Wednesday, July 29, 2015

Why the Export-Import Bank needs to go

So little is known about the Export-Import Bank because, let’s face it, it’s a rather boring subject. That was until it became a bone of contention between Sen. Ted Cruz and his majority leader, Mitch McConnell. Cruz chastised McConnell on the Senate floor for lying to him and others when McConnell said he wouldn’t allow a vote on reauthorization of the bank in exchange for getting Democrat support for fast track authority for the president. McConnell did allow a vote and all the Democrats voting supported the Export-Import Bank along with 22 Republicans.
So, what is this Export-Import Bank? It’s a vestige of the Great Depression. Basically, it’s the official export credit agency for the federal government. It finances and insures high-risk loans for companies that can’t get financing in the private sector because the risk is too high. In other words, it’s corporate welfare. 

Supporters argue that it helps small business but 65 percent of the bank’s business went to foreign companies so they could buy Boeing aircraft. Sure, it helps some small businesses but these are businesses that couldn’t get such financing in the private sector. Supporters say that’s why we need the Export-Import Bank but that’s exactly the point. If you can’t get financing in the private sector you don’t need to be doing business.

For example, the Export-Import Bank gave $10 million in loan guarantees to Solyndra. That solar panel company went belly-up with a bunch of other taxpayer money, as well. Yes, there have been many success stories and supporters point to all the jobs the bank has helped create. That’s all well and good but the government is not in the business of creating jobs. If that were the case then we’d have the government take everyone unemployed and hire them as crossing guards at intersections across the country. Then we could brag about full employment but the cost would be staggering.

Such it is with the Export-Import Bank. Supporters say it makes money but the reality is it loses money. It props up businesses that don’t need propping up, like the oil business and green energy. It gives them access to money they wouldn’t ordinarily have access to because the risk is too great. That alone tells you the bank is nothing more than a welfare program.

Why do so many Democrats support this bank, especially given its history of risky oil ventures? Because they’re Keynesians who ultimately have little faith in the free market. They love the role government takes in ‘helping’ the economy along. They’re bureaucrats who love being ‘useful’ to their constituents which gives them a sense of purpose.

The reality is the free market is the best determiner of where capital is allocated. Private sector businessmen and businesswomen who are held accountable by boards of directors are far more careful with money than government employees whose very existence hinges on how many risky loans they can guarantee.

The Export-Import Bank clings to a depression-era mentality that the only way the economy can grow is through government subsidy. Many studies now show that the Great Depression was so great because the government intervened and gummed up the works. Economists say FDR prolonged the depression by at least 7 years with his intervention policies and the Export-Import Bank was one such ‘solution’ he created.

It’s a very simple principle. If others who have money think your enterprise is worth risking their money to bankroll, they’ll loan it to you. We certainly do not need the government short-circuiting that process.

Phil Valentine is the host of the award-winning, nationally syndicated talk radio show, The Phil Valentine Show.


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