As our national economy continues to lumber along towards full recovery, one thing remains abundantly clear: the federal government shouldn’t be picking winners and losers. Our recent fiasco of taxpayer-funded bailouts and failed stimulus spending should remind us that the economy grows better when the private sector is allowed to reward whoever brings the best product to the marketplace and government largely stays out of the way.
As a technology entrepreneur based in Dallas, I have experienced the daily ups and downs of running a company. I believe that success in business – or any other endeavor – comes from hard work and taking advantage of opportunities when they present themselves. Government intrusion or undue interference should never be part of a business plan.
Unfortunately, there’s at least one government agency that apparently never got that message.
The Export-Import Bank of the United States, also known as “Ex-Im,” is a government credit agency that provides financing to foreign companies looking to purchase American goods. While this may sound good in theory, in practice, Ex-Im is effectively picking winners and losers for deals backed by taxpayer dollars. Essentially, Ex-Im provides subsidies to major corporations that can actually end up threatening American jobs in the process.
Congress has a rare opportunity this September to demonstrate that it has learned the painful lessons of the stimulus, Fannie Mae and Freddie Mac, and other legislative intrusions into the free market. Next month, the Ex-Im’s charter will expire and will be up for renewal by Congress again. Given the questions raised by many lawmakers, including U.S. House Financial Services Chairman and Texas Congressman Jeb Hensarling, the bank could be in trouble.
Proponents of the Ex-Im Bank say it is critical to promoting American products being sold abroad, yet the agency only supports about two percent of American exports. And of the financing that the bank does provide, around 60 percent is funneled straight to ten large corporations, with half of that amount going to one company: Boeing. Ex-Im has earned its nickname – “Boeing’s Bank” – based on its biggest customer. Last year, Boeing benefitted from some $8 billion in Ex-Im financing for deals to sell their aircraft to foreign airlines.
The simple fact is that Boeing – which pulled in nearly $90 billion in revenue last year – does not need these taxpayer-backed subsidies for its clients, courtesy of the Ex-Im Bank. Furthermore, the cut-rate financing deals that Ex-Im delivers goes to foreign airlines that directly compete with U.S. carriers for international flights. Preferential financing of planes for foreign airlines distorts competition with American firms and has already cost our domestic airlines around 7,500 jobs according to an analysis by an aviation economist.
Today, most companies, especially those buying large aircraft, can secure trade financing throughout the world via private lenders or capital markets. But Ex-Im deals could be putting taxpayers at risk; in fact, the Congressional Budget Office recently estimated by using fair-value accounting methods, Ex-Im would lose $2 billion over the next 10 years.
Perhaps what makes Ex-Im’s policy of picking winners and losers even more disturbing are the recent allegations against the individuals who oversee selection. In recent months, Ex-Im has fired three officials and placed a fourth on administrative leave due to accusations of corruption. One of the dismissed officials, Johnny Gutierrez, is alleged to have taken cash from a Florida businessman looking to get Ex-Im financing for his company. At a recent congressional hearing into the matter – at which Gutierrez pled the Fifth Amendment and refused to answer any questions – lawmakers revealed that the bank’s inspector general was investigating some 40 potential cases of fraud.
Beyond officials running a pay-to-play scheme at the Ex-Im Bank, it’s easy to see why there are calls to do away with Ex-Im once and for all. The bank, by its very nature, is the hallmark of crony capitalism as it artificially manipulates the marketplace to boost powerful corporations and kill American jobs and wages. Government subsidies have real costs: one study from George Mason University’s Mercatus Center estimated that subsidies hold back our gross domestic product by $11,000 per person every year.
Subsidies are not the answer to growing our economy. The key to robust economic growth and job creation lies in creating a climate for real innovation – allowing bright thinkers to develop the next new technology, product or service that has the potential to move entire industries forward in an environment with a level playing field. Those who believe in free markets should stand with Congressman Hensarling to eliminate the eighty-year-old Export-Import Bank.
