Imagine you’re walking through a shopping mall, and there’s a banner in every store window announcing discounts and sales on all products, with just one catch: “foreigners only – Americans pay full price.”
If that sounds like it would never happen here, guess again. Every year, the Export Import Bank (Ex Im) of the United States provides billions of dollars in financial assistance and loan guarantees to foreign buyers of American products – ostensibly to provide a boost to American exporters. In reality, Ex Im hurts everyone else. For decades, Ex Im’s corporate defenders kept the New Deal-era institution on the books, until conservatives finally managed to kill the bank’s reauthorization in the summer of last year. There’s just one problem: Ex Im is back, and Congress just moved to hand over more powers to the crony bank in the appropriations bill this fall.
“Appropriators in both chambers passed legislation changing Ex-Im’s quorum requirements for its board of directors, but lawmakers are likely to see debate over the bank reignite in the fall over a potential omnibus spending package funding the government in 2017,” writes Melissa Quinn for the Daily Signal. “The House Appropriations Committee passed an appropriations bill funding state and foreign operations Tuesday, which included an amendment from Rep. Charlie Dent, R-Pa., to allow Ex-Im’s board of directors to begin approving transactions of more than $10 million.”
Through Ex Im assistance, massive foreign companies like Air Emirates and the state oil company of Mexico are able to access loans guaranteed by the American taxpayer, in order to purchase exports from large corporations like Boeing. Essentially, this means that when some foreign companies shop for American goods, they get a discount that isn’t available to their American competitors. American companies like Delta, which also purchase airplanes from Boeing, are put at a disadvantage to companies like Air Emirates who receive financial assistance to purchase the same products. Companies like Valero Energy, based in Texas, have protested Ex Im for the same reasons.
A spokesman for Sen. Lindsey Graham (R-SC) insisted Ex Im was necessary for countervailing foreign subsidies:
“If the French, Chinese, and others want to shut down their export banks and credit agencies, we’ll do the same. But until then, we aren’t going to unilaterally disarm. We need [the] Ex-Im Bank up and running to ensure American manufacturers and American workers are on a level playing field in the international marketplace.”
Ex Im reduces the total income of the United States, and harms the global competitiveness of American industry. In fact, according to Salim Furth of the Heritage Foundation, if Congress abolishes Ex Im, the growth rate of the U.S. economy would get a boost above other nations. Far from making the U.S. more competitive, Ex Im actually holds us back.
The addition of language expanding Ex Im powers to the appropriations bill sets the stage for a major legislative battle in the fall. And as Congress debates the issue of Ex Im, it’s worth examining a related question: Instead of doling out subsidies and federal assistance that are bankrupting America, why not lower corporate income taxes? American businesses would immediately get a boost from the lower tax burden, and foreign companies would clamor to relocate to the United States to benefit from the more favorable business climate. Instead of manipulating competition, picking winners and losers in the economy, and ultimately bankrupting America, commonsense free market policy reforms will actually do what they’re promised to do. We already know how to make America more competitive. Ex Im just doesn’t measure up.