Good policy for Cassidy to reject continuing Ex-Im Bank
If Republican Rep. Bill Cassidy wishes to confirm his conservative credentials in his contest to knock off Democrat Sen. Mary Landrieu, he should vote to end welfare to big businesses and discrimination against private banks, and not become what fellow Republican Rep. Charles Boustany has on the issue of reauthorization of the U.S. Export-Import Bank.
Boustany and Landrieu have touted the benefits of the Bank for Louisiana; Boustany wrote that of the 159 state businesses benefiting from Bank activities the “past few years,” 111 were “small- and medium-sized enterprises.” But in actual proportion of business, of the $355 billion in goods and services exported from 2007 to 2014, the Bank reports that it supported $1.6 million of Louisiana's exports in that same time, $786 million of which went to small businesses. This means that only 0.44 percent of Louisiana’s exports were actually supported by the bank –which is lower than the national average of 1.6 percent. Additionally, it only supported 0.22 percent in exports for small businesses in Louisiana.
Regarding the government concern, Congress must decide soon on whether to allow the Bank a charter to continue, for which Landrieu is all for. It provides loans, loan guarantees and insurance policies for U.S. companies that export products abroad, as well as financing help for some of their foreign customers. Cassidy has said he has not decided what to do when the matter comes up, although he did vote for the previous authorization.
Such doubt doesn’t exist in the mind of Boustany, who penned a full-throated defense of its operations for an establishmentarian website. In it, he claimed that the bank proved helpful to small business and that it could not compete against private lenders and therefore not only would not take business from them but also was the only source for some businesses given foreign regulatory environments, and that it turned a healthy $1 billion profit. Landrieu joined him in a news conference to reiterate that and trotted out a local business owner to sing the Bank’s praises, underscoring that well over a hundred Louisiana businesses got such loans.
But parsing Boustany’s assertions and the data show that the bank serves more as a tool for crony capitalism at taxpayer expense than as an aid for genuine small businesses. The Bank actually allows firms of up to 1,500 employees and $21 million in annual revenues to access its services – not exactly small businesses. In fact, that means that in terms of employees only 0.03 percent and in terms of revenues only 1.57 percent of all existing firms cannot qualify for a loan from it (2007 data being the latest). And this bias towards larger firms in its operations works out in practice: the bank subsidizes less than 2 percent of exports and jobs and less than 1 percent of small businesses in the U.S. each year, only 0.3 percent of all small business jobs were supported by the Bank, and (assuming that each small business transaction went to a unique small business), only 0.04 percent of all small businesses were supported by the Bank.
Then there’s the fact of the bank’s “profit” relative to the assertion that it does not compete with the private sector. The two statements are incompatible: if a government-supported enterprise makes money, by definition it is crowding out the private sector, for the private sector will operate where money can be made. If it’s a question of a barrier to entry such as from startup costs, why doesn’t the government ameliorate those for private operators instead of performing all of their functions?
Boustany and Landrieu simply nakedly pander to special interests through supporting this kind of corporate welfare, by reminding business interests that donate to their campaigns and say nice things about them to others of their necessity in office to keep transferring wealth to these interests from Americans unconnected to these enterprises, when the numbers clearly show that the vast majority of exporting does not need Bank intervention and a large amount of Bank lending goes to larger firms. And if foreign regulatory environments are the problem, rather than a strategy of shifting dollars from some Americans to others as a palliative, treaty arrangements and other means of power projection to end discrimination against U.S. firms are far more effective and lasting means to increase exports.
The policy prescription is clear, but a political component to reject reauthorization also exists for Cassidy. He needs to understand this not only to be able to continue to draw a distinction between his belief in right-sized government versus Landrieu’s love of big, oppressive government, but also to fend off nuisance Republican opponent Rob Maness. To date, Maness has lobbed baseless charges that Cassidy is not conservative enough for the state so therefore he is the logical conservative alternative. A vote for reauthorization finally would begin to make Maness look credible on this account.
Naturally, big businesses that benefit would object to a vote of rejection, but Cassidy should understand that some of them already have jumped into bed with Landrieu regardless of what he does because they care more about lucre accruing to them specifically than in principled policy approaches to create a better environment in which all businesses can succeed better. The larger public is disserved by the use of their taxes for the reauthorization, and Cassidy should consider their greater voting numbers than those of corporate lackeys and subsidized job holders.
Posted by Jeff Sadow at 11:10