October 6, 2014

Only Politically Connected Corporations Benefit From U.S. Export-Import Bank

Veronique de Rugy

George Gibbs Chair in Political Economy
Summary

A debate rages in South Carolina over the possibility that the Export-Import Bank will lose its borrowing privileges at the Treasury Department. This obscure government bank provides taxpayer-backed financing for a small number of domestic and international companies in the hope of boosting U.S. exports.

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A debate rages in South Carolina over the possibility that the Export-Import Bank will lose its borrowing privileges at the Treasury Department. This obscure government bank provides taxpayer-backed financing for a small number of domestic and international companies in the hope of boosting U.S. exports. If you only heard the bank’s supporters, you might think that if its charter were to expire, then exports will collapse, jobs will disappear, small businesses will tank, and South Carolina’s economy will be devastated.

None of this is true.

The Ex-Im Bank is not critical to “promote exports” because over 98% of U.S. exports occur with no Ex-Im Bank subsidies at all. South Carolina actually fares worse than the national average. From 2007 to 2014, only 0.77% of state exports were backed by the bank. Rather, it is only “critical” to the tiny number of U.S. firms whose profits are subsidized by taxpayer-backed Ex-Im Bank assistance.

Nor can the bank be said to promote jobs. Ex-Im Bank’s jobs calculation methodology has been roundly scolded for ignoring the number of jobs destroyed or uninfluenced by Ex-Im Bank assistance. Even if we accept their numbers, the Ex-Im Bank only claims to back fewer than 2% of all export-related employment each year. What’s more, its assistance could be destroying far more jobs than supporters claim it promotes.

The Ex-Im Bank does even less to support small business. The most recent data suggests that Ex-Im Bank subsidies benefit 0.3% of all small business employment and 0.04% of all small business establishments in America each year. Meanwhile, the other 99% of small business firms and employees are put at a competitive disadvantage by Ex-Im Bank subsidies — the vast majority of which goes to large, politically connected corporations.

Despite these facts, Ex-Im Bank supporters are especially keen to fear monger in the Palmetto State. South Carolina houses offices of the country’s top exporter and the Ex-Im Bank’s biggest beneficiary: Boeing.

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