When President Trump promised to “Drain the Swamp,” he swore to take on the special interests that run rife around Washington D.C. His nomination of former congressman Scott Garrett of New Jersey to head the Export-Import Bank is a firm commitment to that promise. The agency is one of the capital’s greatest boondoggles, handing out loans for large corporations at the taxpayer’s expense. Garrett has long been one of its chief critics.
Reforming the agency would bring some much needed accountability to Washington. But the swamp is fighting back, with big businesses ferociously lobbying the Trump White House to remove Garrett’s nomination. This shouldn’t come as a surprise, because Ex-Im has long directed most of its benefits to a handful of large, politically connected firms. They will not give up their corporate welfare easily.
In total, the top 10 beneficiaries of the bank account for around three-quarters of its business. The most notable is Boeing, which regularly accounts for more than 40 percent of Ex-Im’s business. In fact, the agency is colloquially known as “Boeing’s Bank.” This is just one part of a total portfolio of nearly $140 billion that benefits other giants of industry like Caterpillar and General Electric.
Despite this, Ex-Im’s defenders claim that the bank supports small business jobs, not just multinational corporations. Yet merely 20 percent or less of total financing go to small businesses. Even this is generous, given that Ex-Im’s definition of a “small” business is up to 1,500 employees or $21.5 million in annual revenues.
In contrast, 99 percent of total U.S. exports happen without taxpayer subsidies. Total exports for fiscal year 2016 were $2.2 trillion, to which Ex-Im supported just $5 billion. In fact, a survey from the National Federation of Independent Business Research Foundation found that export financing for small businesses was the least worrisome of 75 business problems.
If small businesses can compete internationally without handouts, then a few privileged corporations can, too. Boeing has a market capitalization of $142.6 Billion, and even runs its own finance arm, providing guarantees to those with less than investment-grade credit. This is exactly the function of Ex-Im. Even the ratings agency Standard & Poor’s, along with the Government Accountability Office, have concluded that Boeing would manage just fine without taxpayer subsidies. Multinational corporations have sufficient access to private capital. It is just cheaper and easier for them to trick Congress, on behalf of the taxpayer, into providing it for them.
When economic resources are allocated through the political process like this, it is not surprising to find that the biggest companies with the best lobbyists come out on top. But it is also an invitation to widespread corruption. While the agency employs around 400 people, there were 74 allegations of bribery and other forms of corruption in the five years between 2009 and 2014. As CEI Fellow Ryan Young notes, “In 2010, Bloomberg News reported that Exxon Mobil Corp. paid for nearly $100,000 of travel expenses for Ex-Im employees to locations including London, the South Pacific, and Tokyo. Exxon Mobil was seeking $3 billion in financing from Ex-Im at the time, and received it 11 months later.”
Providing taxpayer-backed finance to help corporations sell their products is corporate welfare, plain and simple. It is no surprise then that Garrett is skeptical. This should be an area of broad agreement between the parties. For Republicans, Ex-Im is yet another big government agency that picks winners and losers instead of the marketplace, while for Democrats, the bank unfairly shores up corporate shareholder’s profits.
Trump should resist being sucked in by the interests of large corporations. “Draining the Swamp” must involve reforming the Export-Import Bank, and appointing Scott Garrett is a great start to accomplishing that goal. He should not waver in his support to reform such a cronyist, corrupt, and destructive government agency.