Congress left town on summer break with a number of tasks left undone. Some of the paralysis can be easily explained by genuine disagreements between the two parties over governing philosophy, some by jockeying for position ahead of the looming midterm elections.
But why would Congress not renew the basic charter of the Export-Import Bank — the U.S. government entity that has, for the last 80 years, made loans to American businesses seeking to sell goods and services abroad? The charter on the Ex-Im Bank is soon to expire; without action shortly upon its return to DC in September, the Congress will be dooming the bank to dissolution.
It is hard to see why this arm of the government could be controversial. After all, it is essentially free; it has actually returned $2 billion more to the Treasury than it has required to cover operating costs and any bad loans over the last five years. And it helps the United States compete with 50+ other nations that have financing mechanisms for their own firms trying to do business abroad.
Ex-Im Bank documents show that loans made by the bank, nearly 90% of them going to small businesses, have supported 1.2 million U.S. jobs over the years — including some 200,000 just last year. The total value of exports in 2013 linked to such loans was $37 billion, with nearly $12 billion for smaller businesses. Whether or not all these prospective exports and jobs would have dried up without the bank, there is little doubt that it has helped considerably with American employment as well as our national balance of payments. Because economic strength and manufacturing as well as scientific prowess are among the foundations of national power, we see these attributes as integral to our country’s security interests as well.
So why is Congress wavering on approving the Ex-Im Bank? To be sure, Congress is right to examine this question with all due diligence. But if one works through the list of arguments most commonly made against the Bank, one sees that the case for it is in fact stronger than ever:
Myth #1: The bank costs the taxpayer too much. It is natural to ask if, in these times of still-huge national deficits, the Ex-Im Bank is an organization we can afford. But, as noted earlier, the bank has been making the taxpayer money, to the tune of $2 billion more than its expenses over the past five years.
Myth #2: The private sector should do it. To be sure, America has lots of commercial banks, with more international operations than ever; so, one might ask why the government is still needed in this business. But as Brookings scholar Amadou Sy explains, small businesses—and many banks—have trouble properly assessing and underwriting risk in certain overseas markets. Given this situation, banks may shy away from the trouble of helping smaller businesses with limited revenue streams, as the potential payoffs may not seem worth it. By contrast, an organization with ties to the rest of the U.S. government can do a good job in aiding the risk assessment process and otherwise helping businesses handle the initial burdens of familiarizing themselves with certain foreign markets.
Myth #3: Even if Costs Have Been Low (or Zero), They Could Grow. It is true that more businesses could, in a bad economic environment in the future, wind up defaulting on Ex-Im Bank loans, costing the taxpayer money in the future even if recent costs have been zero. Put differently, one might worry if the Ex-Im Bank could be the next Fannie Mae, healthy and flush in good times, but a lurking financial time bomb the next time big trouble hits.
However, history is reassuring. The Ex-Im Bank survived the great recession, the Asian financial crisis of the 1990s, stagflation in the 1970s, and many other challenges without costing the American public a bundle. Its recent loan default rate of roughly 0.2% is exemplary. Moreover, broadening American firms’ business interests abroad is a good hedge against slowdowns at home; by diversifying markets, U.S. companies build up resilience against slowdowns or other trouble in any one.
Put it all together, and Congress should see that the case for doing right by American business and the American people by re-authorizing the Export-Import Bank is overwhelmingly strong. Lawmakers have lots of tough calls to make this fall as they face issues from immigration and border security to numerous foreign policy crises and looming sequestration. The Ex-Im Bank is not one of those tough calls; Congress should go for the easy win and renew the bank’s charter.
This opinion originally appeared in the USA Today.
Failure to sign the [Trans-Pacific Partnership] would demonstrate that the United States and Japan cannot move past friction to work in areas such as internationalization of financial services, protection of intellectual property and governance of the Internet economy that are central to the 21st century economy.