Ronald Reagan famously said, “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!” Wait for it now, because there is a sentence coming that is going to be particularly hard to read…ready…here it comes…3, 2, 1….
Ronald Reagan may have been wrong.
With all the foreign policy debacles tearing the world, and with the papers busily covering President Obama lecturing the customers at Canter’s Deli in Los Angeles on the intricacies of a jump shot, you may have missed it but Congress is on the brink of eliminating the Export-Import Bank.
You may not have heard of it, but the Export Import Bank – or “Ex-Im” for those government wonks trying to seem cool – provides taxpayer backed loans, loan guarantees, and export credit insurance. Started in the 1930s, Ex-Im’s charter comes up for renewal in September.
A couple of examples might help explain what Ex-Im does. Say you want to sell widgets to a company in Bangladesh, but the Bangladeshi corporation needs credit to make the purchase. Ex-Im guarantees the credit, and you sell your widgets, and if the Bangladeshi corporation doesn’t pay you back. In another example, you want to sell towels to a retailer in Poland. Ex-Im loans the Polish company the money, which the Polish company then uses to buy your towels. Foreign companies and US based exporters in the Ex-Im’s good graces love Ex-Im because it makes their borrowing costs cheap.
All this sounds lovely, until you think it through. Take Delta as an example. Delta buys planes from Boeing, but because it is a domestic corporation, it doesn’t qualify for Ex-Im funding. But Emirates Air, based overseas, does qualify. This makes it less expensive for Emirates Air to buy planes that Delta, and thus Emirates Air starts with a competitive advantage to an American company, all courtesy of the American taxpayer!
Critics of the Ex-Im point out that 97% of its credit guarantees go to super-huge companies, like Caterpillar, GE, and Dow Chemical. 66% of its credit guarantees go to just one company…Boeing. Of Ex-Im loans, 75% go to purchasers from these same super-huge companies. Critics contend that these large companies’ needs can be met by private lending.
Proponents of Ex-IM (many of whom point to a pickle company: Jenny’s Pickles) counter that some 3,400 small businesses also take advantage of Ex-Im programs, many of whom would be unable to gain financing for reasons unrelated to creditworthiness (it can be tricky to engage in overseas credit transactions). They contend failure to renew Ex-Im’s charter could leave U.S. companies at a competitive disadvantage, because many foreign governments have similar programs. Most importantly, they argue that Ex-Im operates at a profit, and returned $1.2 billion in profit to the Department of the Treasury last year.
Normally, the Ex-Im sails through the reauthorization process, despite the vocal remonstrations of some conservatives, but in recent years it has faced troubles. In 2012, Jeb Hensarling, Chair of the House Financial Services Committee (which oversees Ex-Im), opposed reauthorization, but House Majority Leader Eric Cantor stepped in and organized a deal to reauthorize it. While Hensarling is still Chair of the HFSC, but Cantor is gone, having lost a primary fight to an opponent of the exact type of crony capitalism that Ex-Im represents.
New majority leader Kevin McCarthy has announced he won’t support reauthorization, and John Boehner has signaled that he’ll not stand in Hensarling’s way. Barring any drastic change, come September, Ex-Im’s charter is likely not going to be reauthorized, at least not in its present form. For a few years, Ex-Im would service its existing loans, until they expire. Then it too will disappear, and Reagan will have been proven wrong.
We’ve been watching the coverage surrounding the downing of Flight 17, with 23 American among the 295 casualties, and were reminded of another incident from 1983, when a Soviet jet shot down a Korean Airlines jet. Here’s how President Reagan reacted:
We’ll let you draw your own contrasts with our current Commander-in-Chief.
Over the past few days, the New York Young Republicans have received numerous calls for comments after a post written by William Palumbo, entitled “The United States of Gaymeria [sic]” appeared on the NYYRC blog.
The post has since been removed, and Mr. Palumbo resigned his position with the NYYRC on July 1.
Never more so than now, the NYYRC leadership wishes to remind everyone that at the bottom of every blog post on our site, after the title is clicked the blog includes the following:
DISCLAIMER: This post and the contents thereof are the views of only the author identified immediately above and do not necessarily represent the views of the New York Young Republican Club (the “NYYRC”), its officers or its members. The NYYRC expressly disclaims responsibility for the contents thereof and by its charter documents may not, and does not, endorse any candidate for any office, except in a general election.