Heritage Expert: End Ex-Im Bank to Remove Wasteful Energy Subsidies
The Obama Administration is notorious for the economically harmful and burdensome regulations it has imposed across the U.S. economy. Energy exports have not been spared. But rather than removing regulatory barriers to energy exports, some Washington politicians want to subsidize them at taxpayers’ expense.
The Export-Import Bank has been a channel for these energy export subsidies, so much so that 30 percent of the Bank’s loans and guarantees in 2013 went to producers of energy technologies and equipment.
The Heritage Foundation’s Nick Loris argues that the Ex-Im Bank should be eliminated, because it exists to provide corporate welfare to politically connected companies. It distorts markets and saddles taxpayers with risk.
Loris explains companies should export their products based on how good those products are, not based on political connections:
As with Ex–Im financing broadly, Ex–Im’s energy portfolio is fraught with corporate welfare. General Electric, ConocoPhillips, Bechtel, and Dow Chemical have all been beneficiaries of energy authorizations. These companies either could have secured private financing and are merely using Ex–Im to lower their capital costs or are hedging their bets by using taxpayer-backed financing to invest in projects they would otherwise not invest in. Neither is justification for Ex–Im saddling taxpayers with the risk.
A common argument is that other countries have their respective versions of government-financing for projects, so Ex–Im is necessary to create a level playing field. But that is no reason for the U.S. to do the same. In fact, an industry or business could make that claim about almost any policy. But rather than playing tit-for-tat with bad policy relying on subsidies, Congress should focus on free-market, pro-growth policies such as reducing the corporate tax rate. That way American companies can export their services and products based on the quality and competitiveness of their products.
This is true for all energy sources from oil and gas, to renewables, coal, and nuclear.
The failure to address onerous regulations and restrictions on energy production and export not only adversely affects energy companies, it also hurts American families and businesses by driving up energy costs and driving out competition. Implementing free-market reforms would create a robust, competitive energy sector that would drive innovation and enable companies to export U.S. technologies without the crutch of a taxpayer-backed, government-run financial institution.