Don’t be fooled by lawmakers who tell you that government subsidy programs like the Export-Import Bank are necessary for the economy to create jobs. This is the whopper peddled by Rep. Charlie Dent (R, PA) in a recent article for the Lebanon Daily News.
There are plenty of bad arguments for why taxpayers should continue to subsidize large corporations via the Ex-Im Bank, but none are more misleading than Dent’s claim that “the bank provides financial protections, such as capitol guarantees, for American exporters looking to do business abroad […] where private sector banks are unable to provide the needed assurance.”
This is simply factually incorrect. Most of Ex-Im’s beneficiaries are powerful corporations, not capital-strapped firms. The main foreign and domestic beneficiaries of Ex-Im do not need the government to get access to capital. What’s more, foreign governments often benefit. Many Ex-Im beneficiaries include state-owned companies such as Pemex, the Mexican oil and gas giant, and Air Emirates, the airline of wealthy United Arab Emirates.
On the domestic side, 64 percent of Ex-Im financing benefits 10 large corporations and 40 percent benefits Boeing. Think about that. The primary reason the Ex-Im Bank exists appears to be to promote the specific welfare of a handful of corporations.
These large corporations that benefit from Ex-Im don’t want to lose their perks. They have every incentive to lobby for the Bank to continue.
But normal people matter too. It is critical that we consider the unseen victims of political privilege who pay for these benefits.
First, these victims are taxpayers who now bear the risk for $140 billion in liabilities. No matter what Mr. Dent claims, should the economy turn south and enough companies default on these loans, you Pennsylvanians will be on the hook. Remember Fannie Mae and Freddie Mac? They were solvent before they weren’t, too.
Second, these victims are consumers who pay higher prices for the purchase of subsidized goods. That includes Pennsylvania exporters who use Boeing planes to sell their goods abroad and face inflated costs as a result of the subsidies.
Third, these victims are unsubsidized firms competing with subsidized ones. Not only do they pay higher financing costs, but they also lose out when private capital flows to politically-privileged firms regardless of the merits of their projects. Unfortunately, we will never see the Pennsylvania businesses that could have been. We will never hear from the Pennsylvania workers whose wages weren’t raised or whose jobs disappeared because of unfair competition from Ex-Im-backed firms. Sadly, some people are victimized multiple times: first as taxpayers, then as consumers, then as competitors or workers, and finally as borrowers.
Rep. Dent wants to make you believe that without Ex-Im, Pennsylvanian exports would collapse. Not true. Quite the contrary: Most businesses in Pennsylvania face unfair competition from the subsidized companies thanks to Ex-Im. According to the International Trade Administration, Pennsylvanians exported $39.4 billion of merchandises in 2015. Only $486 million of that was backed by Ex-Im, or roughly 1 percent of all Pennsylvania exports. Pennsylvanians are doing great on their own. Needless to say, Pennsylvania exports wont collapse without Ex-Im.
Rep. Dent also writes that between 2011 and 2015, 246 businesses in the state sought financing from Ex-Im. That’s an average of 49 companies a year. According to the International Trade Administration, on any given year, some 15,600 companies export from the state. It means that over 99.9 percent of companies in Pennsylvania export without any government favors.
These subsidies might be a good deal for those who get them, but most Pennsylvanians will find it unfair that the profits of the winners of this arbitrary government selection come at the expense of the hundreds of thousands of unsubsidized firms, employees, and consumers. Subsidized businesses should not matter more than unsubsidized firms in the Keystone State merely because they happen to have friends like Rep. Dent in Washington. We must end the Export-Import Bank to help the 99.9 percent.