Welcome to Washington -- the city where Congress calls compromise an offer to increase taxpayers' exposure to losses for a program that is little more than an inefficient means of delivering corporate welfare.
As the fight over the reauthorization of the Export-Import Bank rages on, Sen. Joe Manchin, D-W.Va., the chairman of the Senate Banking Committee's Subcommittee on National Security, International Trade and Finance, just proposed not only to renew the bank's charter for five years, but also to increase its credit-exposure limit to $160 billion, up from its current $140 billion level.
While it may seem like a compromise if compared to House Democrats' demand that Congress reauthorize the bank's charter for seven years and raise its lending cap to $175 billion, it is a pie-in-the-sky offer considering that most House Republicans, led by Financial Services Committee Chairman Jeb Hensarling, R-Texas, believe that funding for the bank ought to be eliminated.
The case for killing the Ex-Im Bank is straightforward: The government shouldn’t be in the business of allocating capital to promote exports, green energy, oil and gas, or anything else for that matter. When it does, it creates capital distortions, it suffers from corruption and undue political influence, and exposes taxpayers to large potential losses.
And for what? While the Ex-Im Bank may boost exports for favored companies, its overall impact on exports is ridiculously small, and it doesn’t make much of a difference on the trade balance. It may also create some jobs for the favored industries (though not as many as the bank claims), but that doesn’t mean that it creates actual economic value. In fact, the bank’s activities probably have a seriously depressing impact on the non-favored industries’ job markets.
The evidence overwhelmingly argues for cutting off government funding of the Ex-Im Bank. In fact, if there were ever a winning case for the battle of ideas against special interests in Washington, this is it. As a result, the anti-Ex-Im ranks are growing on a daily basis. Better yet, questioning the legitimacy of the bank is not just popular with a few libertarians and the Tea Party activists anymore. Groups across the political spectrum are speaking out against the bank's bad habit of picking winners and losers, which is hard to ignore when most of the winners that the bank picks are among the most connected and powerful corporations and private lenders in the United States.
For instance, last week, American Enterprise Institute economist Michael R. Strain strongly came out against the bank's reauthorization noting that “Ex-Im is the very definition of corporate welfare -- it helps foreign buyers to purchase U.S. goods by offering favorable financing for those deals.”
This week, Michael Grunwald endorsed ending the bank and wrote: “The Republicans may be hypocrites, but they're right to take aim at the Ex-Im Bank.”
Earlier this week, former director of the National Economic Council for President George W. Bush, Keith Hennessey, came out swinging with a fantastic and devastating piece that summed up neatly all that is wrong with the bank: “There's a difference between what's good for America and what's good for one firm in America.”
Former adviser for Vice President Joe Biden, Jared Bernstein, also raised serious questions about his support for the bank and even commented on the widespread opposition to reauthorization by joking: “At this point, I'm not sure if even Tim Howard could save [Ex-Im].”
And this is where Manchin’s offer to grow the bank in exchange for a few toothless reforms is even stranger than it first appears. We know that reauthorizing the bank is bad economics, and hence bad policy, but it is probably bad politics, too. Last week, the Huffington Post noted that the Democrats’ big push to reauthorize Ex-Im could backfire. Their constituents may be disgusted by their new embrace of big business, the piece says (and rightly so). After the dramatic spectacles of the financial bailouts and the popularity of Occupy Wall Street, this seems like a risky move for Washington Democrats.
But support for the bank is probably riskier than it has ever been for everyone in Congress. For instance, there is a case to be made that the recent demise of House Republican Majority Leader Eric Cantor, R-Va., may have been triggered by his support of the Ex-Im Bank back in 2012.
There is no doubt that people recognize that when big government and big business work together, you get big problems. Americans are fed up with what they rightfully feel isn't a level playing field. Fake reforms of the Ex-Im Bank, of the type offered by Manchin, won't cut it. The country should--and I believe will--demand better.