Yes, the Export-Import Bank Perpetuates Cronyism
As conservatives, we are opposed to the Export-Import Bank of the United States, an 80-year-old institution that allegedly exists to “facilitate exports and imports and the exchange of commodities between the United States and other Nations.” That description sounds benign, or perhaps even beneficial, until the Bank’s practices, such as using taxpayer backed loans and loan guarantees to support politically connected companies or to advance a particular ideology, are brought to light.
We have written about our opposition to the Bank before, invoking the ire of some of the Bank’s supporters.
The Bank’s proponents often justify its existence by suggesting it helps produce American jobs and “levels the playing field” with respect to the government subsidies collected by foreign firms. But that’s not an accurate picture. As Sen. Mike Lee (R-UT) 100% recently put it:
Whether the beneficiaries of particular Ex-Im Bank loan guarantees are respected, successful companies like Boeing or crony basket cases like Solyndra is irrelevant. Twisting policy to benefit any business at the expense of others is unfair and anti-growth.
As we have noted on a number of occasions, citing figures from a 2012 report, (here, here, and here), Boeing — the massive multinational aeronautical company — receives “upwards of 80 percent of the Em-Im Bank’s taxpayer-backed loan guarantees.”
We have also written about “the Bank’s backing of the failed solar panel company, Solyndra, which was the recipient of an Ex-Im Bank loan guarantee of $10.3 million.”
Not everyone engages in debate with facts. As Washington Free Beacon’s Lachlan Markay reports the Lexington Institute “went after conservative activist group Heritage Action for America on Thursday, saying its Ex-Im criticism ‘substitutes abstract ideas for common sense … [and] betrays the principles that made its existence possible.’”
Let’s take Lexington’s claims one-by-one.
Regarding the 80-percent Boeing claim, the Lexington article stated, “In reality, most of Ex-Im’s support for manufactured exports last year went to items other than aircraft.”
Manufactured exports include loans and loan guarantees. Boeing received loan guarantees only. Lexington mixes apples and oranges. Also, our 80-percent figure refers to 2012, and is cited as such, while Lexington is quoting 2013 figures.
Lexington also refuted our reporting on Solyndra saying “Ex-Im never gave money to Solyndra.”
Ex-Im provided a loan guarantee to a Belgian bank that in turn financed the purchase of solar panels from the now-defunct Solyndra. That loan guarantee served only one purpose: to back a deal benefiting Solyndra. Therefore, Ex-Im did, in fact, provide backing to the company.
Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, weighed in at National Review where she said this is not about “leveling the playing field”:
this kind of cronyism tilts the scales towards certain businesses and away from others. Without the manifold incentives provided by these government loans, would a U.S. lender have extended a loan worth almost half a billion dollars to a company that went bust very soon thereafter? Without the incentives provided by the Bank, would the Belgian bank have invested in Solyndra products?
The Lexington Institute article also went on to claim “About 90% of Ex-Im’s export transactions last year were for small businesses.”
The Heritage Foundation’s Diane Katz, a research fellow in regulatory policy told The Forge:
Lexington evidently doesn’t understand the critical difference between “transactions” and “authorizations.” Of the actual dollar value of the loans and loan guarantees, small business received about 19 percent in 2013—this after Congress mandated in 2012 that it provide at least 20 percent of the appropriations to small business.
Lexington also states “Companies… just want Washington to level the playing field.”
How do government loans and loan guarantees to a select few companies constitute a “level playing field” for all the other domestic businesses that don’t get such funding? Lexington is also arguing that the U.S. should adopt the policies of China, Russia and other centrally controlled economies.
Lexington also claims that “Boeing gets no subsides from Washington.” But thanks to the Ex-Im Bank, Boeing does not have to compete for financing and enjoys very favorable terms. That is a subsidy. Moreover, Boeing sells more planes overseas because the U.S. government gives money to foreign governments and airlines to buy Boeing products. That is also a subsidy.
As communications director Dan Holler told the Washington Free Beacon, “Heritage Action expects to be on the receiving end of attacks from folks who are benefiting from the status quo. We are trying to disrupt and break apart the corrupt nexus that has dominated Washington for far too long.”