If a federal agency helped reduce the trade deficit, increase U.S. manufacturing jobs, and returned a profit to the Treasury, you might think that was a good thing. Unfortunately, it’s not the case in topsy-turvy Washington.
The agency in question is the Export-Import Bank. Established in 1934, the Ex-Im Bank is the official export credit agency of the U.S. government. Its mission is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers.
The bank must be reauthorized by Congress every four to five years. Until recently, that hasn’t been a problem. Reauthorizations were approved with bipartisan support in 1947, 1951, 1957, 1963, 1968, 1971, 1974, 1978, 1983, 1986, 1992, 1997, 2002, 2006 and 2012.
Since then, it has become a political football. Organizations such as the National Association of Manufacturers and the U.S. Chamber of Commerce argue the bank is vital for helping U.S. manufacturers compete in world markets. Some Republicans, on the other hand, would like to kill the bank as an example of corporate welfare.
After much squabbling, the House finally passed a bill Sept. 17 that reauthorized the bank until June 30, 2015, when the lobbying and bickering can be revived like locker room mildew.
To be fair, the corporate welfare argument has some merit. The bank is required to make no less than 20 percent of its lending authority available to small businesses, and it often falls short of that mark. In 2013, 76 percent of the value of the bank’s loans and guarantees went to just 10 companies, including Boeing, GE and Caterpillar.
Then again, Boeing’s commercial airplane backlog stood at nearly 5,200 jets in May, enough work to keep the company’s assembly plants running nonstop for the next seven years. How much of that work might have been lost to Airbus had it not been for the Ex-Im Bank? Kostya Zolotusky, managing director for capital markets and leasing at Boeing, says losing the bank would represent “armaggedon” for the company.
And it isn’t just Boeing that benefits from greater exports. Behind every large corporation that benefits from the Ex-Im Bank, hundreds, even thousands, of small businesses benefit, too.
Click Bond Inc., in Carson City, NV, is a good example. The company makes fasteners and adhesives for aerospace manufacturers and other industries. Click Bond is the classic “invisible exporter,” a company that supplies parts to large U.S. manufacturers, which in turn export most of their products with the help of Ex-Im’s backing.
The company’s fasteners can be found on the 787 Dreamliner and the F-35 fighter. Some 80 percent of the Click Bond’s workforce directly or indirectly supports Boeing’s commercial airplane exports.
What’s puzzling about the debate over the bank is that it became a self-funding agency in 2007 (though its loans remain backed by the government). It borrows at a low Treasury rate and lends that money out at a higher rate. Provided borrowers don’t default (the default rate was just 0.194 percent as of June 2014), that margin turns into profit. Last year, the bank provided $27.7 billion in export assistance and sent a record $1.1 billion in profit to the Treasury.
How can that be a bad thing? U.S. exports topped $2.3 trillion in 2013, the fourth straight year of record levels. Let’s not mess with success.