President Trump Promised to Scuttle the Ex-Im Bank But Lately Not So Much
If President Trump is serious about “draining the swamp,” then he can’t go soft on a government agency like the Export-Import Bank that benefits big business and their lobbyists and regularly generates a plethora of campaign cash for both Republicans and Democrats in Congress.
The Ex-Im Bank provides loans to foreign governments wanting to purchase products from U.S. companies. It also offers U.S. companies insurance on those loans (loan guarantees). The rates on those loans and loan guarantees are usually lower than those in the private sector. It is sometimes referred to as “Boeing’s Bank” because the aviation giant is the bank’s biggest beneficiary.
But watching the White House smokestacks isn’t terribly helpful on this issue.
Even though Trump said on the campaign trail that the U.S. could “do well without” the Export-Import Bank, some recent news reports suggest the president is now supportive of this monument to corporate welfare. However, in a recent speech to Boeing, Trump did not mention the Ex-Im Bank, and the Bank is still one of the programs that the Office of Management and Budget in the White House is targeting for elimination.
If Trump does end up caving on the Ex-Im Bank, he’ll have no one to blame but himself. The deal that he worked out with Carrier to keep an air conditioner manufacturing plant in Indiana involved giving special tax breaks to the company. On the one hand, the deal sent the signal that Trump would be a pro-business president, something much needed after eight years of President You-Didn’t-Build-That. On the other hand, it set an example that a business can wrest special treatment from the Trump administration if it threatens to eliminate jobs. Big businesses will try to take advantage of that, and it’s no surprise that Ex-Im supporters are emphasizing all of the jobs the federal agency supports.
Naturally, the CEO of Boeing, Dennis Muilenburg, has urged Trump to support the Ex-Im Bank, claiming that without it “more than 1.5 million aerospace industry jobs in the U.S. [are] at risk.” In a recent speech he also suggested that the private sector won’t, at times, provide the financing the Ex-Im Bank does, saying, “Many of our customers look to Ex-Im when they can’t secure financing in the commercial market.”
Are either of those claims true? An analysis by American Action Forum suggested that, at best, Ex-Im Bank financing merely redistributes jobs across the U.S. company affected. At worst, some businesses in the U.S. may lose jobs when they have to compete with a foreign company that receives a lower interest loan from the Ex-Im Bank. A study from the Congressional Research Service reached a similar conclusion.
Nor does evidence support the claim that the Ex-Im Bank provides financing that the private sector won’t. In 2015, during the five months when Congress did not reauthorize the bank, companies that had relied on it found financing in the private sector.
Sen. Patty Murray (D-Boeing), one of Ex-Im’s biggest apologists, claims that it “does not cost taxpayers a single penny.” That is true if one uses the accounting method based on the Federal Credit Reform Act of 1990, but as the Congressional Budget Office (CBO) has explained, that method “does not fully account for the cost of the risk the government takes on when issuing loans or loan guarantees.” Using the more sound “fair-value” approach, CBO found that Ex-Im’s six biggest programs will cost $2 billion over 10 years.
If Trump wants to boost the U.S. economy, then he needs to pursue tax cuts and deregulation. By doing the bidding of Carrier and Boeing, he risks becoming the Corporate Welfare President.
Crossposted at Bombthrowers.
Photo: Conduit for Commerce