On Friday, President Obama signed into law a five-year, $305 billion highway bill. Marc Scribner, CEI’s resident transportation expert, has his thoughts on the larger bill. But there is one highway-unrelated provision I will comment on: the Export-Import Bank’s revival.
Ex-Im has been in liquidation for the last five months. The highway bill revives it through September 2019 (see pp. 778-99). Unlike most other agencies, Ex-Im’s charter expires every now and then, and Congress has to renew it for it to continue existing.
So while reformers won an important battle, we have lost the war, at least for a few years. The loss stings, but it does bring to mind Ronald Coase’s observation that an economist who “is able to postpone by a week a government program which wastes $100 million a year (what I consider a modest success) has, by his action, earned his salary for the whole of his life.” Coase wrote those words in 1975. His point remains true after forty years of inflation.
Now consider that reformers shut down Ex-Im not for one week, but for five months. And Ex-Im is not a $100 million per year program, but a $27 billion per year program, with a roughly $100 billion pre-liquidation portfolio. A lot of folks earned their life’s pay on just this issue (don’t tell their bosses, though!). Mercatus’ Veronique de Rugy, Tim Carney from the Washington Examiner and AEI, Heritage’s Diane Katz, and Cato’s Dan Ikenson are just some of the people who did a masterful job making the case against Ex-Im to experts, laymen, and everyone in between.
In part because of their efforts, the loss is not total. Ex-Im is still unable to make new transactions larger than $10 million. Ex-Im’s five-person board of directors must approve any transaction larger than $10 million. Vacancies mean the board currently has only two members, short of its three-member quorum requirement. Since Ex-Im board members require Senate confirmation, Sen. Richard Shelby, an Ex-Im opponent, can see to it that Ex-Im actually sticks to its stated focus on small business by simply declining to hold hearings on board nominees. This is a big deal, as Veronique points out:
I calculated that 84 percent of the value of approved deals between October 2006 and September 2014 (the whole range of the dataset that’s online) are above $10 million. Also, while a majority of deals approved are below the $10 million threshold, they still only represent 16 percent of the total dollar amount approved.
So for the time being, Ex-Im will be unable to live up to its reputation as “Boeing’s Bank.”
The bill also contains provisions for an ethics officer (Ex-Im has multiple open corruption investigations), some fraud control provisions, and its total portfolio cap is lowered from $140 billion to $135 billion. There will also be a new risk management committee, and Ex-Im’s audits will now be performed independently by its inspector general. This might do something to lessen Ex-Im’s accounting shenanigans. All of these reforms are weak and of little consequence, but they are better than nothing. So at least there’s that.
The lengthy Ex-Im fight holds an important lesson for reformers. The only reason reformers could win even the modest victory we did is because of Ex-Im’s expiring charter. The EPA, SEC, and nearly all other federal agencies enjoy perpetual life, virtually exempt from congressional scrutiny. More agencies should have Ex-Im’s built-in sunsets. At the very least, they would have to publicly justify their existence every few years, and elected officials would have to go on record supporting or opposing an agency, giving voters valuable information. For more on this idea, see this article I wrote for Investor’s Business Daily.
In the meantime, Ex-Im lives on. But its capacity for cronyism is greatly reduced; may the Senate hold strong and keep it that way. Then Ex-Im can be abolished for good in 2019.