The End of the Ex‐Im Bank?
I’ve been getting a few inquiries lately from folks interested in hearing more about my ideas on closing down the Export‐Import Bank of the United States. This is encouraging: Ex‐Im typically sails through Congress unchallenged. It is quote‐unquote self funding, so is not target number one when it comes to deficit reduction. And it has some powerful backers, including the Chamber of Commerce and Boeing. But in the aftermath of Fannie, Freddie, and Solyndra, people are — finally — beginning to ask questions about just how safe Ex-Im’s activities are for taxpayers, and what the dangers might be of increasing the amount of loans made to risky companies, as the Obama administration is pushing [$]. That move seems to fly in the face of Ex-Im’s admittedly dubious mission of financing only safe transactions (while, and this makes it especially incredible, supposedly only financing transactions the private sector won’t touch). Similarly, while the administration argues that we need to increase funding for Ex‐Im to match increased export credit activity by countries such as China, I would argue that allowing Beijing to set the terms and pace of export credit policy in the United States is foolhardy at best.
U.S. airliners have launched a legal case against Ex‐Im, arguing that its subsidized loan guarantees to foreign state‐owned airliners such as Air India put American carriers at a disadvantage (a possibility I warned about in my paper). This provides a real‐world, commercially significant example of the long‐standing and self‐evident charge that Ex‐Im picks winners and losers in the American economy with, unsurprisingly to anyone with even a cursory familiarity with public choice theory, the most politically connected getting the support.
The bottom line is this: either politicians are serious about reducing the size and scope of the federal government or they are not. If they are, shutting down the Ex‐Im Bank should be a no‐brainer, especially in a political age when “Don’t worry everybody — these loan guarantees are completely safe and pay for themselves” no longer convinces. And corporate welfare is distinctly on the nose.
