Right up to the last minute, it seemed that the vote for re-authorization of the Export-Import (Ex-Im) Bank of the United States would have the support needed by federal lawmakers. In the end, Congress elected to head out of town for the Independence Day recess without passing legislation that would preserve the institution, meaning its doors are essentially shut unless it comes up again later in the month as part of another legislative effort.
The Ex-Im system is simple enough. A nation or company overseas wishes to purchase something from a U.S. company but lacks the money to do so. The foreign borrower gets a loan from the Ex-Im Bank at very competitive rates to enable the purchases of these U.S.-made goods. The money is a loan, not a grant or gift. Historically, these have been routinely paid back in full and on time, as foreign buyers want to be able to access the program in the future. They generally play by the rules.
The opposition to the Ex-Im Bank comes from Republican conservatives who have equated the program with “corporate welfare.” This is a decidedly strange attack given the way the Ex-Im Bank works—it has been taxpayer-neutral or generated a surplus in the vast majority of its years of existence. There are literally thousands of direct subsidies and specific trade preferences issued to various business sectors in the U.S that would closer fit the definition of corporate welfare.
Much has been made of the fact the biggest users of the Ex-Im Bank are companies like Boeing, Caterpillar and General Electric; but they are among 1,700 smaller operations that have taken part in and routinely benefitted from the system. Those three are also competing against companies receiving massive subsides from foreign governments, and the trio relies upon Ex-Im to help level the playing field somewhat.
The opposition is hard to understand and that has led many to theorize what underlying factors might really be behind the objections (re: pressure from big banks that see Ex-Im as a competitor, lawmakers with unrelated disputes with companies like Boeing and Caterpillar, etc.).
- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence