Recent allegations of gifts and kickbacks to officials of the U.S. Export-Import Bank could not have come at a worse time. The new House Majority Leader Kevin McCarthy was already signaling his opposition to reauthorizing Ex-Im which comes up in September. House Speaker John Boehner is taking a "hands off" position. It now appears that Cantor was key to Congress's support of the Ex-Im bank, and now that support is gone.
This is bad news for manufacturing and the country. For as long as I can remember, responsible economists have supported a more aggressive export policy to help U.S. manufacturers contend with intense, and often unfair, foreign competition. Our main competitors in Asia and Europe are not the least bit shy about supporting their export sectors, and that support is reflected in our lopsided trade deficit. It was reflected also in the hemorrhage of millions of U.S. manufacturing jobs in the previous decade that only recently abated.
The Ex-Im bank provides loans and loan guarantees to foreign entities that wish to buy U.S. exports. Some of our big corporations -- such as Boeing and Caterpillar -- benefit from this program. Indeed, some call it the "Boeing Bank." But many smaller firms also take advantage of it. Last year, Ex-Im helped 3,413 small companies launch or expand their export business.
Along with the R&D tax credit, the Ex-Im bank is one the very few supports our government provides for manufacturing. We pour vast sums into agriculture which employs about 2 percent of our work force, and accounts for perhaps one twelfth of exports, but we are downright stingy with manufacturing. This disparity makes no economic sense.
The Ex-Im bank borrows money from the U.S. Treasury Department on which it pays interest that is repaid by borrowers. The Ex-Im bank is not a drain on the budget; in fact it actually produces revenue for the government. Last year it remitted $1.06 billion to the Treasury that it earned from fees and interest charged to borrowers.
Conservatives want to kill the Ex-Im bank, not for budgetary reasons, but as an expression of their small government ideology. Ideology is not enough. In a world where other nations routinely engage in predatory trade practices, we need to support our own exporters. Almost 60 nations have agencies that help finance exports. It is widely seen as a basic government function, and for us it is an effective one that up until now has excited little controversy. In 2012,
Congress hiked the bank's credit exposure limit to $140 billion from $100 billion. In fiscal 2013, Ex-Im authorized $27 billion to support an estimated $37.4 billion in sales of U.S. products. Ex-Im should be called the U.S. jobs bank.
Conservatives in Congress can find other ways to express their ideology. Their opposition to the Ex-Im bank is irrational and contrary to our national interests. If Congress dumps the bank, it will be a major blow to manufacturing and to our economy.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. June 2014