By Jim Cardle Austin Economic Club President
Texas Insider Report: AUSTIN Texas Given the vital importance of exports to job growth and economic recovery especially in Texas Im worried some in Congress want to abolish the Ex-Im Bank; a key federal agency that has promoted U.S. exports for nearly 80 years. Failing to reauthorize the Bank could restrict exports slow economic growth and
cost 100s of 1000s of U.S. jobs including 1000s here in Texas.
The Ex-Im Banks lending authority expires at the end of May and experts say it could hit its $100 billion lending limit as soon as April. This is driven in part because exports are one sector of our economy that is not only healthy but some economic analysts even say is booming.
But some in Congress are calling Ex-Im Bank financing corporate welfare" alleging that it distorts the free market. Not only is this disingenuous but such criticism misrepresents how export financing works by overlooking the (substantial) fact that foreign countries provide far more generous export financing and in many instances even direct subsidies to their own state-owned companies giving them an unfair advantage in the marketplace to begin with.
Just last year the Ex-Im Bank facilitated $41 billion in exports supporting 290000 U.S. jobs much of which would disappear if Congress doesnt reauthorize the Banks authority. The Ex-Im Bank guarantees loans to companies that want to buy products manufactured in the U.S. enabling the commercial banks that provide these loans to offer better lending terms.
To some this seems like an awful lot of government support. But foreign countries are far more aggressive at the export game. The Lexington Institute estimates that China dedicates ten times more of its economy
towards export financing compared to the U.S.
Other countries including Brazil Canada France Germany India and Italy contribute at least four times more.
Many analysts argue that the global market is in fact tilted against U.S. businesses sometimes drastically. The Ex-Im Bank helps level the playing field giving American exporters a competitive chance.
Some in Congress have also criticized the Ex-Im Bank for putting taxpayer dollars at risk and for being a corporate welfare version of Fannie Mae & Freddie Mac. This is just politics getting in the way of our economic recovery.
The Ex-Im Bank is so conservative that it has a better lending record than most commercial banks: less than 2 of Ex-Im loans have defaulted since the Bank was created in 1934. And the Bank is forbidden from competing against commercial banks for loans always allowing private investment to take the first steps.
Furthermore taxpayers do not pay a dime to support the Ex-Im Bank because the Ex-Im Bank is entirely self-financed through the fees it charges its users. Financially the Ex-Im Bank has run a budget surplus that over the last four years has annually returned $800 million to the U.S. Treasury.
Incredibly if Congress abolishes the Ex-Im Bank it will actually increase the federal deficit.
Ex-Im Bank opponents and in this age of scatological internet marketing there a plenty using the issue to build their membership lists couch their arguments in terms of free market principles. But
every Republican president since Dwight Eisenhower has supported the Ex-Im Bank. President Reagan even expanded its authority.
I dont understand the whole idea of subsidy or welfare. That implies its not paying for itself. That implies
theres a transfer from taxpayers to another entity" said Fred Hochberg Ex-Ims chairman and president.
Yes theres a full faith and credit guarantee from the U.S. government but that is the only thing the government is providing. No money. No funding. No appropriation."
We dont make crazy undocumented loans. We make loans that have a reasonable assurance of repayment and we get repaid"
Hochberg said. Theyre all untrue. And if any of them were true we wouldnt have such a good credit rating."
Further 20 of the banks loans go to small businesses comprising 87 of the banks clients last year. Many of those smaller companies have no alternative to find financing for overseas projects.
Its not easy to get a bank to lend you money when you are selling medical supplies to the Mideast or locomotives to Kazakhstan or South Africa. I have said to others that the banks arent lining up four or five deep to lend you money to do so" Hochberg said.
It is hard to imagine opposing an agency that supports U.S. jobs and investment counteracts unfair foreign trade practices and doesnt cost taxpayers a dime. But such is the case with the Ex-Im Bank debate.
This is no time for partisan point-scoring based upon ideology and misinformation. The banks charter is set to expire May 31.
At no cost to the taxpayer while paying for itself and making a profit Congress should support U.S. jobs by reauthorizing the Ex-Im Bank and raising its lending limit now before its too late.
James B. Cardle is President & CEO of the Austin Economic Club a dynamic community of Austin Texas leaders drawn to discuss the necessary public policy processes required to further Texas economic growth.
