Most U.S. Manufacturers Victimized by Ex-Im’s Hidden Costs

In an earlier post today, I described a reasonable methodology for estimating the hidden costs imposed on companies whose suppliers receive export subsidies from the Export-Import Bank. Ex-Im officials like to talk about how they “grow the economy” and create jobs by enticing foreign customers with low-rate financing to buy U.S. exports. As I described in that earlier post, when the cost to business of exporting is mitigated by subsidies, companies will likely export more. That may be good for them, but it’s not so good for their U.S. customers, whose foreign competition is now enjoying lower costs (courtesy of U.S. taxpayers). Delta Airlines’ complaint about subsidized Boeing sales to Air India having an adverse impact on Delta, who competes for passengers with Air India, is a fairly clear example of the problem.

As an approximation of the cost imposed on Downstream Industy A, (let’s call it the Delta Effect), I used the subsidies received by every industry whose output is used in Downstream Industy A’s production process, adjusted those subsidies by the importance of the input relative to the total of all intermediate goods inputs, and summed up the values.  I did this for every 6-digit NAICS manfuacturing code and presented tables of results in descending order from biggest victim to biggest beneficiary.  There were 236 industries – perhaps too much information, particularly for a blog post.

So for greater clarity, this table compiles the data at the broader, 3-digit NAIC industry level.  

As you can see, most aggregated 3-digit industries are victims of Ex-Im subsidies.  And most of the 6-digit industries within each broader 3-digit industry are victims, too. U.S. manufacturers of electrical equipment, appliances, furniture, food products, non-metallic metals, chemicals, computers, plastics, rubber, paper, primary metals, and many other goods should give Delta a call and get really busy during Congress’s August recess.

Florida Parents Fight for Educational Choice

On what would have been the 102nd birthday of Milton Friedman—the godfather of educational choice—six families with children that have special needs are fighting back against Florida’s largest teachers union, which is seeking to kill the Sunshine State’s newest educational choice program.

Milton Friedman on educational choice.

The Florida Education Association is suing the state of Florida to eliminate the new Personal Learning Scholarship Account (PLSA) program, among other recent education reforms, including an expansion of the state’s scholarship tax credit law. Modeled after Arizona’s popular education savings account (ESA), the PLSA would provide ESAs to families of students with special needs, which they could use to pay for a wide variety of educational expenses, such as tuition, tutoring, textbooks, online learning, and educational therapy. Six families with special-needs children who would have qualified for the program are seeking to intervene as defendants in the lawsuit, represented by the Goldwater Institute’s Clint Bolick.

The union’s lawsuit argues that the legislation creating the PLSA, Florida’s Senate Bill 850, violated the state constitution’s “one subject rule” because it contained a variety of education reforms.

Suing the President: Maybe Legal, Likely Unwise

“So sue me,” said the president. Late yesterday, in a mostly party-line vote, the House authorized Speaker Boehner to do just that—to call President Obama over his repeated acts of constitutional dereliction. This is a close call, legally. But as I argued recently, I believe it would be unwise for Boehner to actually bring such a suit, much less to initiate impeachment proceedings, as some Republicans are urging him to do. With mid-term elections less than 100 days ahead, the nation’s attention should be focused on Obama’s sorry record, not on the legal merits of a partisan suit, as inevitably would happen given the legal problems surrounding such a suit.

Those problems are not insignificant. Under the Constitution’s Case or Controversy Clause, a plaintiff must have “standing” to bring a suit. In this case, the House must show some injury in fact that is fairly traceable to the president’s conduct and is redressable by the court. The theory the House is relying on here is novel: the idea is that Congress as an institution is injured when the president refuses to perform his constitutional duty to execute the law, as when he postponed Obamacare’s employer mandate, thus nullifying Congress’s act and leaving it no remedy—it’s power to withhold funds from the executive branch in this regard would have no effect on his failure to act, as it would had he acted contrary to the law.

That may get Congress over the standing hurdle. But again, if it doesn’t, and even if it does, attention will still be focused on the suit, not on Obama’s record. As for impeachment, that would be an even greater distraction, as we saw in the case of President Clinton, and would be a fool’s errand as well, given the Democratic Senate. Frustration over this lawless president is palpable, as the polls show. But at the end of the day, the remedy is likely to be political, not legal. Put plainly, there is a constitutional remedy for these constitutional wrongs: it’s in the voting booth.

House Lawsuit against Obama Has Legal Merit

When the president violates the Constitution, there has to be a remedy short of impeachment, which is a blunt political tool that does nothing to reverse the illegal actions at issue. Speaker Boehner’s proposed lawsuit seems measured to challenge what is perhaps President Obama’s most egregious extra-constitutional action, rewriting the Affordable Care Act to suit his political needs. 

When Congress passes a law, it is the president’s duty to enforce it. The president has discretion in how to enforce it, to be sure, but he can’t suspend, waive, ignore, or change it. The House of Representatives is thus well-placed to sue over the institutional injury that the executive branch has foisted on the legislative branch. 

For more, see this week’s op-eds by David Rivkin and Elizabeth Price Foley in the Wall Street Journal and Washington Post.

The Export-Import Bank and Its Victims: Which Industries Bear the Brunt

The Export-Import Bank of the United States is a government-run export credit agency, which provides access to favorable financing for the foreign customers of some U.S. companies.  For several months, Washington has been embroiled in a debate over whether to reauthorize the Bank’s charter, which will otherwise expire on September 30.  While Republican House leadership remains publicly committed to shutting down the Bank, a bipartisan group of eight senators introduced reauthorization legislation last night, setting the stage for a post-August recess showdown.

Reauthorization buffs contend that Ex-Im fills a void left by private sector lenders unwilling to provide financing for certain transactions and, by doing so, contributes importantly to U.S. export and job growth.  Rather than burdening taxpayers, the Bank generates profits for the U.S. Treasury, helps small businesses succeed abroad, encourages exports of green goods, contributes to development in sub-Saharan Africa, and helps “level the playing field” for U.S. companies competing in export markets with foreign companies benefitting from their own governments’ generous export financing programs.  Accordingly, failure to reauthorize the Bank’s charter would be akin to unilateral disarmament.

But those justifications – two rationalizations, really, and a few token appeals to liberal sensibilities intended to create the illusion of a bipartisan imperative for reauthorization – are unpersuasive or non-responsive to Ex-Im’s critics.  By effectively superseding the risk-based decision-making processes of legions of private-sector, profit-maximizing financial firms with the choices of a handful of bureaucrats using non-market benchmarks and pursuing often opaque, political objectives, Ex-Im risks taxpayer dollars.  That Ex-Im is currently self-sustaining and generating revenues is entirely beside the point and is no more reassuring than a drunk driver rationalizing that he made it home safely last night so there’s no danger in drunk driving tonight.

House Border Bill Would Treat Children Worse than Adults

After much debate, the House finally rolled out its version of a supplemental appropriations bill to deal with the surge of unaccompanied children (UAC) entering the United States.  The bill would treat Mexican and Central American UAC equally under the law - meaning they all would have fewer due process protections than many adults.  

1.       Interviews: The bill would treat Central Americans the same as how Mexican children are already treated. But Mexican children are subject to fewer due process protections than adults in two ways. First, apprehended adults are interviewed by asylum officers who are trained in country-conditions and asylum law.  Under current law, Mexican children are interviewed by Border Patrol agents who are untrained in this area.  In one case, a United Nations report found that a Border Patrol agent believed that a child who had expressed a fear of being trafficked had to be returned “because the paperwork was already filled out.”  Children are also expected to describe their fears of persecution and descriptions of traumatic and violent experiences to a gun-carrying law enforcement agent, which in many cases is an unreasonable request. In fact, a 2011 study by the Appleseed Foundation concluded that “no meaningful screening is being conducted” by Border Patrol.

2.       Appeals: Second, under current law, adult asylum seekers can appeal a determination by an asylum officer that they lack a “credible” asylum claim to an immigration judge (IJ).  The IJ can reverse the decision.  Mexican children cannot appeal the decision of a border agent – they are simply summarily removed from the United States.  This bill would treat Central American children in the same way, denying them an appeal.  The importance of these provisions was recently highlighted by the case of a Honduran girl who was accidentally deported to Mexico.  The United Nations found that border agents are requiring children to “prove they are being persecuted or trafficked” on the spot despite the fact that they are supposed to simply screen out those without any claim at all.  IJs mitigate that problem. 

Ukraine Crisis Reminds Americans Why NATO Should Not Expand

The bitter conflict in Ukraine drags on.  Russia continues to destabilize Kiev and NATO remains divided on how to respond.

Washington has taken the lead against Moscow even though America has little at stake in Russia’s misbehavior.  In fact, the crisis has generated a spate of U.S. proposals to take military action and expand NATO.

For instance, Sen. John McCain urged adding Ukraine to the “transatlantic” alliance.  Former UN ambassador John Bolton suggested including Georgia and Ukraine.  Other proposed candidates for the alliance include Armenia, Bosnia-Herzegovina, Finland, Kosovo, Macedonia, Moldova, Montenegro, and Sweden. 

Efforts to expand NATO are strikingly misguided.  The end of the Cold War eliminated the reason for creating the alliance. 

However, alliance advocates acted like nothing had changed and proposed new justifications for the old organization.  Member governments eventually turned NATO into a mechanism to integrate Central and Eastern European states.   

NATO has turned into a dole for indolent rich countries.  After Moscow’s collapse the Europeans steadily reduced their military outlays. 

Now the Ukraine crisis has reminded everyone that the alliance might be called upon to confront nuclear-armed Russia.  Several of the newest members are screaming for America to “reassure” them by establishing bases and deploying troops.

This ludicrous situation demonstrates the folly of NATO expansion.  The U.S. should not compound its earlier mistake by bringing in additional members with even less strategic value. 

The list of potential members suggests strategic madness in Washington.  For instance, tiny Balkan states Bosnia-Herzegovina, Macedonia, and Montenegro never have mattered for U.S. security. 

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