Among its four principal financial products, the Export-Import Bank has provided “working capital” loans and loan guarantees that assure repayment to private lenders in the event a borrower defaults. According to bank officials, this form of subsidized financing “primarily” benefits small business. In a July 16 letter to Sen. Marco Rubio and others, Ex-Im president Fred Hochberg characterized the bank’s working capital financing as “issued to mostly small businesses.”…
To the put the Ex-Im Bank’s support of American businesses in perspective, we reproduced the White House table and replaced the nominal numbers with the share that each category represents. These shares show the impact of Ex-Im Bank financing on each state as a percentage of that state’s total exports but also small businesses and exporters over the same period.
The Congressional Budget Office (CBO) recently released its annual report on the federal government’s long-term budget outlook, which unsurprisingly remains bleak. Policymakers have known for years that the federal government’s long-term fiscal situation is unsustainable. Unfortunately, they have taken little action to address the situation. The longer Washington waits to get its financial house in order, the more difficult it will be to rectify the situation.
This week’s chart is a re-creation of a chart produced by the Richmond Fed. The share of financial sector liabilities subject to implicit or explicit government protection from losses grew from 45 percent in 1999 to 60 percent in 2013 and amounts to a staggering $26 trillion.
An uninformed listener hearing the debate over the reauthorization of the Export-Import Bank would think that, in most states, most exports are backed by financing from Ex-Im. Nothing could be farther from the truth.
The charter of the US Export-Import Bank is set to expire on June 30 unless it is reauthorized by Congress. Scare tactics aside, the end of Ex-Im would not mean the loss of thousands of American jobs. Economists have long understood that subsidies doled out by government credit agencies such as the Ex-Im Bank are not merely unnecessary: they can actually harm the economy. In their quest to keep the subsidies flowing, proponents of the bank are claiming that failure to reauthorize its charter would lead to massive job losses. This blatant fearmongering has succeeded in causing concern among some lawmakers.
The cause of last week’s tragic crash of Amtrak train 188 in Philadelphia remains unknown. Some policymakers and pundits immediately pinned the blame on a lack of federal funding for the government-owned and -managed passenger rail operator. This week’s chart shows the annual amount of federal operating and capital funding that Amtrak has received since it was created by the Rail Passenger Service Act of 1970, including a generous allocation in 2009, as part of the American Recovery and Reinvestment Act (ARRA).
Using the bank’s own data, the chart shows that, of the total amount of financing authorized by the Ex-Im Bank from FY 2007 to FY 2014, only 23 percent benefitted small businesses. Minority-owned and women-owned firms received a paltry 2 percent and 1 percent, respectively. While government programs should operate on the principle that everyone is “equal under the law,” it would seem that this principle does not apply to the Ex-Im Bank’s export subsidies.