The Export-Import Bank is up for reauthorization again. Democrats and Republicans in Congress are divided against each other and among themselves as to reforms that should be imposed on the bank, and, to a lesser extent, whether the bank should be reauthorized at all.
But before looking at the question of whether the Export-Import Bank should be reauthorized, we should note two earlier banks that were authorized by the U. S. Congress.
One of the first actions of the first Congress of the United States was the chartering of the First Bank of the United States in 1791. Opposition to the bank was led by Congressman, and later president, James Madison. In arguing against the bill to establish the bank, Madison said that the power exercised by the bank bill
- was condemned by the silence of the Constitution,
- was condemned by the rule of interpretation arising out of the Constitution,
- was condemned by its tendency to destroy the main characteristic of the Constitution,
- was condemned by the expositions of the friends of the Constitution, whilst depending before the public,
- was condemned by the apparent intention of the parties which ratified the Constitution, and
- was condemned by the explanatory amendments proposed by Congress themselves to the Constitution.
Nevertheless, the bank bill passed anyway, and the First Bank of the United States received a twenty-year charter.
In 1816, Congress authorized the incorporation of the Second Bank of the United States. It too was chartered for twenty years. In 1819, in the landmark Supreme Court case of McCulloch v. Maryland that confirmed the constitutionality of the bank, Chief Justice John Marshall ruled that even though “among the enumerated powers, we do not find that of establishing a bank or creating a corporation,” yet “the constitution of the United States has not left the right of congress to employ the necessary means, for the execution of the powers conferred on the government, to general reasoning. To its enumeration of powers is added, that of making ‘all laws which shall be necessary and proper, for carrying into execution the foregoing powers.’”
But being authorized by Congress doesn’t change the fact that these banks were not authorized by the Constitution.
Fast-forward almost 200 years later, to 2014.
The Export-Import Bank, created by an executive order of Franklin Roosevelt in 1934, is an independent agency of the federal government like the CIA, EPA, FTC, FCC, FEC, SEC, and NASA. Since its institution, it has been reauthorized sixteen times, with bipartisan support, most recently in 2012. According to the bank’s “Who We Are” statement,
- The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. Ex-Im Bank’s mission is to assist in financing the export of U.S. goods and services to international markets.
- Ex-Im Bank enables U.S. companies — large and small — to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy.
- Ex-Im Bank does not compete with private sector lenders but provides export financing products that fill gaps in trade financing. It assumes credit and country risks that the private sector is unable or unwilling to accept. It also helps to level the playing field for U.S. exporters by matching the financing that other governments provide to their exporters.
- Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing). No transaction is too large or too small. On average, more than 85% of Ex-Im transactions directly benefit U.S. small businesses.
It should be pointed out that when the bank says it assumes “credit and country risks,” it is U.S. taxpayers that are assuming the risks.
Although Barack Obama once called the Export-Import Bank “little more than a fund for corporate welfare,” he now supports the bank’s reauthorization. A White House spokesman states that
since the President took office, the Ex-Im bank has served an important role in helping firms access financing when private sources of finance dried up as a result of the recession in the beginning of the administration. Since then, the Ex-Im bank has been a vital source for these firms, and is key to helping us achieve our export goals and supporting thousands of businesses across the country large and small. We urge Congress to act to reauthorize the bank
The U.S. Chamber of Commerce supports the Export-Import Bank’s reauthorization, as does the National Association of Manufacturers. A letter in support of the bank, signed by 865 business groups representing every state, was sent to every Capitol Hill office. Forty-one House Republicans have also sent a letter of their own to Speaker John Boehner and House Majority Leader Kevin McCarthy. “We believe that Congress should move forward with a multi-year reauthorization of Ex-Im that provides certainty and stability for U.S. manufacturers and exporters of all sizes,” the letter reads.
Rep. Stephen Fincher (R-Tenn.), who voted against reauthorizing the Export-Import bank in 2012, now says, “Let’s try to fix this investment. Let’s make it better. Let’s get back to the original mission of the Ex-Im Bank and don’t hurt jobs in our district.”
The Heritage Foundation, a conservative think tank, terms the Export-Import Bank “a conduit for corporate welfare beset by unreliable risk management, inefficiency, and cronyism.”
The Club for Growth, a conservative free-enterprise advocacy group, considers the Export-Import Bank to be a “corporate welfare slush fund” that “is quickly becoming a symbol for everything that’s wrong with Washington, from corruption to crony capitalism to lobbyists looking to rake in fees to perpetuate the big-government status quo.”
So, should the Export-Import Bank be reauthorized?
The Export-Import Bank should not be reauthorized, but not because of anything to do with crony capitalism, corporate welfare, corporatism, subsidies, waste, fraud, inefficiency, corruption, defaults, mismanagement, or cost. The Import-Export Bank should not be reauthorized because it is an unconstitutional and illegitimate function of the U.S. government to have a bank, finance exports, level the playing field for exporters, fill gaps in trade financing, help small businesses, increase exports, help to maintain and create jobs, match the financing that other governments provide, assume credit risks, or provide credit insurance, loan guarantees, or direct loans.
American businesses that wish to sell their products in overseas markets should bear all the risks in doing do, not American taxpayers. And besides, like the case of the First and Second Banks of the United States, there is no constitutional authority for the U.S. government to have a bank of any kind.
So, is there anything that government can legitimately do to “help” businesses become more competitive and profitable? The answer is a simple one: stay out of the way.
U.S. corporate income tax rates are among the highest in the world. They should be slashed, or better yet, the corporate tax should be eliminated. Employers pay a 6.2 percent Social Security tax and a 1.45 percent Medicare tax on each employee’s wages. Federal unemployment taxes are paid by employers at a rate of 6 percent on the first $7,000 of each employee’s income. All of these taxes drive up the cost of doing business — as do minimum-wage laws, Obamacare mandates, Family Leave requirements, and overtime-pay rules. And then there are the myriad federal regulations that all businesses in the United States are burdened with. The Competitive Enterprise Institute estimates that “the cost of federal economic, environmental and health and safety regulation is around $1.86 trillion annually, based largely upon government data.”
Like the case of the First and Second Banks of the United States, the Export-Import Bank belongs in the dustbin of history.