Democrats are eager to ramp up a corporate welfare agency and load it up with some lefty mandates. That’s no surprise. What’s inexplicable is that at least one powerful Republican is going along with them. This is a mistake, and GOP lawmakers should do what they can to stop the plan.
At stake is the Export-Import Bank, a federal agency that subsidizes U.S. exports, and which Donald Trump called corporate welfare in 2016. The Ex-Im Bank’s charter expires in September. House Financial Services Chairwoman Maxine Waters, D-Calif., has drafted a bill that would expand the Ex-Im Bank, rename it, free it from oversight, and charge it with a handful of irrelevant liberal mandates. The committee’s top Republican, Rep. Patrick McHenry, R-N.C., has unfortunately agreed to Waters’ bill.
“Feather-bedding” was how candidate Trump described the Ex-Im Bank in 2016, and he was right. The Ex-Im Bank provides taxpayer-backed loans and loan guarantees to foreign buyers, mostly China, who buy U.S.-made goods, mostly Boeing jets. This sweetens the pot for the likes of Boeing and its customers, as well as the banks getting the guarantees, but it’s hardly necessary.
We know for a fact what happens without Ex-Im financing available, because from mid-2015 until last month, the Ex-Im Bank was unable to subsidize Boeing exports. Thanks to a lack of a quorum on the Ex-Im board, aircraft financing enjoyed a jubilee of innovation and competition for nearly four years. Private lenders and insurers rushed in and filled the void that Uncle Sam had left, proving that the Ex-Im Bank is unnecessary.
“Commercial Aircraft Buyers Enjoy Unprecedented Capital Access,” Aviation International News reported in 2017. “We’re seeing a lot of new investors coming into the space,” Boeing’s finance chief said a couple of years into the Ex-Im lapse.
It turns out Big Government was crowding out private sector competition. Imagine that! If the Ex-Im Bank were to disappear, the U.S. economy would not suffer noticeably. In the long run, export subsidies would likely make the economy more efficient. For that reason, Republicans should outright reject Waters’ proposal. It’s pitched as a compromise, but the Senate GOP has no reason to compromise. Either fix Waters’ bill or let the Ex-Im Bank’s charter expire in the fall.
The “reforms” in Waters’ bill are weak tea. They don’t do anything to steer the Ex-Im Bank away from being welfare for America’s largest corporations. Boeing sales would keep getting the largest share of financing (typically about 40%), and all big exporters would still combine for about 80% of the pie.
Instead of focusing the Ex-Im Bank on helping small business exports, which is what the agency’s advocates pretend is the Ex-Im Bank’s purpose, Waters would simply slap politically correct mandates on Boeing, demanding diversity reports and the like. That’s on top of new rules requiring the Ex-Im Bank to finance minority-owned businesses and Puerto Rico-based exporters. These rules further transform the Ex-Im Bank from a supposed tool for combating foreign subsidies into a tool for social engineering
Waters would place a few conditions on subsidies to Chinese buyers. In the Ex-Im Bank’s last two fiscal years before its partial shutdown in 2015, the Chinese government was easily the biggest recipient of Ex-Im subsidies. The bill would limit subsidies to some state-owned enterprises in China, but not others. This is a shell game, easily gamed by China’s Communist government, which is not known for playing by the rules. The only sensible reform is to ban all subsidies to China’s government-owned companies and banks.
Most egregiously, Waters and McHenry want to remove accountability from the Ex-Im Bank, by allowing it to keep handing out massive $10-million-plus subsidies even without a quorum on the board. In other words, they take away Congress’s power to rein in the agency’s corporate welfare.
Finally, Waters’ bill would reauthorize the Ex-Im Bank for seven years, through 2026. But there’s no reason an independent agency such as the Ex-Im Bank should have a charter of more than two years.
Republicans have the upper hand here, particularly in the Senate. They should reject Waters’ liberal bill. If she won’t go for real reform, then just let the Ex-Im Bank die. A dead Ex-Im Bank is better than an unreformed one.
