On the 2008 campaign trail, President Obama unequivocally declared that the Export-Import Bank of the United States (Ex-Im Bank) is “little more than a fund for corporate welfare.” Flash forward six years, and the president’s Democrat allies in Congress are demanding that lawmakers “direct immediate attention” toward renewing the Bank’s authorization, which is set to expire in September of this year.
This drastic reversal is nothing short of appalling, especially when contextualized with the Bank’s tendency to harm American interests.
The Export-Import Bank is a federal agency that is backed by the full faith and credit of the American taxpayer. The Bank fulfills its task by offering loans at sub-market rates to foreign companies, wishing to purchase American products. As a result, there is a direct incentive for foreign based companies to import American goods. In reality, what the Bank does is hide behind its alleged mission of promoting trade and American products, and offer deals to political insiders that cost American employers jobs.
Some U.S.-based employers benefit quite generously from the Ex-Im Bank’s largesse, receiving significant increases in capital leading to higher sales. And this would be fine, if it weren’t for the fact that American companies wishing to purchase domestic products are usually excluded from these favorable loan guarantees and terms. This puts U.S. companies at a competitive disadvantage relative to their foreign competitors essentially pricing them out of the market. Over the long-term, these loans add up to billions of dollars in profits, allowing foreign companies to cut prices and undermine the competition. Of course the competition in this particular case are American companies, meaning that our government is effectively intervening into the free market and helping foreign competitors undercut its own businesses.
This has been especially true for airline carriers based in the United States. The largest benefactor of Ex-Im’s financial wherewithal is far and away the Boeing Company. So much so, the Ex-Im Bank is known as “Boeing’s Bank.” On average, Boeing receives roughly 80 percent of Ex-Im’s loan guarantees. In 2012, foreign airlines based in twenty different countries received over $11 billion in below market financing. The Wall Street Journal estimates that this has cost American carriers as much as 7,500 jobs and hundreds of millions of dollars in revenue. And of course, this was all due to a government agency that is supposedly acting on behalf of the best interests of the American people.
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