Trump Is Right: Keep the Export-Import Bank
The House of Representatives has a bill pending to extend the life of the Export-Import Bank. The majority, consisting of Democrats and centrist Republicans dedicated to the bill, guarantees its passage by the House.
President Trump has already indicated his support by appointing former Rep. Scott Garrett, considered a critic of Ex-Im bank practices, for the Ex-Im Bank's top post for a four-year term and by nominating Spencer Bachus III, a former Republican congressman from Alabama, to the board.
The Export-Import bank plays a vital role in promoting American jobs by helping foreigners buy American exports. It is an independent government agency that guarantees loans, usually by U.S. commercial banks, to importers of U.S. goods in order to promote American exports.
The government does not subsidize the loans that the Ex-Im Bank guarantees. But the rates of those loans are considered lower than they would be, without the government guarantee, and some of the loans would not be made at all, causing U.S. exports to suffer.
If U.S. trade were balanced, there would be no need for the government to be involved in promoting U.S. exports. But the U.S. suffers from huge trade deficits, which sap good-paying manufacturing jobs and slow economic growth. There are plenty of government programs that ought to be cut. This is not one of them.
Opponents of the Ex-Im Bank argue that it could cost the U.S. taxpayer money. 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."
But the Ex-Im Bank, in the 72 years of its existence, has not cost the taxpayer a dime, something really rare for any government enterprise. Its default rate is less than one quarter of one percent and is covered many times over by its successful loans.
Katz also argues that the bank is "beset by mismanagement," which has been "documented for years by the bank's own inspector general and the Government Accountability Office." President Trump's new management will no doubt tackle these problems.
Stimulating U.S. exports is a worthwhile objective for the United States government, especially when it involves no taxpayer expenditure at all. What the Heritage Foundation recommends, shutting down the Ex-Im Bank without providing an alternative, would cost hundreds of thousands of American jobs and slow U.S. economic growth.
The Heritage Foundation should actually be applauding Trump for demonstrating opposition to a truly wasteful socialist bank, the World Bank. Unlike the Ex-Im Bank, this international bank requires plenty of U.S. taxpayer funding. Trump has proposed cutting that funding by $650 million over the next three years.
The World Bank was originally intended to support infrastructure loans to undeveloped countries, but it has expanded into loans to fuel alcohol-producing enterprises and other alternative energy enterprises. 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 – namely, wind and solar. A greater waste is hard to imagine. A study by Gabriel Calzada Alvarez and his colleagues at Madrid's King Juan Carlos University found that Spain lost 2.2 jobs in other industries for every government-subsidized green job that it created, partly because renewable energy, being more expensive, raises the overall cost of energy.
Instead of distributing foreign loans through the World Bank, the United States should distribute its foreign loans through the Ex-Im Bank to buy made-in-America products. Then the American worker and the American economy would benefit.
We are sympathetic to the Heritage Foundation's opposition to big government. But they are wrong here, and President Trump is right. Not only does he plan to keep the Ex-Im Bank, which benefits the United States without costing a taxpayer dime, but he also plans to reduce taxpayer funding for the extremely wasteful World Bank.
Raymond Richman is professor emeritus in public and international affairs at the University of Pittsburgh. His dissertation adviser was Milton Friedman at the University of Chicago. The Richmans co-authored the 2014 book Balanced Trade, published by Lexington Books, and the 2008 book Trading Away Our Future, published by Ideal Taxes Association.