The Ex-Im Bank and the essence of socialism
Briefly suspending their warnings about the rising tide of socialism, a large majority of Senate Republicans recently joined with almost all their Democratic colleagues in affirming the essence of socialism, which is government allocation of capital. The Senate’s revival of the Export-Import Bank is a redundant reminder that the rhetorical discord between the parties exaggerates their actual differences.
The Ex-Im bank has been reauthorized 16 times since it was created in 1934 as a filigree on the New Deal’s overarching project of politicizing the allocation of financial resources. The reauthorization requirement is a way of pretending to refute Ronald Reagan’s axiom that there is nothing as immortal as a temporary government program, because programs acquire “reliance interests” the way a ship acquires barnacles.
Between 2015 and the Senate’s recent confirmation of three board mem
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bers, Ex-Im has been without a quorum and hence unable to approve guarantees of large loans (those over $10 million). So, we have had a sustained test of the theory that Ex-Im is vital to U.S. exporting in general, and to the few giant corporations that get the lion’s share of benefits from Ex-Im’s subsidies of foreign entities. The theory has been slain by many facts.
Ex-Im has always been peripheral to U.S. exporting. In the four years since Ex-Im became largely dormant, the portion of American exports it subsidized fell from less than 2% to 0.3% — and exports have risen.
Ex-Im has prudently distributed subsidies to enough small businesses to blur its (accurate) reputation as primarily an ally of corporate behemoths such as General Electric, John Deere, Caterpillar and especially Boeing. Sen. Mike Lee, R-Utah, who opposes Ex-Im, notes, “When Ex-Im financing was at its peak, Boeing received 70 percent of all ... loan guarantees and 40 percent of all Ex-Im dollars.” In 2018, deprived of subsidized Ex-Im loans, Boeing, America’s 23rd largest corporation by market capitalization ($193.58 billion as of Tuesday morning), and 27th by revenue ($101 billion), had its best year ever.
Of course, Ex-Im makes enough loans to small businesses to purchase congressional support in the usual way: Want to build a bomber that the military does not want? Scatter subcontractors around enough congressional districts, and it will be built.
The Trump administration trots out its usual rationale for economic irrationality: Ex-Im is a “national security weapon.” As the bank subsidizes China and Russia? In 2014, in 17 Ex-Im transactions the primary borrower was the Export-Import Bank of China. Says Toomey, “You cannot make this stuff up”: Ex-Im is subsidizing the Chinese bank that is cited as the reason we need Ex-Im.
Toomey notes that Ex-Im’s defenders argue that the bank takes risks that private lenders will not undertake — and that the bank does not risk taxpayers’ money by making unsafe loans. some U.S. winners, Ex-Im makes some U.S. losers: For example, it subsidizes stateowned Air India’s purchase of Boeing jets, thereby enabling it to lower its fares on the New York-Mumbai route, where it competes against Delta Airlines.
Ex-Im, which exists to allocate credit by political criteria rather than the market’s efficiency criterion, is opposed by only 16 Republican senators who, unlike their 37 Republican colleagues, mean what they say when praising free markets and limited government.
Republicans must repeat this dismally revealing exercise by Sept. 30, when the bank must be reauthorized, which it will be. So, the 37 have three months in which to resume their denunciations of socialism, with which they are familiar.