September 8, 2014

Acknowledge Unseen Victims of Export-Import Bank Deals and Shut it Down

Veronique de Rugy

Senior Research Fellow
Summary

The Export-Import Bank is the epitome of corporatism. It is time to acknowledge the unseen victims of the Ex-Im Bank deals and stand up for them by shutting it down.

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A battle is raging in Washington over the impending expiration of the U.S. Export-Import Bank’s charter. This government bank purports to promote a handful of U.S. exporters by lending cheap, taxpayer-backed loans to foreign and domestic corporations. In the process, Ex-Im Bank puts Florida firms and workers at a disadvantage.

Ex-Im Bank’s corporate beneficiaries say much to defend their government privileges. They argue that the bank promotes small business, improves exports, fills market financing gaps, and supports jobs. Their claims are either misleading or simply wrong — and are tailored to protect the corporatist status quo. Meanwhile, the many unseen victims of Ex-Im Bank subsidies are ignored.

Contrary to lobbyist talking points, the Ex-Im Bank is firmly in the “big business” business. Over a third of its activities benefit one giant company: Boeing. Over 75 percent of the bank’s financing aids 10 giant beneficiaries, such as Caterpillar, Bechtel, and General Electric.

The Ex-Im Bank’s effect on small businesses is negligible. Its records suggest that less than 0.3 percent of small business employees and less than 0.04 percent of small business establishments benefit from the Ex-Im Bank annually.

Florida residents should also be skeptical of lobbyist fear-mongering about the catastrophes that will befall U.S. exports without the bank. More than 98 percent of all U.S. exports occur with no Ex-Im Bank subsidies at all.

Florida fares worse than the national average. From 2007 to 2014, Ex-Im Bank only subsidized 1.76 percent of the value of Florida exports and 1.17 percent of the value of small business exports. Meanwhile, Washington state — home of Boeing — had more than 22 percent of its state exports subsidized at the same time. Ex-Im Bank forces Floridians to bear the risks of Boeing’s private profits.

It is not true that Ex-Im Bank is necessary to fill market financing gaps, either. Recent reports from S&P, Fitch, and Goldman Sachs analyze the impact of shutting down the Ex-Im Bank. They conclude that sufficient private-sector financing exists to adequately finance worthy projects. The only difference is that financial risks would be rightly transferred away from taxpayers and toward the companies that profit from them.

It is also absurd to claim, as Ex-Im Bank supporters do, that multinational corporations such as Boeing simply could not find financing without taxpayer-backed export credits. Rather, Ex-Im Bank beneficiaries such as Boeing simply want to enjoy lower costs by forcing taxpayers to shoulder their risks.

How about Ex-Im Bank’s impact on jobs? The “205,000 jobs” that it claims to have supported last year amount to fewer than 2 percent of all export-related jobs in 2013. This number is likely overstated. The Government Accounting Office sharply criticizes Ex-Im Bank’s job calculation methodology for, among other flaws, failing to assess how many jobs are unaffected or destroyed by the bank’s lending.

It is this unfairness that motivates the movement to end Ex-Im Bank corporatism once and for all.

The Ex-Im Bank places the 99.7 percent of unsubsidized Florida small businesses at a competitive disadvantage. It subsidizes lower competitors’ costs and artificially boosts profits. Unsubsidized firms, meanwhile, find it harder to attract capital and expand their businesses, even if they produce a superior product or service. The subsidized get richer and the unsubsidized get poorer.

Tragically, Ex-Im Bank privileges for the few come at the expense of countless Floridians. Employees of unsubsidized firms may see their hours cut, their salaries stagnate, or even their jobs disappear because their employers cannot compete on a level playing field. Unsubsidized firms lose market share and revenue. Consumers must pay more for subsidized goods. The vast majority of unsubsidized Floridians lose so that a few of them can earn a little more money.

The Export-Import Bank is the epitome of corporatism. It is time to acknowledge the unseen victims of the Ex-Im Bank deals and stand up for them by shutting it down.