I was out of the box early on the dust-up around the survival of the Export-Import Bank, but haven’t weighed in since it’s heated up, so allow me to briefly revisit. (You’ll recall that the Ex-Im Bank provides government-backed guarantees to private loans made to other countries under the condition that they use the credit to buy our exports.)
Note the figure in the link above, showing a pretty remarkable drop in Boeing’s share price on the day of Rep. Cantor’s surprise loss to Dave Brat (Cantor’s a supporter of the bank, and Boeing depends on the bank to boost its international sales; Brat’s a strong opponent). That blip says a lot: Brat had a point when he connected Cantor to Wall St., and Boeing is clearly dependent on the Ex-Im Bank.
Brat and the Tea Party are by no means alone in their opposition to the bank’s reauthorization. From what I’ve seen in recent days, punditry opposition from left, right, and center is outpacing support by a wide margin. At this point, I’m not sure if even Tim Howard could save the bank.
Not that the bank obviously needs saving, but neither is the case against it as slamdunkity as opponents claim. For example, running through the critiques is the assertion that the subsidies which the bank provides to American exporters are wasted: they’d make the same sales without them.
That may be the case, but I’ve seen nothing but assertions and no analysis. Keith Henessey, who doesn’t just want to end the bank—he wants to “Kill” it!—makes a point I’ve made as well: “Deep and liquid private credit markets exist today that did not exist when the Export-Import Bank was created in the 1930s.”
Certainly true. The global supply of loanable funds is much greater and cheaper than it was in the past. But neither he nor I nor anyone else knows if that means a developing economy can get an affordable loan of the magnitude needed to buy US-made airplanes. The Ex-Im Bank exists to offset the premium associated with that credit risk and it has done so effectively, in the sense of pricing its loan guarantees to account for the risk (i.e., it has not, on net, lost money on defaults).
That doesn’t mean it’s efficient or even that it deserves to live on. I join the opposition in their major critiques: it’s not clear why Boeing, GE, and other large American exporters need the subsidy, nor why rich countries need the USG to backstop their loans.
But assertion is not proof, and it would be better to test the international credit waters rather than do an experiment with full withdrawal, especially at a time when we very much need the labor demand generated by exports–and remember, we’re talking manufactured goods. Phase-out is also a better strategy given the other main defense of the bank, which is that as long as our competitors for international sales keep their similar credit-providing institutions up and running, we’re at a disadvantage if we drop out of this market. As one critic wrote, that’s not a principled defense, but I think it’s a pragmatic one.