September 17, 2014 8:17 AM
Congress hasn’t voted just yet on the Continuing Resolution that includes the Export-Import Bank’s reauthorization. But we already know that it will pass this week, and Ex-Im will get a new lease on life, probably through June. We’ll have this fight all over again next spring and summer. But the fight has already taught an important lesson: more agencies should have automatically expiring charters. Ending or reforming Ex-Im would never have been a possibility if its charter didn’t have an expiration date. I make that point in a piece in Investor’s Business Daily:
Institutions matter. The rules of the game have a lot to do with how people play it — imagine what basketball strategy would look like if the three-point shot was changed to five points, or how baseball strategy would change if hitters could strike out on a foul ball.
The rules an agency issues aren't the only ones that matter. Rules governing the agencies themselves are just as important. If more agencies had a built-in check such as an automatic sunset that forced a periodic congressional reauthorization vote, they would have an incentive to behave better and pursue their missions in a less burdensome way.
The fight over Ex-Im isn't over. Even with Ex-Im's temporary new lease on life, reformers will still have won an important victory in tamping down its excesses.
September 11, 2014 12:21 PM
A vote on the Continuing Resolution, which includes the controversial Export-Import Bank reauthorization was originally scheduled for today, but has been pushed back to next week. So the combat continues over how long the Ex-Im reauthorization will last, and what other conditions might included as part of the deal. In today’s Washington Times, National Association of Manufacturers President Jay Timmons and I have dueling op-eds, with Timmons favoring reauthorizing Ex-Im, and me wanting to end it. The Wall Street Journal also weighed in with an editorial this morning, sharing my skepticism of Ex-Im.
Timmons makes three points in his piece that deserve a response. First, he argues that Ex-Im fills in gaps in private financing:
Ex-Im Bank provides financing that is critical to fill gaps when private-sector financing for small and large manufacturers is not available.
If Ex-Im makes a profit, as Timmons argues it does, then surely private banks would welcome an opportunity to make money for themselves by lending to more exporting businesses and their customers. If Ex-Im loses money, as the Congressional Budget Office convincingly argues, then there is no financing gap to be filled, and Ex-Im is financing too many insolvent projects.
Second, Timmons commits the “but other governments do it, too” fallacy:
September 9, 2014 12:29 PM
It appears Congress will decide the Export-Import Bank’s short-term fate this week. There are several bills with different reauthorization terms, and Rep. Justin Amash and Sen. Mike Lee even have a bill that would shutter the bank altogether. None of the bills have made it out of the House Financial Services Committee, which is chaired by Rep. Jeb Hensarling, who opposes the bank. What will likely happen instead is that Ex-Im reauthorization will be included in a Continuing Resolution (CR), which Congress must pass by September 30 to avoid a government shutdown.
The current battle isn’t whether Ex-Im will be reauthorized, it is how long the reauthorization will last. There are two likely options. Ex-Im opponents would prefer a reauthorization through early 2015. Ex-Im opposition is bipartisan, but the GOP has been more vocal about it, and most political observers are expecting Republicans to gain seats this November. Depending on how the numbers play out, when the new Congress convenes in January, it might be possible for Congressional Republicans to either let Ex-Im’s charter expire, or pass a bill similar to Amash and Lee’s to actively kill the bank, even if they can’t get much Democratic support.
Ex-Im’s defenders would rather keep the shutdown card in their hand; Ex-Im opponents will not risk a shutdown over a program equivalent to less than one percent of the federal budget. That’s why they want Ex-Im’s reauthorization to be the same length of any Continuing Resolution that gets passed, however long that might be. Even though that would be a shorter-term reauthorization, they can continue to renew Ex-Im with each CR that must pass going forward, knowing that it will succeed.
September 3, 2014 5:23 PM
Congress comes back from its annual August recess next week. One of the top items on its agenda is deciding the Export-Import Bank’s fate. Ex-Im subsidizes financing for U.S. exporters and their foreign customers. As I outlined here, Ex-Im subsidizes certain businesses at others’ expense. It is a pro-business policy, when what the economy needs are pro-market policies. Ex-Im will also be forced to shut its doors unless Congress reauthorizes its charter by the end of September, making for a golden reform opportunity for corporate welfare opponents.
The merits of the issue are clear enough, but politics is getting in the way. A bill to reauthorizes Ex-Im’s charter would likely pass the Senate, but would have trouble getting through the House. This would ordinarily mean that Ex-Im opponents would succeed in shuttering the agency, since Ex-Im’s expiration is automatic without reauthorization. That means Ex-Im supporters will probably pursue other means, such as tucking Ex-Im’s reauthorization into a must-pass appropriations bill. Ex-Im opponents would have no choice but to swallow that poison pill, or risk another politically costly government shutdown.
August 12, 2014 12:12 PM
One of the weakest arguments against free trade is the "unilateral disarmament" fallacy--that a country should refuse to liberalize its trade policies until other countries liberalize theirs. If your opponent uses it, you almost automatically win the debate. The Export-Import Bank's defenders must be getting desperate, because they are now having to resort to the unilateral disarmament fallacy. Here's a letter I sent to the Cleveland Plain-Dealer setting the record straight:
Editor, Cleveland Plain-Dealer:
George Landrith’s argument that the U.S. should subsidize certain businesses because other countries subsidize some of their businesses is equivalent to saying the U.S. government should stop ripping off its citizens only when foreign governments stop ripping off their own citizens (“Why keep the Ex-Im Bank? Unilateral economic disarmament is as unsound as unilateral defensive disarmament,” August 10).
The Export-Import Bank’s special favors make U.S. businesses less competitive by rewarding political connections over customer service, and have led to 74 corruption allegations during the last five years. If other countries want such problems, fine. But the U.S. can, and should, do better by closing the Ex-Im Bank this fall, regardless of what other countries do.
Fellow, Competitive Enterprise Institute
Author of the study, “Ten Reasons to Abolish the Export-Import Bank.”
August 8, 2014 11:34 AM
Over at American Banker’s BankThink blog, I have a piece making the case for closing the Export-Import Bank, mostly on corruption grounds:
The Wall Street Journal reported on June 23 that four Ex-Im employees have been removed or suspended in recent months, "amid investigations into allegations of gifts and kickbacks."
Former Ex-Im employee Johnny Gutierrez allegedly accepted cash payments from an executive of a Florida-based construction equipment manufacturer that has received Ex-Im financing on multiple occasions. In a July 28 congressional hearing, Gutierrez chose to plead the Fifth Amendment rather than deny the allegations. The other cases involve two "allegations of improperly awarding contracts to help run the agency" and another employee who accepted gifts from an Ex-Im suitor.
July 8, 2014 10:02 AM
Over at Rare, I have a piece on the cronyism angle of the Export-Import Bank debate. The Senate will likely vote this on month on whether or not to end the bank:
[I]f government is going to dole out corporate welfare, the most efficient way to do it is to hand out cold, hard cash. Straight subsidies don’t distort international markets or invite corruption the way export subsidies do.
But most cash gifts to corporations are political non-starters. They’re a little too obvious. So companies and allied politicians need cover stories. The Export-Import Bank fits the bill.
An official logo, sophisticated-sounding economic rhetoric, and appeals to American jobs and patriotism are designed to make people feel good about the special favors Ex-Im performs for businesses.
Read the whole thing here.
July 1, 2014 3:51 PM
Last Thursday the House of Representatives passed H.R. 6, the Domestic Prosperity and Global Freedom Act with a bipartisan vote of 266-150. The bill orders the Department of Energy to make a final decision on applications to export natural gas within 30 days of the bills enactment. This would greatly speed up the process, as the DOE has allowed some applications to languish for more than 2 years without a determination being made, effectively strangling exports of natural gas.
The bill’s passage came despite the best efforts of America’s Energy Advantage, a business advocacy group that strongly opposes the bill. In a press release the day before the bill’s passage, AEA declared “exports of this scale will raise domestic natural gas and electricity prices for every American, undermine our manufacturing competiveness and cost the nation good-paying jobs”. Its argument is as follows: if we export natural gas, that will lower the supply sold in America, which will lead to an increase in natural gas prices. That, in turn, will “hurt manufacturing competiveness”(especially among companies who are part of the AEA) by making it more expensive to produce their goods. To protect America, then, we must limit natural gas exports.
For that reason, the AEA called the bill “harmful to the public interest of American consumers, manufacturers and the economy” in a statement following passage.
June 24, 2014 2:09 PM
When government has a lot of money and power, it is natural for people to curry its favor. It is just as natural for those wielding money and power to use it for personal gain. The Export-Import Bank has just provided the latest real-world example of this human frailty. The Wall Street Journal is reporting that four Ex-Im employees have been removed or suspended in recent months, “amid investigations into allegations of gifts and kickbacks.”
The article names one employee, Johnny Gutierrez, who accepted cash payments from an executive of Impex Associates, a construction equipment manufacturer that has received Ex-Im financing on multiple occasions. The other cases involve two “allegations of improperly awarding contracts to help run the agency,” and another employee who accepted gifts from an Ex-Im suitor. A spokesman responded to the allegations by noting that “the Export-Import Bank takes extremely seriously its commitment to taxpayers and its mission to support U.S. jobs.”
June 20, 2014 12:18 PM
In The Really Inconvenient Truths, I wrote about the environmentalist mantra I = PAT, where I is environmental impact, P is population, A is affluence, and T is technology. Under this formulation, as I put it, “Population, affluence, and technology are all evils of the modern world, not boons.”
It should therefore come as no surprise that, just as 19th century missionaries raised money and went out from the west to cleanse the poor benighted savages of Africa and the Indian subcontinent of their sins, there are modern day equivalents doing the same. Only this time, the sins are technological projects that will increase affluence in heavily populated areas.
We saw how they can work in the recent Chevron case, where activist lawyer Steven Donziger was found to have used fraud, bribery and other illegal means to secure a court victory against Chevron for supposed pollution by its predecessor Texaco in Ecuador. Demonstrations against Chevron have been found to have been staged, with paid protestors.