tea party the blame for the shutdown (perception more important than reality just as with the previous shutdown over defunding obamacare), plus splitting the repub factions into warring and squabbling. With any luck, dems will not suck so badly in the November elections, if they can make repubs look bad, is the idea. Plus, they save union pork, and get corp donors.

    If estab-repubs can unite with tea-repubs, and agree to stick together and defund the ex-im bank in 2014, then Pelosi’s scheme will backfire: she and Reid will look like the supporters of corporate welfare, that they actually are. However, if estab-repubs instead decide to fight for the ex-im bank, looking forward to mega-donor support and such to come their way in the future from the usCoC (heavy backer of the ex-im) and the like, then the tea party folks take the blame. Given what has happened in the past, the estab-repubs may do exactly as Pelosi hopes, and the media will help shape the narrative that the tea-folks are crazy, the ex-im bank is bipartisan wise profitable investing which returns a profit, and blah blah blah. To quote John Yarmuth D-KY, the ex-im reauth is “a no-brainer …provides demonstrable benefits at no cost…”

    So at the end of the day, fighting the ex-im bank is a high-risk high-reward strategy. It is far more important that the omnibus spending bill of September 2014 be reasonable *overall* than that the ex-im bank get cancelled. If we can get the overall spending and debt-ceiling-hike of September to significantly cut spending, in exchange for reauthorizing the ex-im bank another year or two (with no increase to the statuatory cap whatsoever), that is a good deal and we should take it. If instead, we get the dumb victory of “cancelling” the ex-im bank, but in exchange the omnibus bill provides the exact same pork-spending to Boeing/etc by other mechanisms, and the overall omnibus bill enacts a policy of spending-growth, then we just shot ourselves in the foot.

    Only 93 repubs in the house voted against the ex-im back in 2012 (and McCarthy the new estab-Leader has said he is against the ex-im in 2014 which is nice…. furthermore 20 senators including McConnell were already against the ex-im reauth back in 2012). By my calculations, we currently have about 104 repubs very likely to vote nay on ex-im reauth, 67 repubs who will do what Scalise and McCarthy order them to do, and about 63 repubs who will fight for the ex-im bank to stay alive. There are a single-digit-handful of dems who will buck Pelosi, and vote against ex-im because it is blatant corporate welfare pork. Unfortunately, that means ~199 dems will fight to keep the ex-im alive, and force a shutdown if they can make it look like our fault. They only need a gang-of-19 group of repubs to do that, and 41 have already signed a letter fully supporting multi-year reauth of the ex-im pork (another 20 or so kept quiet for now).

    If we want to fight this battle, we need to peel away some anti-corporate-welfare dems from the Pelosi bloc, and simultaneously, force repubs to decide whether they are pro-big-biz (crony bureaucracy), or pro-free-market (free trade sans subsidies). Voting to preserve the ex-im, because Putin will not permit free trade, is nuts. Putin got his start working in the overseas-investment-arm of the KGB — there is a REASON that he has a policy to manipulate the export market of Russia. Our policy should be based wholly around free enterprise, not merely because it is morally superior to Putin-style oligarchy, but because it is economically more efficient, and we the people are GOOD at free enterprise, if only we are given the liberty to try it. Repubs in the legislature should therefore decide to cut spending, increase liberty, and promote free enterprise … which means, with any luck, refusing to reauthorize the Export-Import Bank in 2014 … but it will take bipartisan support from anti-pork dems like Alan Grayson and Lloyd Doggett, to make that happen.

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