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Ex-Im Bank Reauthorization: Lesson in Institutional Design

For all its flaws, the Export-Import Bank’s charter gets an important thing right: the agency must be reauthorized every few years, or it will close. This makes Ex-Im an important case study in institutional design. Its reauthorization requirement should be applied to nearly every government agency. Reauthorization offers regularly scheduled opportunities for Congress to enact possible reforms, or close an agency entirely. It also adds a level of democratic accountability to agencies that mostly lack it.

The executive branch has long since become too powerful. The other branches have too few meaningful checks on executive power. The result has been that agencies often face no consequences for abusing their authority, wasting resources, corruption, or ineffectiveness. If an agency has to face reauthorization every so often, it gives agencies more incentive to self-police against problems and reform them proactively, so emerging problems do not metastasize.

More to the point, the burden of proof properly lies on agencies for justifying their existence. If they are going to command resources rather than other agencies or taxpayers, they should have good reasons. If the federal government really needs an Economic Development Administration, a Hass Avocado Board, or a U.S. Board on Geographic Names, that agency should have no problem making its case every few years to Congress. If it has compelling arguments, the agency can continue on. If it does not, reauthorization provides regular opportunities to reform or end wasteful or harmful policies. This is an important part of governmental hygiene. Reauthorization allows Congress to enact reforms an agency cannot, or will not enact on its own.

Reauthorization also means that an agency’s window for reform never fully closes. Sometime soon, depending on how the current federal funding fight goes, the Export-Import Bank’s charter will almost certainly be renewed. Some needed reforms might even be part of the deal. Usually, a minor agency like Ex-Im will only garner congressional attention once every few decades, if at all. But charter reauthorization guarantees regular opportunities to enact reforms, or discipline the agency where needed. As happened temporarily in 2014-2015, Congress was able to close Ex-Im by simply declining to vote on reauthorization.

The only agencies that should fear a reauthorization requirement are the ones that do not deserve reauthorization. Policymakers and the public can identify them by their reaction to a potential requirement.

For more on reauthorization and other lessons from Ex-Im’s last five years, my new paper is here. For a short summary of the main findings, a press release is here.