The American economy couldn’t survive without the Export-Import Bank. At least, that’s what the Bank and its supporters claim. Created in 1934, it “facilitate[es] the export” of our country’s “goods and services.” It “ensures a level playing field for U.S. exports in the global marketplace.” And like every good bureaucracy, it “supports jobs.”
This is a case study in bureaucratic double-speak that covers up corporate welfare. The Export-Import Bank is actually a relic of a bygone era that benefits a select few special interests while leaving taxpayers on the hook. Congress should not renew its charter when it comes up for re-authorization this summer.
The bank’s erstwhile job is to provide loans and guarantees to banks, which then finance companies attempting to import and export goods. The lion’s share of its money goes to multi-national, multi-billion dollar corporations. Roughly 90 percent of its 2010 loans and guarantees went to ten major corporations like General Electric and Caterpillar. In 2012, Boeing received roughly 80 percent. Small businesses typically receive less than 20 percent of the bank’s loans by dollar amount.
These large, usually publicly traded companies would have no problem securing funding from elsewhere. After all, U.S. exports wouldn’t have reached a record high $2.2 trillion last year if there weren’t plenty of private finance opportunities available. Yet thanks to the Export-Import Bank, these companies can avoid the risk by using public money to guarantee private profits.
This generosity results in significant taxpayer exposure. American taxpayers are currently on the hook for approximately $134 billion in outstanding Ex-Im loans. This is a more than 100 percent increase since 2007, the year after the bank’s most recent congressional re-authorization. Every year, more companies realized that they can benefit from this arrangement. Last year’s 4,061 deals marked a 33 percent increase over the bank’s 2009 total.
In recent years, Ex-Im has given loans to such politically well-connected companies like Enron, First Solar, and Solyndra. None of these loans went well for the taxpayer; all three companies have since gone bankrupt. Meanwhile, most of the bank’s current beneficiaries can afford teams of lobbyists to keep the money flowing.
The agency has also proven popular with politicians running for re-election — nothing says photo op like a local company flush with Ex-Im funding. North Carolina’s endangered Sen. Kay Hagan did just that earlier this year with a company in her home state.
So powerful is the bank’s political potential that politicians often change their minds about whether it should exist. The GOP decries corporate welfare on a regular basis but is currently divided on whether to re-authorize the bank. Its list of opponents-turned-defenders extends all the way to President Obama. While campaigning in 2008, then-candidate Obama described the bank as “little more than a fund for corporate welfare.” He changed his position after taking office, applauding Congress for reauthorizing the bank in 2012 and citing its “extraordinary mission.” Of the two, candidate Obama was right.
Beyond its political benefits, the Export-Import Bank stays alive through a series of accounting mistakes. Reports from numerous government agencies consistently show problems with the bank’s calculations. The Congressional Budget Office believes that the bank uses outdated accounting methods that cause it to overstate its profit margins. A recent MIT study proved this by using fair-value accounting practices; the authors estimated that the bank is losing $200 million a year.
Similarly questionable is the bank’s erstwhile support of jobs. Mounting evidence shows that it either protects jobs in one industry at the expense of another or props up jobs overseas while limiting job creation by domestic companies. Case in point: The Air Line Pilots Association estimates that the bank’s recent loans to foreign airlines caused U.S.-based airlines to lose 7,500 jobs.
Despite this sloppy bookkeeping, the agency shows no signs of change. The bank’s Office of the Inspector General has written extensively on its insufficient policies for preventing waste, fraud, and abuse, as well as its outdated risk management policies and its inadequate recordkeeping. The IG also noted that the bank lacks mechanisms to comply with federal and agency credit policies. Last year, the Government Accountability Office recommended that the bank take a number of concrete steps to bring its accounting practices up to par. Most of the requests have gone unanswered.
Such policies give new life to the saying, “good enough for government work.” Yet the Export-Import Bank isn’t good for Americans, who are paying for it once in their taxes and twice with its negative effects on the economy. It only benefits special interests and the politicians who can use it to their advantage. Congress should cut them both off.
Christine Harbin-Hanson is the Federal Affairs Manager of Americans for Prosperity.