Almost immediately after his election as House Majority Leader, Rep. Kevin McCarthy (R-Calif.) suggested that he would try to effectively kill the U.S. Export-Import Bank when its charter expires in September. The bank provides low-interest loans to foreign companies, who then use that loaned money to buy U.S. goods. Big U.S. manufacturers—companies like Caterpillar and Ford—love the bank because it makes it easier for them to export their goods. Many conservatives, especially those who lean libertarian, see the bank as a vehicle for the government to give arbitrary special favors to companies.
It doesn’t matter, Jared Bernstein says. Even with the Ex-Im Bank’s flaws, it’s worth keeping. Bernstein points out that the stock price of Boeing, one of the companies that benefits most from the Ex-Im Bank’s cheap loans, plummeted just after Eric Cantor lost his primary (Cantor was one of the Ex-Im Bank’s staunchest supporters). The stock price fell to $132 from $138 that week, erasing all gains from the year so far, reports the NYT. Boeing closed at $128.54 today. It’s all well and good to inveigh against the bank’s “crony capitalism” in theory, Bernstein says, but people’s livelihoods are still at stake: “Imagine the upheaval to communities where Boeing is such a strong presence if the hard right shuts down the bank.”
Joe Nocera is not amused by McCarthy’s proposal either. In addition to helping American companies by providing low-interest loans to foreign companies that want to buy our stuff, he says, the Export-Import Bank “costs the taxpayers nothing — not only does it support itself through the fees and interest it charges for its services, it also regularly sends money to the Treasury to reduce the debt, some $2 billion over the last five years.” And Matt Yglesias claims that Fair Value Accounting, the account methodology that the bank’s critics often use, doesn’t offer a compelling argument against the Ex-Im Bank’s record of profits.
While it’s tempting to look at the raw dollar amount that the Ex-Im Bank adds to the nation’s coffers every year, says economist Veronique de Rugy, the bank is still an example of crony capitalism at its worst. She writes, “It’s easy for Ex-Im defenders to point to the visible beneficiaries of government largess … It is harder, but in many ways more important, that we consider the invisible costs of political privilege, like market distortions, resource misallocation, job losses, and destroyed potential.” Dean Bakeralso says good riddance. He concedes that “it is possible to make an argument for the Ex-Im Bank,” but he doesn’t think it’s a very good one. Baker says that “by diverting capital to the winners picked by the Ex-Im Bank, we are raising the price of capital for other firms,” who tend to be smaller business. Danny Vinik agrees, saying this is one issue where populists from both parties can join hands.
Paul Krugman can’t really make up his mind. The Ex-Im Bank is counterproductive because mercantilist trade policy is a bad idea — except when mercantilist trade policy is a good idea, like right now, he says. — Jordan Fraade
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