On March 23, the Chamber sent a letter to the full Senate backing a bipartisan bill to reform and reauthorize the Export-Import Bank of the United States (Ex-Im). An organization called Freedom Partners (FP) responded with an email to the Senate commenting on the Chamber’s letter and pushing its campaign to “end Ex-Im.” However, this purported “fact check” runs afoul of the real world pretty quickly.
Small Business, Big Business?
First, Freedom Partners (FP) takes issue with the Chamber’s statement that Ex-Im is essential to many small and mid-sized companies that export. Plainly, it is a source of continual annoyance to the bank’s critics that small and medium-size businesses account for 85 percent of Ex-Im’s transactions. But this annoyance doesn’t make it less true.
Yes, FP is correct that large companies also use the bank, and when they do — especially for expensive, long-lived capital goods such as aircraft, turbines, locomotives, and nuclear reactors — the dollar amounts involved are large. But so are the numbers of jobs such exports support.
Further, it is a fact that commercial banks generally refuse to extend export finance to small businesses. While banks happily accept domestic receivables as collateral for loans to small businesses, foreign receivables usually are not accepted.
Ex-Im also helps thousands of smaller firms indirectly. Workers at many small and mid-size manufacturers of parts and components in the nuclear power or aircraft sectors, for instance, don’t think of themselves as exporters. But they are: The larger firms that are their market rely on foreign customers for the vast majority of their sales.
Helps Some, Hurts Others?
Second, FP doesn’t like to hear that Ex-Im “supports over 150,000 American jobs at 3,000 companies that depend on the bank’s services in order to compete in global markets,” claiming instead that Ex-Im helps some firms while harming others.
However, international business is conducted in the real world, which doesn’t always align with the preferences of those of us who support free enterprise and free markets. It’s a world where the export credit agencies of the world’s other top trading nations provided 18 times more export credit assistance to their exporters than Ex-Im did to U.S. exporters last year, according to a report prepared by the National Association of Manufacturers with data and analysis from the Economist Intelligence Unit.
It is par for the course for Canadian planes, Chinese trains, and Russian nuclear reactors to be sold worldwide with unashamed backing from the export credit agencies of these firms’ home countries.
Ex-Im does indeed help American exporters; but the beneficiaries of a successful campaign to “end Ex-Im” would be these American companies’ foreign competitors.
Profit or Loss?
Third, FP selectively cites a recent Congressional Budget Office (CBO) paper to contend Ex-Im will cost U.S. taxpayers billions over the next decade. Using the accounting method required by current law, CBO has estimated that Ex-Im’s activities would generate budgetary savings of $14 billion between fiscal years 2015 and 2024. However, CBO estimated Ex-Im’s programs would cost taxpayers $2 billion during this period under an alternative “fair-value” accounting method.
However, consider these facts, which are not in dispute:
- Since 1990, Ex-Im has sent to the Treasury $7 billion more than it received in appropriations for program and administrative costs.
- Ex-Im’s overall active default rate has hovered at less than one-quarter of 1 percent for several years.
- Ex-Im has a $4 billion loan-loss reserve fund to cover any claims, more than meeting OMB requirements.
In its report, CBO did not look at Ex-Im’s eight-decade record. Rather, the report made a set of assumptions about Ex-Im’s 2015 lending profile and extrapolated over a ten-year period to arrive at the $2 billion estimate.
The CBO report makes some highly questionable assumptions. For instance, it assumes Ex-Im will make $37.6 billion in loans per year. That’s significantly more than most experts anticipate and well above recent lending, which has been declining steadily as the financial crisis of 2008-2009 recedes.
Moreover, in 2012, CBO released a similar report in which it estimated that Ex-Im would generate a profit (a “negative subsidy”) for taxpayers even under the fair-value methodology. It isn’t clear what changed in CBO’s approach. We think an eight-decade record beats the CBO’s questionable assumptions and projections.
At a time of disappointing economic growth and tough global competition, these attacks make no sense. Ex-Im is the rare federal agency that actually supports private-sector jobs at no cost to the American taxpayer. It’s time to get over these breathless charges and reauthorize Ex-Im.