April 16, 2012

Growth in U.S. Export-Import Bank Authorizations

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Today, President Obama touts the Export-Import (Ex-Im) Bank as the key to his administration’s goal of doubling U.S. exports by 2015. However, then Senator Obama denounced the Ex-Im Bank as “little more than a fund for corporate welfare.”

With the reauthorization of the Ex-Im Bank set to expire on May 31, Mercatus Center senior research fellow Veronique de Rugy uses Ex-Im Bank data from the past five years to examine the growth in the bank's approved financing for working capital, loans, and loan guarantees that support U.S. exports.

In fiscal year 2011, the Ex-Im Bank authorized a historic total of $32.7 billion—a 33.8 percent increase in total authorizations from FY 2010. This increase follows a four-year expansion of the bank’s lending, which was $12.6 billion in 2007 and had more than doubled by 2011.

While authorizations have increased, Ex-Im backed exports still remain a mere footnote in the overall U.S. export market. According to Cato trade policy analyst Sallie James, exports supported by the bank “represented less than 2 percent of the $1.8 trillion worth of all U.S. goods and services exported in calendar year 2010.”

Moreover, the Ex-Im Bank’s 2011 annual report shows that Bank activity remains highly concentrated in certain industries, primarily aviation, gas and oil exploration, and manufacturing. Some of the primary beneficiaries within these industries include the Boeing Company (the largest U.S. exporter), which has 49 deals with the bank worth $10.8 billion, and Solyndra, which has two deals worth $10 million. While these companies benefit from the unhealthy marriage between the private sector and government, many others don’t.

The Ex-Im Bank’s facade of boosting exports and creating jobs is not well supported by its own data. The actual effect of the bank’s activity is the creation of perverse incentives, moral hazards, and inefficient outcomes that has become a fund for corporate welfare. It is worth questioning whether the United States, with mounting debt problems and the possible expiration of the Ex-Im Bank’s reauthorization, needs yet another agency to subsidize companies with taxpayers picking up the tab.