President Bush’s budget proposes cutting nearly all funding for the favorite government agency of many American big businesses — and they’re just thrilled.
The Export-Import Bank of the United States is a federal agency that loans money and guarantees loans to foreign governments and companies to help the foreign buyers buy American goods.
In recent years, Congress has appropriated more than $900 million for Ex-Im, but this year, the president’s budget calls for only $1 million, a 99 percent reduction. This is hardly a step by the president to abolish corporate welfare, but rather a move to reduce the scrutiny of corporate welfare by making Ex-Im self-financing.
Ex-Im is a posterboy for corporate welfare. Its mission is to transfer money from U.S. taxpayers, through foreign buyers, and ultimately into the pockets of American companies. While the agency touts its support for small business, a vast majority of its money goes to subsidize sales by the largest corporations in America.
The money from Ex-Im loans and loan guarantees — the agency’s biggest transactions, and the only kinds that are itemized in Ex-Im’s annual report — goes overwhelmingly to a handful of large corporations, including Halliburton, Bechtel, General Electric, Caterpillar and Westinghouse. But there’s a reason Ex-Im is known as “Boeing’s Bank.”
In fiscal years 1998 through 2005, Ex-Im has issued $63.5 billion in loans and long-term guarantees. In those years, $33 billion of Ex-Im subsidies went to Boeing. That means that a majority — 52 percent — of Ex-Im’s money went to help just one company.
These same well connected companies, including Boeing, support the near-zero level of appropriations Bush is requesting for Ex-Im. The Coalition for Employment through Exports, whose head describes the group’s members (Boeing, Bechtel and GE among others) as “the most active users of Ex-Im,” has made it clear CEE “strongly favors” the Bush proposal basically to end appropriations for the agency.
Ex-Im charges fees when it guarantees loans, and it collects principle and interest on the direct loans it has issued. For years, this revenue stream from Ex-Im’s activities has gone straight into the general fund as “miscellaneous Treasury receipts.” Meanwhile, Congress has been passing appropriations for Ex-Im that approach a billion dollars some years. The White House this year has proposed to let Ex-Im keep its receipts, and to cut off appropriations to the agency.
At first glance, cutting off appropriations to one agency while keeping it running sounds like the best of both worlds. But a closer look raises many problems.
First, if Ex-Im generates enough revenue to fund all of its operations, why is it a government program at all? If it makes a profit, why not privatize it?
Edmund B. Rice at CEE says that, while the export financing Ex-Im undertakes may be profitable, private banks still eschew it because there are so many more profitable things for them to do with their money. In other words, lending to Boeing’s foreign customers may make a buck, but it doesn’t beat the market.
But being a government agency provides Ex-Im an advantage a private bank might not have: taxpayer bailout. Ex-Im is currently exposed to about $60 billion in outstanding loans and loan guarantees.
Some of that financing is in places such as Azerbaijan, Zimbabwe and Ethiopa. If any of those loans default, the federal government foots the bill — whether or not Ex-Im is getting an annual appropriation.
On a budgetary level, cutting off Ex-Im doesn’t help us out, either. While taxpayers lose an expense, we also lose a source of revenue — including the repayments on the loans we’ve already made through Ex-Im.
Most importantly, we need to worry about what it means for good governance to move Ex-Im off the books, so to speak. Rice said his members are pleased with the Bush proposal because it might “end the traditional attack on Ex-Im by skeptics as corporate welfare.”
Rice is referring to the brief flurry of criticism the agency receives from hard-core fiscal conservatives and anti-corporate-welfare liberals every year during the appropriations process. These little battles never amount to much, but Ex-Im’s dependents might have new reason to worry.
The foremost liberal critic of Ex-Im is now a senator, Bernie Sanders of Vermont. With Sen. John McCain, R-Ariz., and Sen. Tom Coburn, R-Okla., picking at spending waste from the GOP side in the upper chamber, Ex-Im and its clients have good reason to want less scrutiny. Zeroing out Ex-Im might sweep it out of the sight of budget hawks, which could keep this spigot of corporate welfare flowing.
Examiner columnist Timothy P. Carney is the author of “The Big Ripoff: How Big Business and Big Government steal your money.”
