Ex-Im Bank: A Legacy of Corporate Welfare
The Great Depression in the 1930s ravaged the post-World War I American economy. Decreased production and severely limited international trade caused the economy to contract drastically year after year for the first half of the decade. In one of many efforts to reverse this trend, President Franklin Delano Roosevelt issued an executive order in 1934 establishing the Export-Import Bank of the United States. This new agency was formed with the stated goal of aiding in the finance and facilitation of new trading partnerships between the U.S. and other nations. More specifically, it was meant to bolster American companies so that they would be on a level playing field with other foreign corporations that had the financial backing of their respective countries.
While it served a noble cause in the 1930s, the Export-Import Bank has since deviated critically from its initial goal. It is now an agency devoted to subverting free market capitalism. Under the auspices of creating and sustaining American jobs, the Export-Import Bank doles out billions of taxpayer dollars to politically favored entities with little oversight or accountability. Its methods have recently and accurately been described as anti-competitive corporate welfare mired in crony capitalism. And what’s worse is the policies of the Ex-Im Bank have been directly responsible for the loss of American jobs.
The American domestic airline industry serves as a telling example. Over the last decade, the Ex-Im Bank doled out hundreds of billions of dollars to foreign companies to facilitate the purchase of Boeing airplanes. The outcome of these subsidies meant that foreign airlines could buy new aircraft more cheaply than their U.S. competitors. Immediately, foreign carriers had an advantage in the global air transportation market and consequently, U.S. airlines had to cut routes and American jobs. This of course was all paid for by American passengers who bore the cost of increased costs.
Thankfully, some in Congress noticed. The consistent pattern of re-authorization that the Ex-Im Bank enjoyed for the last 75 years ran into a bit of a speed bump last spring when Republicans and even some Democrats finally stood up to the misguided agency and demanded reform. Even though Congress increased the Ex-Im Bank’s borrowing authority by $40 billion (a blow to fiscal responsibility), the new re-authorization bill, H.R. 2072, which passed only after a long and tense debate in Congress, demanded more transparency and accountability from the Ex-Im Bank. The bill even contained a provision that empowered the Treasury Secretary to negotiate the winding down of export subsidies with other countries. All in all, the new re-authorization bill was supposed to rein in the uncontrolled lending practices of the Ex-Im Bank, eventually eliminating a system that perverts competition in the marketplace.
The reasonable reforms are sorely needed go beyond the airline industry. For instance, one needs to look no further than the green energy industry and a company named First Solar – a politically favored solar energy company that received a $1.5 billion loan from the Department of Energy last December. The loan, it seems, didn’t help. Since December, the company has performed very poorly; declining profits led to two rounds of layoffs, leaving 2,100 Americans out of work. The only thing keeping First Solar from filing for bankruptcy was the Ex-Im Bank. Possibly to avoid another “green” embarrassment for the Obama Administration, additional direct loans from the Ex-Im Bank were awarded to two Indian firms to subsidize the purchase of solar panels manufactured by First Solar. The Ex-Im Bank is supposed to help businesses compete globally, but it consistently gives millions to companies that can’t even compete domestically.
Policy makers at the Ex-Im Bank aren’t entirely blind though. Sensing the hostility in the last round of re-authorization negotiations, the Bank has embarked on a new public relations campaign to make the public believe that the organization is a boon to American small business owners. Press releases describing the success of the bank’s micro-lending practices have been published on a near-daily basis. Yet this new agenda is nothing more than a hoax. The Ex-Im Bank hopes that by putting out a multitude of press releases on the subject of small business, the public will ignore the reality that it is still giving out billions in taxpayer-backed loans to foreign companies at the expense of American workers.
President Obama’s continued support for the detrimental effects the Export-Import Bank has on the free market is deeply disturbing. If creating more domestic jobs is a real goal of this White House, then the President must be willing to stand up against the agencies within his own administration that are inhibiting that attainment of that objective. Otherwise, the American public may just stand up against the President this November.