What is the Export-Import bank, and why is Washington fighting over it?
On Tuesday, Congress failed to reauthorize the charter of the 80-year-old Export-Import bank, a government agency that subsidizes the foreign buyers of US made products.
While that detail alone may not be an attention grabber, the fact that Republican lawmakers have launched a full-scale attack against the bank is indicative of a larger argument in Washington, the outcome of which could determine how involved the government gets in the economy, and ultimately, how the US labor market fares in the future. In the end, it鈥檚 all about jobs.
The "Ex-Im" as insiders call it, was ordered by Franklin Delano Roosevelt in 1934 as away to close financing gaps in large sales of US goods to buyers overseas when private lenders are unable or unwilling to take on the financial risk.聽In 2013, for example, the bank authorized around $27 billion to subsidize foreign buyers of US products, guarantee their private-sector loans, and insure them against risk, according to its annual report.
Despite being unknown to most Americans outside of Capitol Hill, the bank has drawn the ire of tea-party aligned conservatives and many a GOP presidential hopeful. These staunch opponents of the Ex-Im say that the bank is a symbol of 鈥渃rony capitalism鈥� and the ties between big government and big business.
"The Ex-Im Bank claims to correct market failure, but it introduces distortions into the economy and inserts politics into what should be purely commercial decisions," trade policy analyst Sallie James for the libertarian think tank the Cato Institute.
Moreover, some experts have pointed out that opposition to the bank provides an opportunity for Republicans to demonstrate that they are defending the free market, not just the interests of big business.
"Defense of free markets is often caricatured by the left as being, 'This is just a defense of big business of corporate America.' ... The best way to show that the defense of free markets is about free and open competition is for the leaders of free enterprise to stand up and fight against corporate welfare,鈥� said Timothy Carney of the center-right think tank the American Enterprise Institute .
But supporters of the bank say that the Ex-Im is imperative for maintaining American jobs, which are bolstered by the ability of foreign entities to purchase American goods.聽Foreign companies competing with US firms, they say, are supported by their own national versions of the Ex-Im, meaning that the bank鈥檚 demise could cause foreign buyers to turn their backs on US businesses, leading to fewer sales and fewer employment opportunities.
"Particularly for expensive, long-lived capital goods such as aircraft, nuclear reactors, locomotives and earth-moving equipment, U.S. companies are bidding in competition with foreign companies that are backed by very generously funded export credit agencies of their own,"聽 John Murphy, vice president for international policy at the US Chamber of Commerce, said in an interview with the .
"Bids from all tenders must come with official export-import credit agency backing, which Ex-Im uniquely provides in the United States. So the bottom line in those cases is that without Ex-Im, U.S. companies aren't even able to bid."
Meanwhile, the acclaimed yet polarizing economist Paul Krugman didn鈥檛 miss his opportunity to weigh in on the issue, arguing that while the the Ex-Im鈥檚 impact on the US labor market may be聽negligible聽under normal circumstances due to rising interest rates, this is not the case now.
鈥淩ight now鈥� we鈥檙e at the zero lower bound, which means that the Fed won鈥檛 raise rates,鈥� Mr. Krugman wrote for .
鈥淯nder current conditions mercantilism works 鈥� so this is exactly the moment when ending an export-support program really would cost jobs.鈥�
And President Obama, who during his 2008 campaign the bank 鈥渓ittle more than a fund for corporate welfare鈥�, is now calling for the bank to be reauthorized.
"We will lose business and we will lose jobs if we don't pass it," Mr. Obama said Wednesday,
But regardless of this alleged importance for the US labor market, lawmakers allowed its charter to expire this week. As Stanford professor Russell Berman pointed out in , 鈥渢he conservative victory came as a result of Congress doing what it does best: Nothing.鈥�
鈥淒espite an aggressive push from Democrats, the White House, and powerful industry groups like the U.S. Chamber of Commerce, neither the House nor Senate held binding votes on its reauthorization as the deadline approached,鈥� Mr. Berman continued.
In spite of this inaction, many believed that the Ex-Im would be retroactively reauthorized. But now, seven conservative Republican senators are demanding that the bank begin to immediately disclose its plans for liquidation.
On Wednesday聽Republican senators, including presidential candidates Marco Rubio, Ted Cruz, and Rand Paul, wrote a letter to Ex-Im Chairman Fred Hochberg claiming that, under law, the Ex-Im should now only exist to liquidate itself.
"Given the unique nature of your agency鈥檚 termination, we write to request clarity on your plan for an orderly liquidation," they wrote, .
Still, House Speaker John Boehner said he plans to present legislation that would bring the Ex-Im back. The debate will continue when Senators return after the 4th of July recess.
In the 81 years since its founding, the Export-Import Bank has been reauthorized 16 times without any major difficulties.聽
