“NO” on Continuing Resolution and Extension of the Export-Import Bank (H.J. RES. 124)
Today, the Senate is expected to vote on the House-passed Continuing Appropriations Resolution (H.J. Res. 124), which would fund the government through December 11, 2014, reauthorize the Export-Import Bank until June 30, 2015 and serve as a vehicle for a key component of President Obama’s Syria strategy.
Despite his current affinity for the Ex-Im Bank, President Obama once denounced the bank, saying it “has become little more than a fund for corporate welfare.” That characterization is undeniable — participating banks call it “free money” and multinational conglomerates like Boeing, Caterpillar and General Electric account for the bulk of the bank’s financing. Boeing, for example, received roughly two-thirds of the bank’s loan guarantees in 2013.
Although proponents claim the expiration of the bank amounts to unilateral disarmament because other countries have export credit agencies, less than one-third of the bank’s activity supposedly “levels the playing field” against “competition from a foreign, officially sponsored export-credit agency.” That is just 0.5-percent of America’s $2.3 trillion in exports in 2013.
For its part, Boeing predicted “The 2014 aircraft finance markets should be healthier and more balanced.” As the Wall Street Journal reported thirteen months ago, a managing director of Boeing’s finance arm said the company “could find alternative funding for customers that wouldn’t require it to boost its support of aircraft sales” if the bank expired. Late last week, Reuters confirmed “Emirates, Dubai’s flagship airline, would not have trouble buying planes from Boeing Co. even if the U.S. Congress fails to renew the U.S. Export-Import Bank’s charter.”
Frequently missed in the debate is the harm done to domestic companies. While Delta’s objections have been well chronicled, less attention has gone the impact of a $694 million loan to Australia’s Roy Hill mine, which is owned by that country’s richest person. As reported by the Duluth News Tribune (MN) in 2013, the deal was “strongly criticized by Minnesota mining interests and some members of Congress who say it’s helping an Australian mine gain a foothold in the global iron ore trade that could hurt” jobs in Minnesota and surrounding states. Similarly, thousands of Tampa-area jobs will soon be competing with a foreign, state-owned fertilizer company in Morocco because of a $117 million loan guarantee from Ex-Im.
Economists have long understood export subsidies do not actually create jobs. A 1981 Congressional Budget Office report explained: “Subsidized loans to exporters will increase employment in export industries, but this increase will occur at the expense of non-subsidized industries.” A 2011 Congressional Research Service report was equally blunt: “Subsidizing export financing merely shifts production among sectors within the economy, but does not add to the overall level of economic activity, and subsidizes foreign consumption at the expense of the domestic economy.” Even the American Action Forum, which supports the bank, agreed: “Export financing merely redistributes jobs across the economy rather than create more overall jobs.”
The case against the Export-Import Bank is crystal clear, and Heritage Action agrees with Majority Leader Kevin McCarthy’s comment in June: The bank should be allowed to expire in September because the private sector can do it.
Additionally, the bill contains just a 2-month extension of the Internet Tax Freedom Act (ITFA), which prevents states and localities from imposing taxes on internet access (sometimes called “email taxes”). This places the expiration of ITFA right in the middle of a lame duck session setting up a potential fight over the so-called Market Place Fairness Act, or Internet Sales Tax.
Finally, the bill contains a key component of President Obama’s Syria strategy – arming Syrian rebels. By including this proposal in the underlying bill, Senators will be able to pass it without technically voting on the policy itself. A House Democrat called it the “sneakiest of all maneuvers.” The Heritage Foundation’s Steve Bucci — who served as an Army Special Forces officer and served as top official at the Pentagon during the Bush administration — explained, “As the representatives of the American people, the Congress ought to be able to show their support or principled opposition for military action without hiding it in the CR.”
Heritage Action opposes H.J. Res. 124 and will include it as a key vote on our legislative scorecard.