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Richmans' Trade and Taxes Blog
Conservative Opposition to the Ex-Im Bank is Misguided; They Should Consider Opposing the World Bank
The Heritage Foundation is a conservative think tank promoting a stronger economy and reduced government, traditional family values, and a strong America in the international arena. More often than not, its analyses and recommendations are sound in each of these areas. But one can quarrel with its opposition to Congress renewal of the charter of the U.S. Export-Import Bank, an independent government agency whose loans to exporters of US. goods are guaranteed by the government. There can be no doubt of our need to close the U.S. trade gap which has caused extensive dis-employment in the U.S., more than four million jobs over the past two decaades in our estimate. So does the Heritage Foundation have a case in opposing the Ex-Im Bank?
The government does not, other than giving its guarantee, subsidize the loans the Ex-Im Bank guarantees. It does not in fact cost the government a dime. The Ex-Im Bank’s default rate is less than one-quarter of one percent, covered amply by its successful loans. Diane Katz, a Heritage Foundation Research Fellow writes, “Taxpayers are ultimately on the hook for the $140 billion in loans and other credit that is currently outstanding.” Yes, but it has not cost the government anything, which she does not mention.
Heritage Foundation’s objection is that the Ex-Im bank is in competition with commercial banks and other lenders who do not enjoy the government’s guarantee of foreign investments that are sometimes risky. The Heritage Foundation’s objection is that the Ex-Im Bank unfairly competes with the private banks because of its ability to make loans at a lower interest rates than commercial banks on risky loans. True. But instead of recommending an end to the Ex-Im Bank, it could recommend guaranteeing the loans of commercial banks in some way. Stimulating exports is a worthwhile objective, especially when it involves no government expenditure at all.
The Heritage Foundation, if it wants to pick on a socialist bank, can find one in the World Bank, an entity that the U.S. created. The U.S. government has wasted hundreds of billions of dollars supporting the World Bank which makes loans to foreign governments and enterprises whether or not they import from the U.S. What is the Heritage Foundation’s position on the World Bank, which has cost and continues to cost the U.S. treasury so much? So far, nothing but silence. Originally intended to support infrastructure loans to undeveloped countries, the World Bank has expanded into loans to fuel alcohol producing enterprises and other alternative energy enterprises. The World Bank has long ceased to justify its existence. Its president, always an American, gets paid $800,000 or more and is currently making loans to governments and private enterprises to combat global warming, whose cause is the sun’s activity over which we have no control.
Moreover, economic studies show that the U.S. and Canada (and Russia!) stand to benefit from global warming in increased crop yields as they have in the last eon of global warming. Global warming is no threat to us but global cooling is and that, too, depends on the sun’s activity.
The fact is that the Ex-Im Bank, at no cost to the taxpayer, has preserved a million or more U.S. jobs in the private sector by facilitating U.S. exports.
We are sympathetic to the Heritage Foundation’s opposition to big government. We are sympathetic to its opposition to government enterprises. But its opposition to the Ex-Im Bank is wrong at least until a better alternative is in place to finance exports.
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