Downsizing Government has added a new essay on ending the Export-Import Bank, which subsidizes the financing of U.S. exports. Author Sallie James argues that the Ex-Im Bank creates economic distortions and mainly benefits large corporations that can obtain their own private financing.
Enron – the failed energy conglomerate – is a perfect example:
Another problem is that the Ex-Im Bank’s subsidies can encourage investment in very dubious projects. That is the story of Enron’s international investments, which played an important role in the implosion of the firm. By one estimate, Enron received $2.4 billion in federal aid for overseas energy projects through the Export-Import Bank and the Overseas Private Investment Company between 1992 and 2000. Another study puts total federal government subsidies to Enron for its foreign schemes at $3.7 billion. All these subsidies made possible Enron’s excessively risky foreign investments, which came crashing down at the same time that the firm’s accounting frauds were being revealed.
Unfortunately, Republicans and Democrats recently teamed up to protect this blatant example of corporate welfare:
In 2012 Congress voted not only to renew the charter of the Ex-Im Bank, but to increase its lending limit from $100 billion to $140 billion. Despite the usual claims by House Republicans that they favor smaller government, 61 percent of them voted to approve this expansion of corporate welfare. Tom McClintock of California was the sole Republican to speak against the legislation on the House floor. He noted that it “dragoons American taxpayers into subsidizing loans to foreign companies by making it cheaper for them to buy products from politically favored American companies … Legitimate companies have plenty of access to private capital. They don’t need these subsidies.”