Media have framed the debate over Export-Import Bank reauthorization as yet another battle in the war being waged by free market extremists to wrest control of the Republican Party from what they see as the infidels of the business establishment. That simplistic narrative, perpetuated by an irrepressible disdain for anything that whiffs of Tea Party ideology, has brought editorial boards and journalists from the Left to stand shoulder-to-shoulder with the multinational corporations they normally demonize in an effort to beat back a common foe.
But the compelling case against Ex-Im is less an ideological than a moral one. It is not merely that Ex-Im puts taxpayer resources at risk or that the Bank’s operation encourages too close a relationship between big business and government or that resources are being used inefficiently. Anyone concerned about economic fairness should see the virtue in terminating a program that benefits some companies at great expense to many, many others. But the window to that view has been shuttered by a media that finds it more important to portray the reformers as childish idealists throwing tantrums.
Ex-Im is a government-run export credit agency that arranges special financing to facilitate sales between U.S. companies and foreign customers. Barring congressional reauthorization, its charter will expire on September 30. Supporters claim that since exports are good for growth and job creation and since the Bank “creates” exports, failure to reauthorize will hurt the economy. But that conclusion rests on the illusion of single-entry accounting. It fails to consider the substantial, but more difficult to observe costs.
There are opportunity costs, representing the growth that would have occurred had Ex-Im’s resources been deployed more efficiently in the private sector. There are intra-industry costs – those incurred by the unsubsidized competitors of firms receiving Ex-Im subsidies. And there are “downstream” industry costs borne by producers whose domestic suppliers receive export subsidies. These downstream firms are hurt because crucial inputs become more expensive, while their foreign competition gets subsidies from U.S. taxpayers.