Welcome to an occasional series at Storyline, Do I Need to Care, in which we assess how much the topic du jour in Washington actually matters to you.
First up: The Export-Import Bank, whose charter will at the end of September unless Congress reauthorizes it. The House has failed to do so (and is expected to head out on recess sometime today), because members have been fighting about it for months. That raises the real possibility that the 80-year-old institution will cease operations this year, as not much of anything happens in the intensely political season between August recess and a midterm election. Should you care?
What is this about?
The Export-Import Bank — Ex-Im for short — is both a federal agency and a bank that lends money and provides insurance at low rates to foreign entities that want to buy U.S. products. In its early years, it financed big overseas infrastructure projects, such as the Pan-American Highway and the Burma Road. It does less of that these days now that private banks are more willing to lend to overseas buyers; this year it celebrated a decline in its own financing activity as a sign that credit has loosened up, since overall U.S. exports have actually increased. At the same time, however, many other countries continue aggressively lending through their own versions of the Ex-Im bank, meaning that a total retreat might put U.S. firms at a disadvantage. (Here’s Wonkblog’s explainer for more info.)
Why are we arguing about it?
The Ex-Im Bank’s charter has to be renewed every four to five years, and it’s usually noncontroversial. Lately, though, tea party Republicans have made its destruction a key priority: They charge it’s a form of distortionary “corporate welfare,” since the government is “picking winners and losers” (it’s even generated a bizarre cartoon featuring the “Kronies“). Former House majority leader Eric Cantor (R-Va.) supported the bank, but his successor, Rep. Kevin McCarthy (R-Calif.), has turned against it. In the Ex-Im Bank’s corner: Mainstream Democrats and large U.S. manufacturers, which want its customers to have access to cheap credit and have scrambled to highlight that Ex-Im financing helps small businesses reach international markets, as well.
Do I need to care?
The Ex-Im bank, at the very least, likely doesn’t do Americans any harm. It’s self-funded, returning about $1 billion last year to the Treasury in proceeds from interest rates. While some companies — such as Delta Airlines — claim Ex-Im financing helps their foreign rivals purchase supplies at lower cost, the effect is probably outweighed by the U.S. government using its prodigious lending capacity on the behalf of U.S. producers. The bank calculates that its 2013 portfolio currently “supports” 205,000 jobs, which is a not insignificant number of jobs.
But would you notice if the bank disappears at the end of September? If you’re one of the 7,000 businesses the bank says it helped between 2007 and 2014, it could make the difference between getting a big contract or not. If you’re a shareholder of Caterpillar, General Electric or Boeing — three of the biggest recipients of Ex-Im financing — you might notice slightly lower returns.
But overall, it only touches two percent of U.S. exports. And often, Ex-Im financing is something that’s just nice to have, not essential. As the chief financial officer of New Jersey-based Rastelli Foods, a big Ex-Im client, put it: “If their charter is not renewed, we will be scrambling to find trade insurance that is as flexible and easy to manage as that provided by Exim Bank.”
Ultimately, as the Wall Street Journal explained, the fight over the Ex-Im Bank reauthorization is more important for what it says about the shifting nature of American politics than it is to the overall economy. The right wing of the Republican party is flouting the desires of big business, while moderates get behind a mild form of protectionism. Meanwhile, liberals have largely abandoned their previous opposition, which arose in response to environmental and human rights issues with the projects that Ex-Im used to support. Whether it survives is an indicator of who’s on top in Washington — with some real consequences, but not far-reaching effects.
Care-o-Meter, scale of 1 to 10: 3
Correction: The Bank financed the Pan-American Highway, not the Panama Canal.