Die, Ex-Im Bank! Faster, Faster!
The most interesting, and puzzling, political development of the last month has been the impending demise of the U.S. Export-Import Bank. Puzzling, because the Export-Import Bank is basically small beer -- the sort of government agency that usually achieves immortality through obscurity. It's surprising to me that this has actually become a hot political issue. Interesting, because reform conservatives look like they may well claim a genuine scalp: eliminating a long-standing instrument of corporate welfare.
For those who do not follow the details of Washington export policy, the Export-Import Bank provides below-market loans to foreigners who buy U.S. products. The bank's defenders argue that it doesn't cost the government anything, because the loans are below-market but not free. Though of course the same could have been said of Fannie Mae and Freddie Mac's implicit government guarantees . . . in 2007.
The economic impact of this agency is slight. Oh, its impact on specific companies can be large: Boeing will be hurt if the government declines to reauthorize Ex-Im, while domestic air carriers will probably benefit a bit because their foreign competition will no longer receive subsidies from the U.S. government. But overall, its demise would not have any effect large enough to notice, either on the federal government's budget or on the U.S. economy. Exports will probably decline somewhat, but that will be offset by freeing up a similar sum for expenditure in other sectors. Overall, kind of a statistical yawn.
But if the economic impact is slight, the symbolic impact is huge: Conservatives are taking a run at a major dispenser of corporate subsidies, while Democrats have suddenly discovered a deep love of government-financed corporate expenditures. It just got a little bit harder to argue that Republicans are the party of big business.
On this issue, I'm with the symbolists. The government should not be directly subsidizing purchases of American goods, and no, I don't care if all the other kids at the World Trade Organization get to do it. The principle involved is not whether there's an explicit taxpayer expenditure, but whether corporate welfare is within the proper scope of the federal government's duties. Conservatives say it isn't, and I agree.
Of course, you can argue that there are other forms of corporate welfare that matter more, and fair enough. But this is one that's easy to do, politically, because the bank has to be periodically reauthorized -- meaning that this particular piece of welfare can easily be killed. There's no reason to make the perfect the enemy of the good when all forms of corporate welfare deserve to die. This may be a small step, but at least it's a good start.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To contact the author on this story:
Megan McArdle at firstname.lastname@example.org
To contact the editor on this story:
James Gibney at email@example.com