The tentacles of the Beltway swamp were out in full force Tuesday morning—and it wasn’t for tax reform either. By a 10-13 vote, the Senate Banking Committee rejected former Rep. Scott Garrett’s nomination to chair the Export-Import bank, an agency he has labeled as embodying “the corruption of the free enterprise system.” Two Republicans, Sen. Tim Scott (R-SC) and Sen. Mike Rounds (R-SD), joined every Democrat in opposing his nomination.
The hypocrisy in opposing Garret’s nomination is startling. The Senate Banking Committee deals with its fair share of corporate welfare, leading legislation on both tax policy and financial regulation. Both Democrats and Republicans repeatedly accuse each other of favoring their own special interests. Garrett’s nomination should have been one of the few blatantly obvious opportunities for bipartisanship—to reform an agency whose mission is to shore up profits of the largest corporations.
The Export-Import bank is one of the capital’s greatest boondoggles, providing taxpayer-backed financing to help corporations sell their products overseas. For a short list of some of the worst examples of the bank, here is an excerpt from a blog post I wrote earlier in the year:
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.”
Appointing Scott Garret to lead the Export-Import Bank should have been 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. There is no other way to put it. Today’s vote was a win for corporate welfare, a win for the Swamp, and a major missed opportunity for taxpayer relief.