Big-business executives, big-bank dealmakers, big-government politicians and big-name politicians converged on Woodley Park last week to rally for increased cooperation among big government, big manufacturers and big banks.
The business and government elites who gathered at the Omni Shoreham hotel for the Export-Import Bank annual conference showed anger and disbelief that some conservatives in Congress might block — or at least delay — reauthorizing Ex-Im, which subsidizes U.S. exports through direct loans and loan guarantees to foreign buyers.
Exporters get more business and banks get risk-free loans when Ex-Im guarantees them. Politicians and bureaucrats get more power when government subsidizes exports. Foreign buyers get discounted goods thanks to Ex-Im. But how do these beneficiaries justify profiting at taxpayer risk? And how does the Obama administration, with all its anti-special-interest rhetoric, justify its full-throated push to expand and extend Ex-Im?
First, proponents claim it’s not corporate welfare. Ex-Im President Fred Hochberg expressed disbelief at this charge. “Really?” he asked in his opening remarks Thursday morning. “Corporate welfare?”
Well, that was precisely the charge leveled in 2008 by a certain Illinois senator and presidential candidate who attacked “the Export-Import Bank that’s become little more than a fund for corporate welfare.” Now that Barack Obama is president, even more Ex-Im money is going to the biggest businesses.
Hochberg argued Ex-Im isn’t corporate welfare because it doesn’t “cost taxpayers money.” Which is to say, Congress moved Ex-Im off-budget in the last decade. The agency funds its financing with fees and revenue from past loans.
But recently, banks and Realtors have been quietly making the case that there really was no downside to Fannie Mae and Freddie Mac. After all, they didn’t cost taxpayers money, either — or at least not until the defaults started rolling in.
The difference: Fannie and Freddie were only implicitly backed by U.S. taxpayers. Ex-Im’s taxpayer backstop is explicit, providing private profit at public risk. But don’t call it corporate welfare.
Ex-Im defenders reject even more objective descriptions. “It’s not a subsidy,” Boeing’s Kristen Richmond shot back at me in unison with her colleague Patrick Needham when I used the S-word to describe Ex-Im financing.
“They aren’t subsidies,” Ex-Im spokesman Phil Cogan scolded me at the conference. “We don’t provide subsidies,” Hochberg proclaimed onstage Thursday.
Team Ex-Im has quite a narrow definition of “subsidy,” it seems. When a government agency places the full faith and credit of the United States behind a sale, thus increasing the seller’s profit (and, in the case of guarantees, boosting the lender’s profit), that’s a subsidy by any normal understanding of the word.
When not playing word games, what do Ex-Im defenders argue?
For months, the Obama team has relied on an almost jingoistic sentiment to promote export subsidies: We can’t let China or Germany beat us in the export game! Boeing representatives always point to the European subsidies Airbus receives. Of course, Europeans justify these subsidies by pointing to U.S. subsidies. Jetmakers and bureaucrats on both sides of the Atlantic win.
Recently, though, the administration has been sharpening its argument for policies favoring manufacturers, signaling in the past few months that Obama will run a pro-manufacturing banner, touting the Detroit bailout and heightened export subsidies.
This theme nicely bridges the populist and the elite — exalting blue-collar jobs and playing to patriotism while justifying government alliance with big business and its financiers.
This spring, the administration finally laid out an economic (rather than simply political) justification for Obamanomics. Gene Sperling, director of Obama’s National Economic Council, made the case last month that, because of positive spillover effects, “manufacturing is worthy of a special emphasis in the Obama economic strategy.”
Here’s what Sperling never addressed but was glaringly clear at the Ex-Im conference: When government steers the economy, big business benefits while small business suffers.
Ex-Im conferences always shine the spotlight on smaller exporters as much as possible, but everyone familiar with the agency understands that it’s really “Boeing’s Bank.” In fact, Richmond, Boeing’s “director of strategic regulatory policy,” used the phrase “until we (italics added) get reauthorized” to describe Ex-Im’s reauthorization to me.
Thursday’s keynote speaker, former President Clinton, personally thanked his former White House economic aide Tim Keating, who was in the audience — because he is now Boeing’s VP for government affairs. Small businesses can’t afford Tim Keating as their top lobbyist.
The Obama administration can make a plausible case that subsidies to Boeing and General Electric ripple out (don’t say “trickle down”) and help small business, and thus the whole economy. But outside critics make an even more plausible case that this is a self-serving argument by the politicians and corporate titans who profit from corporate welfare.
Timothy P.Carney, The Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Monday and Thursday, and his stories and blog posts appear on washingtonexaminer.com.
