Defenders of the Export-Import Bank argue that the agency is profitable.

This argument convinces some people to support (or at least tolerate) Ex-Im. It shouldn’t.

Ex-Im’s profit is (1) an accounting fiction, and (2) a temporary, unstable state. And (3) to the degree that some Ex-Im programs may be “profitable,” that’s an argument that the private sector could carry out their functions.

The Export-Import Bank’s profits are an accounting fiction

Loans and loan guarantees are an odd business for government to be in, and so the budgetary accounting rules around them are a bit of a mess.

Some recent loan guarantee programs, like the Wall Street bailout, use “fair value accounting” to determine their budgetary costs. Ex-Im uses a different accounting method, created by the 1990 Federal Credit Reform Act, which results in lower budgetary costs.

The Congressional Budget Office consistently argues that FCRA accounting is improper and misleading for Ex-Im. In March 2012, the CBO wrote: “FCRA cost estimates understate the cost of federal credit programs to the government” because they don’t take into account all the risks included in Fair Value Accounting.

Ex-Im would be budgeted as a $2 billion cost to taxpayers over a decade if proper accounting was used, the CBO concluded in May 2014.

Fannie Mae and Freddie Mac didn’t cost taxpayers anything until they did, and Ex-Im poses the same risk

The Export-Import Bank exposes taxpayers to more than $110 billion in foreign companies’ debt. (Ex-Im’s total exposure as of the end of Fiscal Year 2013 was $113.8 billion.)

In recent years, defaults have been low enough that Ex-Im’s fees to banks and borrowers have exceeded its costs. Ex-Im defenders use this fact to say Ex-Im operates “at no cost to the taxpayer.”

But that’s a temporary state, and an artifact of good fortune. Fannie Mae and Freddie Mac also operated “at no cost to the taxpayer,” its defenders argued, until they collapsed. “Freddie Mac benefits home buyers and renters at no cost to the government,” Freddie Mac CEO Leland Brendsel said in 1996.

Eventually Fannie and Freddie collapsed, and taxpayers picked up the tab. That could happen with Ex-Im’s 10-figure exposure.

In 1987, Ex-Im asked Congress for a bailout. In the following decade, even using FCRA accounting, Ex-Im “cost the U.S. taxpayers about $4 billion” between 1992 and 1997,” the GAO reported at the time. If Ex-Im's foreign borrowers ran into trouble, so would the U.S. taxpayers.

If some Export-Import Bank activities are profitable, that suggests those activities could be carried out by the private sector

Many countries operate state-owned companies that are supposed to generate revenue. In the U.S., revenues are supposed to come from taxes, while profitable undertakings are left to the private sector.

Ex-Im defenders argue that the agency is profitable. This suggests that the agency’s activities — its loan guarantees, loans and credit insurance — could be conducted by private banks, insurers and hedge funds.

For instance, consider how the private sector has reacted as the Ex-Im and its foreign counterparts have gotten rid of their most generous financing for aircraft (Ex-Im’s largest industry by far). Boeing has written: “Deliveries supported by lessors are expected to continue growing as the higher cost of export credit and changes in bank lending make leasing an economical alternative for more airlines.”

Commercial banks, investment banks, insurance companies, hedge funds and other financial institutions all offer the products Ex-Im does (though at the higher cost and without the full faith and credit of the United States). There are even firms dedicated to financing international trade.

Corporate welfare's costs are not typically budgetary costs, but distortions

The ethanol mandate and the sugar program are probably the most notorious cases of corporate welfare in the U.S. The sugar program works through loans and protectionist trade quotas. The ethanol mandate works by forcing refiners to buy ethanol. Neither of these add to the deficit directly, but they are clearly corporate welfare.

The cost that ethanol, sugar and Ex-Im impose are on the entire economy. They push consumers, lenders and investors to act in ways that are inefficient —except for the policies. These policies reward the favored industries by pushing business their way — and thus away from the activities that private actors would have chosen.