Wonkbook: Yes, the Export-Import Bank matters

June 25

Welcome to Wonkbook, Wonkblog’s morning policy news primer by Puneet Kollipara. To subscribe by e-mail, click here. Send comments, criticism or ideas to Wonkbook at Washpost dot com. To read more by the Wonkblog team, click here.

Wonkbook’s Number of the Day: 24. That's how many times as much wealth the richest 5 percent held as did the median household in 2013 — up from 16.5 times as much in 2007.

Wonkbook’s Chart of the Day: Graduates owe more money in student loans than they used to, but that debt is still just as burdensome, these charts show.

Wonkbook's Top 5 Stories: (1) Why the Export-Import bank fight matters; (2) is the student-debt narrative overblown?; (3) the Great Recession's enduring impact; (4) risky business on climate change; and (5) the looming Obamacare contraception-mandate ruling.

1. Top story: Why you should care about the Export-Import Bank's fate

GOP infighting is threatening the Export-Import Bank. "The House Republican leadership shakeup has revived a conservative-led push to terminate the nation's Export-Import Bank, testing the GOP's traditional alliance with business groups. House Majority Leader Eric Cantor (R-Va.), who lost his seat earlier this month in a major primary upset, was a key backer of a 2012 compromise that staved off a push by his party's small-government conservatives to block renewal of the bank's charter. The current authorization for the bank — which helps finance U.S. exports with government-backed loan guarantees — expires in September." Michael A. Memoli in the Los Angeles Times.

Never heard of the Export-Import Bank? You're not alone. "It's one of hundreds of obscure federal agencies you don't usually hear much about. But the U.S. Export Import Bank is getting more than its 15 minutes of fame this week — in part due to a long-running debate over the government's role in helping spur economic growth by singling out individual companies for loans and other assistance. Now add reports of an investigation into allegations of gifts, kickbacks and attempts to steer government contracts to favored companies and this once-sleepy corner of the federal bureaucracy is getting more than its share of attention." John Schoen in CNBC.

Why you should care about this debate. "If the Ex-Im Bank is wound down, the impact on the economy is uncertain. Supporters of the agency believe it would have a devastating impact, while opponents of the company believe it would be just the jolt of free-market capitalism that the economy needs to stand on its own two feet. Politically, this marks a big test for Democrats as well as Republicans. Will Democrats go to bat for an agency that supports a select pocket of companies? Will Republicans split into different camps?" Damian Paletta in The Wall Street Journal.

Explainer: Key questions and answers on the Export-Import Bank. Claer Barrett in The Financial Times.

This fraud investigation won't help its reauthorization chances. "The U.S. Export-Import Bank has suspended or removed four officials in recent months amid investigations into allegations of gifts and kickbacks, as well as attempts to steer federal contracts to favored companies, several people familiar with the matter said. One employee, Johnny Gutierrez, an official in the short-term trade finance division, allegedly accepted cash payments in exchange for trying to help a Florida company obtain U.S. government financing to export construction equipment to Latin America, according to a person familiar with the inquiry." Damian Paletta in The Wall Street Journal.

Why does big business generally support the bank? "Business owners and trade groups already frustrated this year by the House's inaction on an immigration overhaul pushed back this week against the latest evidence of conservative lawmakers dismissing industry priorities....Some business groups have started emphasizing the consequences if Congress doesn't extend the agency's charter, which would prevent the agency from backing new financing and force it to start winding down its loan portfolio. The agency's supporters say that would give an advantage to the nearly 60 other nations that have their own agencies to help finance exports." Kristina Peterson and Michael R. Crittenden in The Wall Street Journal.

Even Delta Airlines, longtime Ex-Im critic, is softening its opposition. "The head of Delta Air Lines Inc. is expected to back the Export-Import Bank of the U.S. providing some support for sales of Boeing Co.'s biggest jets, softening his stance even as the agency's political critics step up a campaign to have it abolished. The third-largest U.S. carrier by revenue has been the staunchest of airline-industry critics of the Ex-Im Bank, arguing that the bank's support for sales of Boeing widebody jets gives rival carriers overseas an unfair advantage by reducing their finance costs." Doug Cameron in The Wall Street Journal.

The Ex-Im Bank is actually losing its competitive edge. "The US Export-Import Bank is losing competitiveness against other countries as China ramps up export credit and developed country rivals defect from international rules....The boom in Chinese export credits highlights a growing threat to US manufacturers, even as the US considers opting out of export support altogether, with Republicans mounting a determined effort to shut ExIm down." Robin Harding in The Financial Times.

Texas, for one, is worried. "Business leaders across Texas are frantically lobbying Congress to prevent the Export-Import Bank’s charter from expiring this year. Their pleas are falling on deaf ears, however, when it comes to the one Texas lawmaker they need to convince the most: Rep. Jeb Hensarling. As chairman of the House Financial Services Committee, the panel with jurisdiction over the Ex-Im Bank, Hensarling has stated unequivocally that he is opposed to extending the government agency’s charter, which is set to expire at the end of September." MJ Lee in Politico.

Et tu, Boehner? "Speaker John A. Boehner of Ohio declined to commit to reauthorizing the Export-Import Bank, saying instead Tuesday morning that he is trying find common ground between his members who want to end the bank and those who want to continue funding it. Boehner said he is looking to tomorrow’s Financial Services Committee hearing on the subject, and will rely on Chairman Jeb Hensarling of Texas, who has said he wants to let the program expire to lay out the way ahead. Boehner’s comments come amid revelations that some Ex-Im Bank employees were fired for allegedly accepting bribes." Daniel Newhauser and Emma Dumain in Roll Call.

White House: GOP leaders won't back bank, so we will. "Asked about McCarthy's comments, White House spokesman Josh Earnest said the bank 'helps American companies create and support jobs here at home at no cost to taxpayers' and traditionally has enjoyed bipartisan support as a result. The bank also returned $1 billion to the Treasury in the last budget year." David Espo in the Associated Press.

KRUGMAN: Bad timing by the tea party. "So it looks quite likely that the Tea Party will claim a scalp from the business lobby, and kill the Export-Import Bank. And there is a case for doing away with the lender — except that this is the worst possible time for it....We’re at the zero lower bound, which means that the Fed won’t raise rates. As I’ve said a number of times, under current conditions mercantilism works — so this is exactly the moment when ending an export-support program really would cost jobs." Paul Krugman in The New York Times.

DE RUGY: What public-choice economics tells us about the Ex-Im fight. "Political benefits are concentrated on a few firms who fight like dogs to keep their privileges flowing. The costs are large, but they are dispersed among millions of Americans who are frankly too busy to closely examine the finer details of technical debates in D.C. Special interests, like those who signed the Chamber of Commerce/NAM letter to Congress, know this unfortunate reality and take advantage of it. This is why unjustifiable cronyist programs continue to be reauthorized despite public opposition and poor economic outcomes....The Ex-Im fight is just another iteration of this same old story." Veronique de Rugy in National Review.

Top opinion

O'BRIEN: A terrible defense of trickle-down inheritances. "You need to remember that Mankiw has never met a rich person whose taxes he doesn't want to cut. That's clear enough in his latest piece arguing that we shouldn't worry about inherited wealth, because it will ultimately trickle down to everyone else. 'When a family saves for future generations,' he tells us, 'it provides resources to finance capital investments,' which eventually 'raises labor productivity' and lets 'workers enjoy higher wages.' That's just, as he puts it, "standard economic analysis." The problem, of course, is that the world doesn't always work the way standard economic analysis says it should." Matt O'Brien in The Washington Post.

PORTER: Carbon cuts won't stop climate change, but they could help slow it. "Climate change is not an event in your children’s future. It is bearing down upon you now. And there is nothing you — or anyone else — can do to prevent the hit....This is our future even if every person on the planet abruptly stopped burning coal, gas, oil, wood or anything else containing carbon today and we hooked the world economy onto the wind and the sun tomorrow. The change is baked in, caused by CO2 spewed into the air long ago....Reducing carbon emissions now is about helping prevent even more serious damage." Eduardo Porter in The New York Times.

VINIK: Congress has it wrong on its ideas for funding transportation projects. "In a rational political environment, Congress would respond by passing an infrastructure bill that allocated new money, even if meant deficit spending. There are still lots of construction workers looking for work, after all, and borrowing is cheap, thanks to low interest rates. But Republicans have blocked such proposals. The best lawmakers can do, it seems, is to keep funding infrastructure at current levels. To do that, they must come up with some way to replenish the federal Highway Trust Fund, which is running short on money. Unfortunately, they can’t even get this part right. There are now three Highway Fund proposals under consideration in Congress. All of them are bad." Danny Vinik in The New Republic.

SUNSTEIN: The poison pill hidden in the EPA ruling. "Yesterday’s U.S. Supreme Court decision involving the Environmental Protection Agency’s authority to regulate greenhouse gases was generally a big victory for the Barack Obama administration. But the court’s opinion contains a poison pill, one that lawyers will undoubtedly invoke in future cases involving the Affordable Care Act....It is reasonable to wonder whether Scalia had that in mind as he wrote the EPA opinion." Cass R. Sunstein in Bloomberg View.

AMBINDER: Congress' election-year trick won't wean Europe off Russian natural gas. "If there was a way to transport U.S. natural gas to Europe....Well, it seems there is! It is called the 'Domestic Prosperity and Global Freedom Act.' (!) The House will take a vote on the bill [today]. The jettisoning of environmental regulations aside, the bill looks like a decent and creative way to advance U.S. interests. But upon closer examination, the bill turns out to make sense for the liquefied natural gas (LNG) industry inside the U.S. and for a Republican congressman running for Senate. Even if it passed the House, went to the Senate, and was signed into law tomorrow, it would not help solve Russia's geopolitical extortion of Europe." Marc Ambinder in The Week.

Cute interlude: Sea lion plays with a little girl.

2. The student debt debate just got more confusing

The good news if you have student debt: It gets better. "More and more students have been graduating with loans, especially since the financial crisis....Total outstanding student debt, which is around $1.2 trillion, is second only to home mortgages as the largest form of personal debt. Relatively high default rates among graduates and a recent decline in homeownership among graduates has led some observers to worry that student debt may be hampering the economy....Yet according to the Brookings report, the median borrower's monthly student loan payment has held steady between 3 percent 4 percent of her monthly income since 1992....Repaying student debt takes only about two and a half years longer now than it did then, on average. What's more, the share of borrowers with very high monthly payments relative to their income appears to be falling." Max Ehrenfreund in The Washington Post.

Primary source: Is a student loan crisis on the horizon? Beth Akers and Matthew M. Chingos in Brookings.

The reality of student debt is different from the clichés. "All of which is to say that student debt is indeed a problem for some young people today, but that it’s not a new phenomenon. For most, the returns on a college education have more than kept pace with the cost. What explains the widely held notion to the contrary? I think it stems in large part from the fact that Americans are legitimately frustrated about the economy’s performance over the last 15 years. But when you start looking at the evidence that blames student debt, it can be flimsy." David Leonhardt in The New York Times.

Are we focusing our student-debt concerns on the wrong college-goers? "My hunch is that this has a lot to do with class. A vocal, college-educated group dominates the mediascape....But the truth is, if you managed to rack up giant student debt loads, that’s likely because you’ve undertaken — and finished —the kind of extensive education that enables you to earn a good salary over time. And while it’s a drag to have to pay your loans, it’s really not a problem for society at large. The real student debt problem comes in the relatively modest amounts of borrowing done by low-income, first-generation college goers, who are four times more likely to leave school after the first year than students without those risk factors. Incidentally, this is also why increased funding of state schools is probably the answer." Matt Phillips in Quartz.

@bencasselman:
1. I agree w/ @MatthewPhillips (& others) that biggest issue is ppl who drop out with debt. (I wrote about it here...)
2. But that isn't ONLY issue with debt. More ppl are borrowing, & they're borrowing more. $100k is rare, but $25k isn't--and $25k is a lot!
3. Student debt issue isn't separate from broader economic discussion. When grads can't get good jobs, "modest" debt loads look much bigger.
4. Virtually all discussion of higher ed, including debt, is too focused on the small subset of students who go to elite schools.
5. There's a real lack of good data on debt, and especially how it interacts with outcomes. Makes it hard to get beyond anecdote.

Long read: How to pay off $124,421 in college debt in six long years. Chadwick Matlin in Medium.

Don't forget about lifelong consequences. "When we look at the effects of a major economic change...we can’t just look at what immediately happens. We need to also consider how people behave in the long run. And when we look at student loans from the point of view of a lifetime, the results are more worrisome. How could this matter? An infamous study on student debt by Jesse Rothstein of the University of California, Berkeley, and Cecilia Elena Rouse of Princeton looked at the results of a highly selective university replacing loans with grants. It concluded 'that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs." Mike Konczal in The New Republic.

Yes, going to college is still a wise move despite the debt, Fed study says. "A New York Federal Reserve study released Tuesday found that both associate and four-year degrees remain solid investments, even as the cost of going to school rapidly escalates and real wages decline for graduates....Surprisingly, the economists found that the rate of return on a bachelor's and associate degree is largely the same and has remained that way for several decades in the U.S. And the difference in wages between the two degrees also has remained relatively constant....The cost of either degree...has remained largely the same over recent decades as well....That is because while tuition has rapidly escalated for a four-year degree, the lost-wage cost of leaving the workforce for high-school graduates to attend school has fallen." Mark Peters and Douglas Belkin in The Wall Street Journal.

Working full-time, but still relying on Mom and Dad. "The new results of the study mark the fourth time over the last six years that Serido has interviewed the same pool of young adults. This time, roughly 1,000 of them participated in the survey, which looked extensively at their transition from college to careers. Among the most surprising findings was the degree to which young adults (even those employed full-time) still rely on their families for financial assistance. Many also face mountains of student debt." Nancy Cook in National Journal.

Other education reads:

Trimming the FAFSA, a popular idea, makes its way to Congress. Dan Bauman in The Chronicle of Higher Education.

States' special education services face tighter oversight from Obama administration. Lyndsey Layton in The Washington Post.

Daredevil interlude: Subway skaters jump the tracks.

3. The enduring impact of the Great Recession

America has less economic, more educational opportunity than in 1970. "Americans today have more social and educational opportunity than they did 40 years ago — but they have less economic opportunity, thanks to a bruising recession and the alarming economic trends that preceded it. That's the sobering conclusion of a detailed study out today from Opportunity Nation and Measure of America....For the nation as a whole, the best news in report — and a big driver of the overall improvement in opportunity — is education. The score for preschool enrollment across the country has almost quadrupled since 1970. For adults earning an associate's degree or more, it's doubled." Jim Tankersley and Jeff Guo in The Washington Post.

Recession, uneven recovery have widened the wealth gap. "The richest 5 percent had 24 times the wealth of the median household in 2013 — up substantially from 16.5 times as much in 2007, according to a study by University of Michigan researchers. Substantial gains in the stock market have enabled richer Americans to regain much of their wealth....By contrast, middle-class Americans remain further behind because whatever wealth they have is derived mainly from home equity. Home prices have only partially recovered from the housing bust....The University of Michigan study found that households at all levels lost wealth during the recession and that not even the top 5 percent have fully regained it." Christopher S. Rugaber in the Associated Press.

Is it time for Americans to save more now? "In the throes of the Great Recession, lawmakers worked to pull the country out of the downturn by introducing stimulus....Now some economic experts say it's time for Americans to do just the opposite....The thinking is that by boosting savings, specifically retirement savings, people will be less likely to fall into poverty in old age, making them less reliant on government-funded programs like Medicaid. They might also have more money to pass on to their children or to invest in the market, reducing the need for American companies to rely on foreign capital. Indeed, the writers argue that raising the savings rate could add $7 trillion to the U.S. economy over the next 25 years." Jonnelle Marte in The Washington Post.

Why the economic picture is brighter, despite looming downward growth revisions. "Why aren't economists, businesses or investors likely to panic? Because most agree that the economy last quarter was depressed by temporary factors — particularly the blast of Arctic chill and snow....Since then, the picture has brightened. Solid hiring, growth in manufacturing and surging auto sales have lifted the economy at a steady if still-unspectacular pace. That said, sluggish pay growth and a stumbling housing rebound have restrained the expansion." Christopher S. Rugaber and Martin Crutsinger in the Associated Press.

Consumer confidence and a surge in new home sales add to the optimistic picture. "U.S. consumer confidence jumped to its highest level in nearly 6-1/2 years in June and sales of new homes surged in May, the latest signs that the economy has regained momentum. Growth is accelerating after crumbling in the first quarter, but Tuesday's robust reports likely exaggerate the strength. Nevertheless, they added to data on employment, factory and services sector activity in suggesting a sharp growth rebound." Lucia Mutikani in Reuters.

The rise in housing prices is slowing, and that's a good thing. "The latest readings on United States home prices are the latest confirmation of a slowdown in that area: Prices are still rising in most cities, but much more slowly than they were a few months ago. And that’s news we should cheer....The healthiest thing for the housing market would be home price rises that thread the needle: high enough that homeowners are building equity and homebuilders have incentive to start new construction, but low enough that they don’t significantly outpace wage growth and result in unaffordable housing and a painful correction. The April home price numbers suggest we may be heading there." Neil Irwin in The New York Times.

Other economic reads:

Seeing the less distressing side of existing home sales. Joe Light in The Wall Street Journal.

Fed's Dudley sees mid-2015 rate hike as "reasonable." Ann Saphir in Reuters.

Unemployment insurance debate begins again. Wesley Lowery in The Washington Post.

Astronomy interlude: Rover celebrates one-year anniversary by taking a selfie.

4. A changing business climate in a warmer world

Why a group of business leaders are freaking out over climate change. "The study is called 'Risky Business', and the driving force behind it is a bipartisan group of prominent former businessmen and public officials: entrepreneur and former New York Mayor Michael Bloomberg; retired hedge fund manager Thomas Steyer; and Henry Paulson, a former Wall Street titan and Treasury secretary under President George W. Bush. Paulson, a Republican, acknowledges that many in his party are skeptical of the science of climate change and want more research. He says this new study suggests the business and investment community needs to take action." John Ydstie in NPR.

Primary source: The report.

The reaction from Hill Republicans: Crickets. "Opposition to carbon regulations or carbon pricing is, if anything, more powerful than it was a few years ago, when Republican Sen. Lindsey Graham negotiated a climate proposal with then-Sens. John Kerry and Joe Lieberman (although Graham ultimately abandoned the talks). Republican Sen. John McCain coauthored cap-and-trade bills several times during the 2000s, but he's no longer pushing the idea. It's too early to say whether more GOP ex-officials will speak up, or whether they could have any sway on Capitol Hill." Ben Geman in National Journal.

Chart: Data confirm May was Earth's warmest on record. Andrew Freedman in Mashable.

U.S. challenges oil-export ban with approvals for two Texas companies. What does it mean? "The decision falls far short of what oil producers and some of their allies in Congress have been urging — including a wholesale repeal of the trade limits on crude. But it could provide a new avenue for the ultra-light condensate that flows along with crude out of many Texas wells tapping the Eagle Ford Shale and effectively delay a broader, deeper debate about broader crude exports. Because the classification ruling is limited to condensate that has been run through a distillation tower, it does not apply more broadly to unprocessed condensate that has just flowed out of oil and gas wells." Jennifer A. Dlouhy in the Houston Chronicle.

'Frozen' interlude: These dads are sick of hearing "Let It Go" from the Disney animated movie.

5. What to expect from the Supreme Court's Obamacare contraception mandate ruling

Here's what the ruling would and wouldn't do. "No matter what happens, the Court won't strike down the entire mandate. The two companies that brought their challenge to the Supreme Court...haven't asked the justices to ax the entire policy. The most sweeping option is a broad First Amendment proclamation that all corporations have a fundamental right to exercise religion, in this case by refusing to cover birth control in their employees' health care plans. This outcome would be almost a sequel to the Citizens United case on campaign finance laws and free speech. It would probably open the door for any company to challenge a slew of state or federal regulations, and would allow any corporation to avoid the contraception mandate — potentially affecting millions of women....But a sweeping First Amendment ruling might not be the most likely option." Sam Baker in National Journal.

Related: The most important Obamacare case isn't the Hobby Lobby one. Philip Klein in the Washington Examiner.

Explainer: A guide to the Supreme Court's upcoming birth-control decision. Jason Millman in The Washington Post.

Abortion funding for Peace Corps volunteers advances with GOP help. "Congress has repeatedly blocked federal funding for abortions for Peace Corps members, even in the event of rape, incest, or life endangerment. Until now. For the first time, the Senate and House Appropriations Committees have both approved bills that lift the ban on abortion funding for volunteers in the above circumstances. The movement gives reason to believe Congress may actually approve the funding this year." Sophie Novack in National Journal.

Other health care reads:

After five years of reduced growth, health spending will pick up again. Jason Millman in The Washington Post.

How big cities will suffer in states that snubbed Obamacare’s Medicaid expansion. Emily Badger in The Washington Post.

Congress has one hurdle left to pass a VA bill, but it's a high one. Stacy Kaper in National Journal.

The case for banning cigarettes entirely. John Tozzi in Bloomberg Businessweek.

Health officials: Immigrant surge is a medical crisis. Alexa Ura in Texas Tribune.

Congress interlude: Congressional leaders hold hands and awkwardly sway to music.

Wonkblog roundup

Greg Mankiw’s awful defense of trickle-down inheritances. Matt O'Brien.

Congrats, America. You have less economic opportunity than you did in 1970. Jim Tankersley and Jeff Guo.

How big cities will suffer in states that snubbed Obamacare’s Medicaid expansion. Emily Badger.

Your taxes are going up. You just don’t know it yet. Zachary A. Goldfarb.

Good news if you have student debt: It gets better. Max Ehrenfreund.

Map: The age of housing in every zip code in the U.S. Christopher Ingraham.

The word "natural" helps sell $40 billion worth of food in the U.S. every year — and the label means nothing. Roberto A. Ferdman.

Is now the time to get Americans to save? Jonnelle Marte.

After five years of slower growth, health-care spending will pick up again. Jason Millman.

Et Cetera

FDA outlines policy for overseeing nanotechnology. Matthew Perrone in the Associated Press.

The tea party suffered a night of near misses in Tuesday's primaries. Eric Kleefeld in The Week.

Boehner planning lawsuit against Obama executive actions. Daniel Newhauser in Roll Call.

AT&T says merging with DirecTV would help it challenge Comcast. But how? Brian Fung in The Washington Post.

What Washington is doing about the children who have become a flashpoint in the immigration debate. Elahe Izadi in National Journal.

Got tips, additions, or comments? E-mail us.

Wonkbook is produced with help from Michelle Williams and Ryan McCarthy.

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