Ordinarily, a question of whether to reauthorize the U.S. Export-Import Bank (Ex-Im) and to increase its loan limit would be about as uncontroversial a proposition as one could find on Capitol Hill. Ex-Im provides an important counterpart to the government-guaranteed loans our international competitors use to encourage their industries’ exports. And it actually makes money for the Treasury.
This year, though, some of my friends among the fiscal conservative and strict constitutionalist communities are urging that the Bank’s authorization be allowed to expire or, at least, that Ex-Im not be allowed to increase the amount of loans it can make with government guarantees. They argue that we should not be extending credit at a time when we are broke, we should not be picking winners and losers, and that these sorts of transactions amount to crony capitalism and favor big businesses.
Despite such concerns, the outcome is not really in doubt. The U.S. Senate will surely vote to reauthorize the Export-Import Bank, as has the House of Representatives, and raise its loan limit from $100 billion to perhaps as much as $140 billion. The reason is clear: The current authorization will expire on May 31st, and the Bank’s existing loan limit will be reached this month. Most Senators and their House counterparts recognize that renewing the Ex-Im’s authority and expanding its lending capacity is crucial to maintaining the industrial base and military readiness, to rebuilding American manufacturing and job growth, to improving our trade balance with other nations – and to reducing the deficit.
But let’s examine the critics’ complaints in turn.
First, the Export-Import Bank is a money-making activity for the U.S. government. According to the U.S. Chamber of Commerce, since 2005, Ex-Im loans, guarantees and insurance programs have returned $3.4 billion over and above its costs and loss reserves, with a default rate of less than 2%. That includes $400 million in 2011 alone. Even if we have to borrow money from the Chinese to make such loans, the net return on investment is positive. That is money that reduces the deficit, not adds to it.
Frank Gaffney Jr. is the founder and president of the Center for Security Policy and author of War Footing: 10 Steps America Must Take to Prevail in the War for the Free World .
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