The Export-Import (Ex-Im) Bank is making quite the ruckus in Washington these days. Senate Majority Leader Mitch McConnell (R-Ky.) has dubbed the state-run bank “controversial.” House Republicans seem divided on the issue. Indeed, this lesser-known bank will likely surface in the coming months as a topic of debate for presidential hopefuls. Some have called it “crony capitalism,” while others maintain the bank is useful to small businesses nationwide.
A new study by Mercatus Center scholar Veronique de Rugy and Heritage Foundation senior research fellow Diane Katz sheds light on the issue. They find that the Export-Import Bank dedicates around 80 percent of its financing to large firms while only 20 percent goes to small firms. So what is the claim that Ex-Im benefits small business based on?
The bank determines a firm to be “small” when it employs up to 1,500 workers and makes up to $21.5 million in revenue annually—a definition of “small” business that includes firms owned by Warren Buffet and Carlos Slim, as well as companies like Swarovski jewelers, Toshiba, and Hitachi. Indeed, the bank doles out lavish sums of money to domestic and international giants like Boeing, Caterpillar, and Halliburton. It also benefits foreign firms—including oil giants like Mexico’s Pemex and India’s Reliance Industries and airlines like the UAE’s Emirates and Hong Kong’s Cathay Pacific.
The facts outlined above show why some accuse Ex-Im of cronyism. The bank provides competitive edge to very large and select firms, making their products artificially less expensive, while smaller firms remain unaided and must attempt to compete with these large, governmentally favored corporations. And the small firms not aided still have to combat the usual onslaught of government regulation, which burdens them disproportionately in comparison to larger firms. But these critiques don’t even capture the entire issue here. America’s Export-Import bank provides generous subsidies to foreign oil while the current administration stifles American oil endeavors with its ongoing refusal to develop lands here for drilling, among other projects.
Far from creating jobs and wealth in America as bank spokesman Matt Bevens asserts, this governmental agency quite literally exports U.S. taxpayer wealth and employment potential overseas. Presidential hopefuls as well as Republicans in Congress would do well to take De Rugy and Katz’s simple admonition regarding the bank to heart: “End it.”