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Earlier this month, the Congressional Budget Office (CBO) issued a report presenting cost estimates for the export finance programs of the Export-Import Bank of the United States (Ex-Im) using two different accounting methods. It triggered a wonky debate with real-world implications because Ex-Im’s charter will lapse on September 30 absent congressional reauthorization.
Using the accounting method required by current law, CBO 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.
While critics opposed to Ex-Im’s reauthorization gleefully seized on the report, the reality is that Ex-Im plays a vital role maintaining the competitiveness of U.S. exporters at no cost to the American taxpayer. Consider these facts, which are not in dispute:
- Ex-Im returned $1.057 billion to the U.S. Treasury after covering all its expenses in FY 2013.
- Since 1990, Ex-Im has sent to the Treasury $6.7 billion more than it received in appropriations for program and administrative costs.
- Ex-Im’s overall active default rate for the last quarter of FY 2013 was less than one-quarter of one percent.
- Ex-Im has a $4 billion loan-loss reserve fund to cover any claims, more than meeting OMB requirements.
In its new report, CBO did not look at Ex-Im’s 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.
This approach is very different from examining Ex-Im’s eight decades of real-world experience. This record shows Ex-Im hasn’t cost the taxpayer a dime, and there’s every reason — from its rock-bottom default rate to its ample loan-loss reserve — to expect that it won’t.
The CBO report works from some 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 as the financial crisis of 2008-2009 recedes. In FY 2013, for example, Ex-Im authorized $27.3 billion in loans, down from its record high of $35.8 billion one year earlier.
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.
Ex-Im’s current accounting method follows the law, as laid out in the Federal Credit Reform Act (FCRA). Congress chose this approach, and has not adopted the fair-value method considered by CBO.
Finally, the widely-respected Peterson Institute for International Economics recently issued an analysis debunking similar claims that Ex-Im somehow imposes costs on the taxpayer.
At a time of high deficits and disappointing job creation, 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.