It’s really hard to buy solar panels these days. It’s hard to acquire the materials needed to build solar panels these days.
“We’re seeing delays in our bread and butter equipment,” the boss at San Antonio’s electric utility, CPS Energy, recently said.
“Supply chain issues are a significant problem” in the solar panel world, Forbes reported. “So is the labor shortage. The one-two punch is causing about a 20% increase in prices — everything from cold storage to solar plants, adds Ray Kowalik, chief executive of Burns & McDonnell.”
Yet today, a U.S. government agency will vote to subsidize a Norwegian company building a solar farm in Honduras. That agency is the Export-Import Bank of the United States.
Given that private companies and profitable industries exist to buy, sell, and finance solar panels, it has always been hard to justify Ex-Im’s existence. But in these times of high inflation and supply chain backlogs, subsidizing U.S. exports seems particularly unwise.
The immediate result of increased exports is more money in the United States and less stuff in the U.S. More money and less stuff to buy with it — that is the textbook explanation for how inflation happens.
Put another way, subsidizing U.S. exports drives up demand for U.S.-made goods. Driving up demand, all else being equal, drives up prices. Trade economist Steven Suranovic puts it this way: “When a large exporting country implements an export subsidy, it will cause an increase in the price of the good on the domestic market and a decrease in the price in the rest of the world.”
I explain this well, I believe, in this video I made a few years back:
The counterargument is that when foreign buyers bid up U.S. exports, that added demand doesn’t always increase prices, but it can end up increasing supply. If John Deere gets a big order from the Netherlands for tractors, that might make tractors more expensive, or it might push Deere to expand operations, thus keeping prices stable.
But in 2022, and for the foreseeable future, ramping up production isn’t really an option. Everyone is backlogged at every step of the supply chain.
So Ex-Im’s subsidies in September 2022 for foreign purchases of U.S.-made solar panels just bid up solar panels in the U.S., reduce our supply, and increase the amount of cash floating around the economy.
The Biden administration should suspend all export finance until inflation is under control. If it doesn’t, Congress should put Ex-Im on ice.
