The Senate is planning a weekend vote-athon to finalize work on a short-term fix for highway funding. Authorization for infrastructure spending expires at the end of the month, making a Highway Bill “fix” the last piece of “must-pass” legislation before Congress leaves town for a month.
That makes the “fix” an enticing target for legislation that couldn’t pass on its own.
While the Senate will consider a number of amendments to the legislation this weekend, the most politically revealing provision offered will be resurrecting the New Deal-era Export-Import Bank. The charter for the federal lending agency expired at the end of June.
Senate Majority Leader Mitch McConnell has said he will allow a vote on an amendment to the highway bill reauthorizing the bank. The amendment will likely pass, as the bank is supported by Democrats and a large number of establishment Republicans in the Senate.
The bank is opposed by a large number of Republicans in the House, but is supported by House Speaker John Boehner. If the Senate GOP does reauthorize the bank in its highway bill, it will set the first real showdown between Senate and House Republicans.
With the news media focused on the daily iterations of the Presidential nominating contests, there has been little attention on the Ex-Im Bank’s possible return from extinction. The outcome of the debate, however, is an existential battle for the heart and soul of the GOP.
The Export-Import Bank was created as part of FDR’s New Deal to provide taxpayer-backed loans to foreign companies to purchase American products. The deal might have made some sense almost 100 years ago, with more limited capital markets and much more restrictive financing options.
It makes much less sense in our modern economy, as the macro-numbers from Ex-Im Bank reveal. Less than 2 percent of American exports receive any financing from the Bank. It isn’t at all clear that even these deals would be at risk without taxpayer-subsidized loans given the largess of Central Banks pumping essentially free money through the world’s financial markets.
Even if there were deals that could only happen through the subsidies of the Ex-Im Bank, why should taxpayers finance deals that the private markets have rejected? Taxpayers are currently on the hook for $134 billion to underwrite these deals.
As with most things involving the federal government, the Bank seems to concentrate its activities on those companies big enough to navigate it. Over 60 percent of the taxpayer-subsidized loans finance deals benefiting just 10 companies. Boeing, the airline manufacturer, alone benefited from over 40 percent of the Bank’s financing.
The Boeing deals themselves reveal the muddled justifications for the Bank’s existence. The beneficiaries of Ex-Im loans to purchase Boeing airplanes are foreign airlines, often owned by foreign governments, competing directly with American airlines. Government policies that benefit one American company at the expense of another are the very definition of crony capitalism.
Boeing, and other corporations, have ramped up their lobbying to resurrect the Bank. In the most recent quarter, Boeing reported spending almost $10 million on lobbying Congress. This is more than two times the $3.8 million the company spent in the first quarter.
Boeing, in fact, has spent almost as much lobbying Congress the first six months of this year as it did in each of the last four years.
There is simply no economic justification for continuing the Export-Import Bank. It would be more intellectually honest to simply cut checks from the federal Treasury to these mega-corporations.
The debate over the Ex-Im Bank will be decided by Republicans. The establishment wing of the party is committed to preserving the Bank. On Friday, on the eve of Senate votes on reauthorizing the Bank, the US Chamber of Commerce announced it was going to challenge Republican opponents of the Bank in primaries next year.
There is no similar seriousness of purpose among Conservatives opposed to the Bank.
In the scope of a mammoth federal government and $18 trillion national debt, the Export-Import Bank is the equivalent of couch-cushion change. Its impact on the overall economy is a rounding error, but its benefits are showered on a handful of mega-connected corporations.
If Republicans can’t eliminate this antiquated vestige of crony capitalism, then they have no hope of taming the federal leviathan.