Despite torrents of opposition to the Ex-Im slush fund for corporate welfare, the U.S. Chamber of Commerce is sticking to its guns. Last week, it released a series of "facts" to promote reauthorization of its charter this fall.
Real Fact One: Ex-Im's past returns to the Treasury are beside the point.
Investing appropriations in other sectors of the economy would produce returns, as well. This does not protect taxpayers. Fannie and Freddie returned dividends on their investments before Americans were called in for a $200 billion bailout. Moreover, you'll notice the Chamber is sure to specify "Since 1990...", seeing as how in 1987, Ex-Im was forced to reveal long-term losses amounting to nearly $3 billion (almost half of what the Chamber boasts it would go on to return). The simple fact that taxpayers have not been called upon to pay its debts lately is not justification enough to leave them on the hook. Add to this the recent CBO report that calculated Ex-Im's cost to taxpayers at $2 billion over the next decade. This "fact" is conveniently missing the context that renders it irrelevant.
Real Fact Two: Small business financing accounts for roughly 19 percent of Ex-Im's portfolio.
Again this is intentionally misleading. The 90 percent figure refers to the number of deals made, not the amount of money allocated by the Bank (the latter being the only metric relevant to taxpayers). In 2013, out of $27.3 billion in total authorizations, only $5.2 billion (19 percent) was designated for small businesses. Ex-Im's actual loan activity is concentrated in a few wealthy and well-connected industries. Of course there are fewer billionaire corporations than small businesses. This in itself represents the injustice; it is not a reason to defend Ex-Im.
Real Fact Three: Ex-Im losses are inevitable and imminent.
Both the GAO and the Inspector General have warned that Ex-Im's "loan-loss rate" is suspect and that the bank is not properly protected against waste, fraud and abuse. Ex-Im's bases this risk assessment on a notoriously unreliable accounting methodology; the Bank has long refused to transition to the fair-value method that private banks are required to use. The failure of its current metric is plainly evident in the nonpartisan CBO finding that the Bank will cost taxpayers $2 billion over the next ten years. Moreover, the "loan-loss" ratio is only one indicator of trouble. There is no mechanism in Ex-Im's public disclosures that assures us that the bank is not perpetually restructuring loans to avoid default or the appearance of volatility. Ex-Im's antiquated accounting practices had led them to label certain loans as "impaired" or "restructured" that would be considered defaults under any private sector standard. As a result, Ex-Im's long-term stability is simply unknown.
Real Fact Four: Ex-Im cannot claim to create jobs.
The Chamber cleverly states that Ex-Im has "supported" x number of jobs. No defender of the Bank can make a viable claim of job creation and nearly all have stopped trying. As the American Action Forum itself, a noted advocate of reauthorization, summed up in 2011: "Export financing merely redistributes jobs across the economy rather than creates more overall jobs." The economic reality is that Ex-Im does not create net new jobs. When capital is reallocated from some other sector of the economy, it effectively weakens one sector in order to "support" the employment of certain companies in another. At best, the effect on jobs is neutral (while the effect on the market is distortionary). As another CRS analyst explained, the consensus of economists is that "promoting exports through subsidized financing...will not permanently raise the level of employment...but alters the composition of employment among the various sectors of the economy and, therefore performs poorly as a jobs creation mechanism." These realities, however, do not appear to deter the Chamber from making the sterilized case for job "support." The word has no meaning and the Bank no positive effect on employment.
Real Fact Five: Allowing the Bank to expire will save taxpayers money, while having almost no effect on exports.
Of all U.S. exports in 2013, only 2.2 percent received Ex-Im financing. Of that percentage, less than half were intended to counteract credit subsidies from abroad. The effect of Ex-Im's absence has been dramatized by its defenders in the interest of scaring up support for reauthorization and continued protection of billionaire corporate interests. If Ex-Im is making sound investments with taxpayer funds, as it claims, then the jobs and growth it "supports" will be sustained by the private sector. Furthermore, the idea that the U.S. will lose money if it fails to subsidize foreign purchases of our domestic goods isn't based on sound economic rationale. If foreign governments choose to export goods to the U.S. on favorable terms, those savings will be passed on to the American consumer. This is not a phenomenon that warrants distorting the market. As Rep. Jeb Hensarling (R-TX) recently explained in his speech at the Heritage Foundation, "If other countries want to subsidize the products they sell us, maybe we should thank them instead of copying them. I'm not interested in engaging in a taxpayer-funded subsidy arms race with the rest of the world."