Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
Conservatives Want to Eliminate the Ex-Im Bank Which Creates Jobs While Costing the Taxpayer Nothing
Conservatives oppose renewal by the Congress of the Ex-Im Bank whose guaranteed loans have facilitated exports and created and preserved American jobs while costing the government and taxpayers nothing at all. There are plenty of government programs that ought to be cut. Why should the one selected be one that costs taxpayers nothing and does create jobs. At the same time, conservatives are silent about the World Bank, a world socialist bank which the U.S. created and financed at a cost of hundreds of billions of dollars and continues to do so to this day. This is ideology being promoted at the expense of U.S. taxpayers and U.S. workers.
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 Congressional renewal of the charter of the U.S. Export-Import Bank, an independent government agency whose loans to importers of US. goods, loans made usually by U.S. commercial banks, 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 decades in our estimate. 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, something really rare for any government enterprise. The Ex-Im Bank’s default rate is less than one-quarter of one percent and is covered many times over 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 on risky foreign loans at a lower interest rates than commercial banks would. Instead of recommending an end to the Ex-Im Bank, it could recommend guaranteeing the export loans of commercial banks in some way. Stimulating exports is a worthwhile objective, especially when it involves no government expenditure at all. What the Heritage Foundation recommends instead, shutting down the Ex-Im Bank without providing an alternative would cost hundreds of thousands of American jobs.
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 at the end of WWII. 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 kind of a deal is that? 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. Its employees earn high salaries free of taxes. And their fringe benefits include a golf course and country club. And what is the main focus of the World Bank at present? The irrational commitment to expensive alternative intermittent sources of energy, wind and solar. A greater waste is hard to imagine. 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 whether we experience global warming orf cooling is overwhelmingly depends on the sun’s activity. Man-made global warming makes only a small contribution to global warming, which may be desirable if the world begins to cool.
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. There are many government expenditures and tax expenditures that should be eliminated. Heritage foundation should name them rather than eliminating an agency that costs the government and taxpayers nothing and creates jobs.
Comment by Jesse, 9/3/2014:
To be fair to the Heritage Foundation, they are not that positive about the World Bank either. See for instance:
But the broader point is well taken.
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