It’s hard to justify making the U.S. taxpayer backstop J.P. Morgan’s loan to finance Air China’s purchase of Boeing jets.
Yet that’s exactly the sort of thing the U.S. Export-Import Bank does.
Republicans and Democrats in Congress both seem certain to reauthorize Ex-Im this month. The reauthorization makes less sense than usual, considering how the last few years proved the agency to be both useless and unnecessary.
From July 2015 to May 2019, for various reasons, Ex-Im was blocked from issuing financing greater than $10 million. Into that void, unsurprisingly, stepped the private sector. Boeing even assembled a consortium of lenders and insurers who created all sorts of innovative ways to finance aircraft sales without taxpayer guarantees.
The case for Ex-Im is thus weaker than ever. And that may explain why its Senate champions, Republican Kevin Cramer of North Dakota and Democrat Kyrsten Sinema of Arizona, have crafted a reauthorization bill aimed to shield the agency from congressional oversight.
Their bill would reauthorize Ex-Im for an unprecedented 10 years. This is a blatant effort to avoid reform and scrutiny from Congress. As the Competitive Enterprise Institute pointed out in a new paper on the Cramer-Sinema bill, “Ex-Im-related legislation would likely almost never appear on the congressional calendar if occasional reauthorization did not require it to.”
Ex-Im, as an independent agency, should only ever get a two-year charter. That will allow each Congress a chance to reform it or else wind it down. Ten years is outrageous.
In yet another effort to avoid democratic accountability, the Kramer-Sinema bill sets up a Rube Goldberg-like method of allowing Ex-Im to operate under a board that has not been confirmed by Congress. This undemocratic move is an effort to prevent the conditions that caused the recent lull in megadeals from recurring — the very lull that required Boeing to assemble its financing in the private sector.
These undemocratic provisions are perfectly fitting in a way. The corporatist industrial policy embodied by the Export-Import Bank is by its nature tied up with an elitist mindset. The very idea behind Ex-Im is that government can allocate financing with more wisdom than the market can.
The last few years have shown that without government, airplanes, engines, power equipment, and all manner of exports can find private financing without great difficulty or expense. Half of the point of Ex-Im is to make sure that financing goes to the right place — the wind farm in Peru, the power plant in Saudi Arabia, the airline in Dubai.
Ex-Im typically dedicates half of its financing to exports by a handful of the largest manufacturers. This fondness for the big guys is part of the corporatist mindset that sees Big Business’s economies of scale as a salutary efficiency that government should help make even more lucrative.
Conservatives in Congress don’t think they have a chance to defeat Ex-Im this year, as they did temporarily in 2015. But GOP leadership shouldn’t allow a bill like Cramer’s to pass either way. Any Export-Import Bank reauthorization should be two years long, maximum. It should bar financing to state-owned enterprises, and it should shrink Ex-Im’s exposure limits, among other reforms. Anything else would be complete surrender to the big business-big government leviathan.
