Export-Import Bank supporters are back at it again. According to a document from the Office of Management and Budget, the administration is reportedly asking lawmakers to include a provision restoring the agency’s full lending authority as part of the continuing resolution that needs to be passed in order to keep the government functioning after September 30th. It was just a few weeks before his election in 2008 that Obama said it had “become little more than a fund for corporate welfare,” and cited it as an example of why he wasn’t someone “who believes we can or should defend every government program just because it’s there.” What a difference eight years can make.
Opponents of the bank cheered last year when Congress let the bank’s charter lapse, only for it to be reauthorized months later when a provision was attached to the highway bill in December to reauthorize the agency through September 2019.
The agency, which provides financing and loan guarantees for U.S. export transactions, has since been limited in the scope of its lending authority, as the Senate has declined to approve the administration’s nominee to its board of directors. With three of five board seats vacant, quorum rules prevent the bank from approving any transactions over $10 million until the vacancy is filled.
This latest request from the administration is the culmination of a concerted effort on both sides of the aisle to restore full authority to the agency, without which it cannot approve the larger deals that would benefit the bigger companies that receive so much of the bank’s support. This is hardly a partisan affair, as earlier this year Republican Rep. Charlie Dent introduced an amendment to the State and Foreign Operations Appropriations Bill that would achieve the same objective.
The agency’s supporters suggest that companies are moving some operations abroad for lack of support from the Export-Import Bank, leading to lost jobs. These claims should be viewed with a lot of skepticism, as the agencies support primarily introduces distortions that shift jobs to the industries and firms it subsidizes. Most of the beneficiaries are major corporations that already have access to capital, almost two-thirds of the bank’s financing benefits just 10 large corporations.
According to analysis from Veronique de Rugy, the Export-Import bank supports only a miniscule share of exporters or small business: 0.42 percent of exporters and 0.28 percent of small businesses from FY2009-2014. The vast majority of these companies operate and compete just fine without the Export-Import bank. In fact, these firms which are not directly supported by the bank are placed at a competitive disadvantage by its interventions.
Despite the bipartisan support from policymakers, voters are less sure about the need for an Export-Import Bank. In a Morning Consult poll from last year, 36 percent said that the statement the agency is a “government handout that benefits only a handful of major American corporations” was closer to their opinion than that it “supports U.S. jobs.”
In that same poll, 73 percent of registered voters responded that they had not heard much or anything at all about Export-Import Bank, which may be part of the reason that firms who receive the concentrated benefits of its support are consistently able to overcome opposition from some policymakers, and public support that is tepid at most.
The Export-Import Bank is just one aspect of corporate welfare within federal government policies, and one that does not currently place an outsize fiscal burden on taxpayers, but it still distorts business decisions and gets the government into the role of influencing which firms will be winners and losers from policy. Each year, the federal government spends more than $100 billion on various forms of corporate welfare. Given the stubborn persistency of the Export-Import Bank and the broader problem of concentrated benefits and diffuse costs, this state of affairs will unfortunately continue for years to come.