Topic: Government and Politics

Would We Start the Ex-Im Bank Today?

One point that I think gets overlooked in the Ex-Im Bank debate is whether we would create the bank today, if it did not already exist. If there were no export credit agencies out there already, what would the discussion over whether to start one look like? I have a difficult time believing that, based on current understandings of finance markets, a proposal to start using government-run export credit banks would gain any traction today.

So what we really have is a program that was created many years ago, vested interests have emerged to fight its repeal, and the practice has spread around the world. It’s basically just status quo bias that is keeping Ex-Im around, as I argue in this HuffPo piece:

It is difficult to imagine that we would create an Ex-Im Bank today if none existed. Yet we cannot seem to get rid of it.

The Ex-Im Bank was created in 1934, at a time when finance markets were undeveloped and international trade was filled with uncertainty. This was also a time of growing economic intervention in the economy, centered around the New Deal. As the Ex-Im Bank itself explains, “The Export-Import Bank was established by President Franklin D. Roosevelt, in 1934, as a New Deal program and to support his foreign policy.”

In the ensuing decades, economic thinking has changed radically, as our understanding of markets has grown. While it is possible that financing was simply not available for certain transactions at the time of Ex-Im’s creation, it is difficult to believe this is the case today. Finance is a sophisticated field with numerous options. If financing is not available for a particular transaction, it is almost certainly because the sale is not commercially viable. As The Economist recently put it, “The scarcity of private financing for certain exports reflects genuine risks that taxpayers are forced to assume.”

Of course, this problem of overcoming the status quo occurs in other policy areas as well. No doubt this blog’s readers can think of many examples where programs exist and linger on, even though they could never generate the support to start them today.

Should the U.S. Take the Lead on Climate Change Policies?

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

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With its 2007 ruling in Massachusetts vs. EPA, the U.S. Supreme Court opened the door for the U.S. Environmental Protection Agency to regulate carbon dioxide emissions under the 1990 Clean Air Act Amendments. But to meet the Supremes’ criteria for regulation, EPA first had to find that the emissions of carbon dioxide and other greenhouse gases were an “endangerment” to public health and welfare. While the sitting Bush administration was reluctant to do this, President Obama’s EPA made the “preliminary” finding of endangerment a mere 94 days after his inauguration.

The “final” Endangerment Finding came on December 7, 2009, just in time to provide the United States credibility at the then-starting Copenhagen Conference, a United Nations affair at which a replacement to the failed Kyoto Protocol was to be enshrined. The meeting was the most disastrous yet for global warming hawks, but President Obama quickly declared victory and rushed off on Air Force-1, in order to beat what was to be the first of three bona fide blizzards in Washington that winter. He lost that race, too.

A torrent of regulations followed, “culminating” in EPA’s recent proposal to regulate greenhouse gas emissions from existing electric power plants. That controversial proposal, announced in early June, followed on the heels of EPA’s January proposal of regulations limiting greenhouse gas emissions from new power plants.

If adopted (and they will be), these proposed regulations will be the biggest diktats yet originating from Obama’s Climate Action Plan. Administration officials are already celebrating the salvation of mankind, even before the regulations are finalized.

The administration is holding “hearings” around the country so it can take your input to improve these already near-perfect rules. To help guide us, the White House just released a new report describing how the costs of climate change will skyrocket the longer we delay taking action to stop it.

According to EPA Administrator Gina McCarthy, the collection of administration actions on climate change is “changing the tone” in talks with foreign nations. No doubt encouraged by this “changing tone,” President Obama is scheduled to attend a UN climate “summit” in New York this September.

To what end? What benefit will “taking the lead” on climate change actually provide the United States?

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.

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. 

Playing Tourist in Beijing: Communing with the Greatest Mass Murderer in History

It isn’t often that I get to spend time with mass murderers, let alone the greatest mass murderer in history.  But in playing tourist in Beijing I had a chance to hang out with the Great Helmsman himself, Mao Zedong.

His mausoleum sits at the center of Tiananmen Square, facing the Gate of Heavenly Peace with its famous Mao portrait.  The facility’s hours of operation are few and the number of visitors many.  When I joined the line mid-morning it began at the building’s side, headed to the rear, then reversed course back toward the front.  The line moved at a steady slow walk, with individuals and groups constantly attempting to push by and gain a couple feet. 

The lines split apart going through a security check-point—no doubt, al-Qaeda has placed the mausoleum high on its target list.  The line then reformed and moved forward again.  Vendors sold flowers which people deposited on entering the mausoleum, in front of a statue of a sitting Mao, backed by a painting of a peaceful mountain scene.  He looked thoughtful, as if plotting his next madcap scheme, a la the “Great Leap Forward,” actually into the abyss, and the Cultural Revolution, which consumed even the most dedicated communists. 

In the next room the Great Man—assuming it really is him—lies under glass beneath a blanket decorated by a hammer and sickle. Two soldiers stood guard behind him, while mausoleum staff urged onlookers to move along.  No time to look at the body of the greatest mass murderer in history, who caused decades of human carnage.