I was against the Export-Import Bank before I was for it, and I may someday be against it again. But right now I’m for it, because the congressional fuss over the renewal of its charter is mostly political grandstanding. The Ex-Im Bank is portrayed — mainly by tea party conservatives — as a citadel of “crony capitalism” and an example of government bloat that’s bleeding taxpayers. All this is, charitably, wildly misleading. It suggests that Congress is getting serious about trimming unneeded government, when it isn’t.
The central fact about the Ex-Im Bank is that, in the $3.5 trillion federal budget, it is a pygmy. It has about 400 employees. In 2013, its operating budget — its overhead — totaled $90 million, according to a report from the Congressional Research Service (CRS). But these expenses were fully paid by fees and interest from Ex-Im’s private customers. There was no direct drain on taxpayers. Indeed, the bank turned a profit in 2013 and paid $1.1 billion to the Treasury. If it were eliminated, future deficits would probably increase, albeit by small amounts.
It’s hard to square these realities with the overheated rhetoric of Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, which is debating Ex-Im’s charter. Where does the bank get its money, asks Hensarling? “It is taxpayers’ money,” he says, answering his own question dubiously. The funds come from the “cashier at the corner grocery store, the cop on the beat, your children’s teachers.”
Not exactly. Although Ex-Im does borrow from the Treasury, it has paid its own way since fiscal 2008, says CRS.
Created in 1934 by President Franklin D. Roosevelt, Ex-Im runs four major programs to support U.S. exports: 1) direct loans to foreign buyers of U.S. products; 2) loan guarantees to banks that lend to foreign buyers; 3) insurance against losses made by U.S. exporters and banks on loans to foreign buyers; and 4) loan guarantees to banks making “working capital” loans — for materials or salaries — to U.S. exporters.
In 2013, the agency authorized $27.3 billion in direct loans, loan guarantees and credit insurance. Loan guarantees led at $14.9 billion, followed by direct loans of $6.9 billion. Since 2006, Ex-Im says its default rate has averaged less than 1 percent. The CRS gives examples of transactions in 2013: a $155 million loan to Ghana for a hospital expansion supported by U.S. engineering and construction firms; a $1.1 billion loan guarantee to an Indonesian airline to buy Boeing jets; and a $694 million loan to an Australian company for U.S. mining and rail equipment from Caterpillar and General Electric.
True, the case for Ex-Im isn’t airtight. If it disappeared, U.S. exports would hardly budge, because the bank aids 2 percent or less of them. (In 2013, U.S. exports totaled almost $2.3 trillion.) Smaller firms — about 90 percent of Ex-Im clients — mostly use working capital guarantees. But most of Ex-Im’s funds support exports of major multinational firms — Boeing and the like. Should we subsidize these firms’ profits through preferential credit? Probably not.
As I said, I’ve favored curbing or eliminating the Ex-Im Bank in the past. I might again. But this is the wrong time for two reasons. First, in this fragile economic recovery, we shouldn’t jeopardize job creation. Ex-Im estimates that its programs helped support 205,000 jobs in 2013; whatever the actual figure, it’s a plus. Second, other countries provide export credit subsidies. The United States sometimes needs a counter. In 2012, China’s credit subsidies alone exceeded Ex-Im’s by almost 50 percent.
Overhauling Ex-Im belongs in a big budget bargain combining needed spending cutbacks and tax increases. My complaint about today’s debate is that it’s political theater. By exaggerating Ex-Im’s importance, the tea party types pretend they’re making a major assault on government spending when they’re not. This pretense in turn gives them an excuse to avoid harder spending choices. Large programs, starting with Social Security, are popular and untouchable precisely because they’re large. Only when the tea party and others face up to this will they be serious.
Read more from Robert Samuelson’s archive.