With all the suffocating legislation handed down to American businesses in recent years, why would our congressional leaders shut down legislation that promotes healthy job creation and costs taxpayers nothing?
Congress is playing with fire when it attacks the export economy by shutting down the federal Export-Import Bank. The bank has been a vital cog in our export system, providing loans and insurance to help American companies sell their products overseas. Despite its importance to the economy — the bank supported nearly $30 billion in exports last year — it remains under assault from tea-party leaders like Texas’s Jeb Hensarling and Ted Cruz, who think government has no role to play in helping American businesses succeed.
Yet they ignore the lesson of the last recession. The damage from shutting down the bank this summer isn’t limited to exports. Like the fallout from the housing bubble and Wall Street crisis, it is spreading like wildfire across our nation.
The Export-Import Bank is not some rogue, wasteful agency. The opposite is true. Ex-Im has been one of the smallest federal agencies out there. It is a cautious lender with strict underwriting rules and a default rate far lower than that of private banks. The bank pays for its own operations out of interest and fees on its services. Most years it runs a surplus as one of the few federal agencies that makes money for the taxpayer. Over the past two decades the bank has generated $7 billion in revenue above and beyond its operating costs.
And its value to the American economy is enormous. The bank has made nearly $300 billion in export sales possible since 2007. Do bank critics really want to hand the next $300 billion worth of Ex-Im deals to our rivals in Germany, China and Japan? Do they want to give pink slips to the 164,000 American workers whose jobs depend upon the bank each year?
Much of this is already happening. For instance, International Green Structures has shut down its manufacturing plant in Fort Worth and laid off workers because its orders have stalled because of a lack of Ex-Im Bank financing. Chief Operating Officer Bill Britt says his company’s affordable housing product is superior to those offered by Chinese and South Korean competitors, but it’s at a competitive disadvantage since it can’t provide financing to potential buyers in Africa and the South Pacific without the Ex-Im Bank. Several thousand small and mid-sized businesses face similar problems.
Every other major industrial country operates an export credit agency like Ex-Im to make sure its manufacturers can get the credit they need to do business in unfamiliar and far-flung markets. In fact, Ex-Im pales in comparison to its rivals. As a share of GDP, France offers triple the export financing, Germany 10 times as much and South Korea 35 times as much. Our rivals in these countries were licking their chops at Congress shutting down the Ex-Im Bank and U.S. businesses being forced out of the global market as a result.
Critics offer mostly ideological objections to the bank, slurring it as “crony capitalism” or arguing that it distorts private markets or picks “winners and losers” in the economy. It’s hard to know what makes something “crony capitalism,” but the bank’s services are available on equal terms to all American businesses trying to break into markets overseas. That’s no kind of cronyism as I understand the term. And the bank doesn’t distort private markets. It helps them work better by filling gaps when the ordinary financing system lacks the expertise to evaluate transactions crossing national borders. All Ex-Im transactions are private sales between free-market participants, and the only “winners” are American businesses and the workers they employ.
The only practical criticism most bank opponents offer is the charge that large companies like Boeing and GE use the bank. But that too ignores the basic truth about the interconnectedness of our economy. Every time Boeing exports a 747, for example, that plane includes electronics made by my own company, AirBorn Inc., based in nearby Georgetown, Texas, along with other parts and components made on a vast, nationwide supply chain made up of 15,000 small and mid-sized firms. Maybe Boeing can weather a shutdown of the bank, but the small businesses that make up nearly 90 percent of its transactions cannot.
Texas leaders should put our economy first and abandon their reckless campaign against the Ex-Im Bank when the issue resurfaces on Capitol Hill this week. Ex-Im reauthorization should at least get an up-or-down vote.