The Trump administration may strike a blow to corporate welfare if recent public comments by Treasury Secretary Steve Mnuchin tell us anything.
Mnuchin hinted that Trump may transform the Export-Import Bank of the United States — an agency that mostly subsidizes a few large businesses, their foreign (largely state-owned) customers, and some giant Wall Street banks — into an agency that mostly subsidizes U.S. businesses trying to do business overseas.
“Boeing’s Bank” as Ex-Im is known around D.C., would actually become what President Barack Obama always pretended it was: another small-business subsidy.
In a typical year, Ex-Im dedicates 80 percent of its funding to subsidizing exports by big businesses, and half of that — 40 percent of all Ex-Im financing — subsidizes Boeing’s sales. The five largest exporters subsidized by Ex-Im pocketed 57 percent of all Ex-Im subsidies in 2014, the last full year before Ex-Im’s operations were hampered by a political fight over its existence.
This is why candidate Obama called Ex-Im “little more than a slush fund for corporate welfare.” President Obama then ramped up the Boeing subsidies (reaching $12 billion in the 2012 fiscal year) while selling the agency as a friend of the little guy: “It helps small businesses go global,” Obama argued in a 2015 op-ed. “It helps American entrepreneurs take that next step.”
Obama pulled out all the stops to save Ex-Im in 2012, 2014, and 2015 when conservatives fought to kill the agency. Big Business and the Democrats won the battle, and Ex-Im survives.
But as a casualty of this fight, “Boeing’s Bank” hasn’t subsidized a single Boeing jet since June 25, 2015, when the board approved taxpayer-backed financing to Comair of South Africa ($79 million), Biman Bangladesh Airlines ($89 million), Cargloux Airlines of Luxembourg ($171 million), and Emirate Airlines ($258 million), all to buy Boeing jets.
Ex-Im’s charter expired five days later, thanks to conservatives in both chambers blocking a vote on renewal. Ex-Im’s allies finally pushed a reauthorization measure through and restored the agency in December 2015. But over that summer, two members of Ex-Im’s board of directors, Patricia Loui and Sean Mulvaney, saw their terms end. Senate Majority Leader Mitch McConnell and Banking Committee Chairman Richard Shelby have made it clear they oppose Ex-Im, and neither felt compelled to consider President Obama’s nominations to the board. Lacking a quorum, Ex-Im has been barred by law from authorizing deals greater than $10 million ever since.
Mnuchin’s recent comments suggest he’s fine with this new look that Ex-Im has unwillingly adopted. “There’s a lot of concerns historically about the Ex-Im Bank and — is it just subsidizing certain large corporations?” Mnuchin said on CNBC recently. “And that’s not something we’re interested in doing.”
“To the extent we think the Export-Import Bank can be competitive in helping small and medium-sized businesses export, that’s something that’s important,” Mnuchin continued.
This could bring into harmony the seemingly discordant notes on Ex-Im coming out of Trumpworld. Trump commented on Ex-Im once during the campaign, calling it “feather bedding” for “a few companies … that can do very well without it.”
Indeed they can. Boeing literally has its own financing arm, Boeing Capital, which has stepped up (along with many other sources of financing) to fill the gap in financing left by Ex-Im’s absence. General Electric has GE Capital. Caterpillar has its own financing arm. There was no market failure in big business exports that the agency needed to correct.
Congressional sources have repeatedly told reporters that Trump has converted and become pro-Ex-Im. Yet one recent budget document listed Ex-Im among programs to axe.
From this mess of seemingly conflicting comments, one could discern the hints of a coherent plan. It would be something of a compromise between the conservative half of the party and the pro-business half of the party.
Trump could keep Ex-Im doing what it is doing now: providing only about $5 billion in financing per year (compared to the Obama-era range of $20 billion to $35 billion), with a full half of that for small exporters, and no deals greater than $10 million.
Subsidizing small exporters doesn’t make much more sense than subsidizing big ones. It doesn’t grow the U.S. economy. But it’s better than what Democrats, Boeing, and the Chamber of Commerce want, which is a restoration of Ex-Im to its full glory.
Congressional Republicans were evenly split over Ex-Im in 2015, and the compromise Mnuchin suggested—a bill permanently constraining Ex-Im to its current limited role — could get enough votes to become law.
Trump was never going to be a full-fledged free-marketeer, but Mnuchin’s comments suggest he is serious about rooting out corporate welfare. The right move would be killing Ex-Im while it is crippled. Second-best would be permanently crippling it.
Timothy P. Carney, the Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Tuesday and Thursday nights on washingtonexaminer.com.
