Principles or common sense: Which should prevail for Ex-Im?

Our parents taught us to live by our principles. They also intended us to practice good common sense, something learned slowly over time. If politics is the art of compromise, then it is unsurprising that politics is where compromise — and conflicts — between principles and common sense most often occur.

We have an opportunity to watch such a battle play out in Congress right now, as some ideologues work to eliminate a tiny but significant U.S. government agency. The U.S. Export-Import Bank (Ex-Im) helped finance over $25 billion of U.S. exports last year by issuing loan guarantees to foreign buyers of U.S. goods and services and selling export credit insurance for working capital. Ex-Im Bank’s charter is up for reauthorization this month. A small group of congressmen are against it.

Critics of the Ex-Im Bank insist they have principles on their side in this argument. I wish they were using common sense instead.

{mosads}They say they want to eliminate “corporate welfare.” It is true that Ex-Im’s biggest beneficiaries are also the biggest U.S. exporters, including Boeing, General Electric and Caterpillar. But let’s apply some common sense here. They compete with large competitors around the world to sell expensive capital equipment. We know Airbus gets significant support from comparable export credit agencies (ECAs) in Europe, and Komatsu gets support competing with Caterpillar. Are we willing to jeopardize the thousands of export-related jobs at these great American companies? And let’s not forget that Ex-Im’s users pay significant fees and interest. In fact, Ex-Im Bank actually not only covers its own expenses, but generates a profit for the U.S. taxpayers. Ex-Im has returned more than $7 billion since 1990. How can these critics call it “corporate welfare” when users pay for the service? One direct economic impact economists often neglect is that exporters pay federal income taxes on the incremental business that Ex-Im helps finance: on $25 billion of exports, that would easily be over $1 billion of taxes annually.

These same critics say we shouldn’t care what other countries are doing to support their own exporters. Rather, we should act unilaterally according to “free market” ideas. Countries rarely have unilaterally and literally disarmed — militarily — to rely on the good will of others. Common sense tells us that international trade — economic warfare — is not much different.

I can tell you firsthand it’s a jungle out there. Our Wisconsin factory workers, our Kansas City inventors and our Baltimore welders depend on me to beat the global competition selling construction equipment in tough places: the Middle East, former Soviet countries and sub-Saharan Africa. Our competition from Holland, Germany, Canada, China — all come armed with backing from ECAs. Without the Ex-Im bank, I can’t take advantage of opportunities in these growing markets.

Critics of Ex-Im argue that they want to shrink the size of government. This is a worthy principle shared by most Republicans and many Americans, but an agency with 400 employees seems hardly worth the effort of this battle. Perhaps disappointment over their failure to eliminate the Affordable Care Act is fueling the fervor of some to deliver a government scalp. Eliminating an expensive and ineffective department or, better yet, eliminating a large program like ethanol subsidies would be more worthy goals for adherents to this principle.

Some critics say Ex-Im favors Wall Street over Main Street. That couldn’t be further from the truth. While big companies do benefit from government programs, that isn’t a reason to shutter Ex-Im. I run a small business, but I am happy to see big American businesses do well. More importantly, small businesses have the opportunity to benefit from Ex-Im too. Congress requires Ex-Im to reserve at least 20 percent of its financing for small businesses. Ex-Im has sometimes fallen short of that 20 percent goal, but that’s normal when you’re running a business, where getting close to a challenging goal is a positive thing. Main Street and Wall Street actually agree that Ex-Im is valuable to the U.S. economy, and both benefit with export-related job creation.

Ex-Im’s opponents assert that only politically connected companies receive financing, calling its users “cronies.” If that were true, I would be the first to object. But opponents have struggled to find supporting evidence. Ex-Im has high standards for its customers, but it is open to all qualifying exporters.

Ex-Im’s opponents have argued that it has suffered from fraud and should, on principle, be forced to shut its doors. Again, let’s use some common sense. A small number of bank employees were outed by their colleagues for committing fraud. We should always be alarmed when any public servant abuses the public trust — whether IRS employees who haven’t paid their taxes or Atlanta Public School employees falsifying test results to earn bonuses or members of Congress misspending campaign funds. Those incidents don’t mean that we should abandon those institutions. We should shed light on any problems and fix them.

Lastly, Ex-Im’s opponents say that because it supports less than 10 percent of all American exports, it is irrelevant and unnecessary to the export market. How is that conclusion logical? That fact is good: it means that Ex-Im not only is essential to that small portion, but that it is has not expanded beyond its mission as lender of last resort.

Several members of Congress have proposed useful reforms for the Ex-Im bank. Let’s have an honest conversation about those reforms. Ironically, much of the need for reform comes from mandates imposed on Ex-Im — on issues like restrictions on coal-related exports.

The debate over reauthorization is showing how difficult compromise can be. Unfortunately, it also proves just how uncommon common sense can be. We can’t let the perfect be the enemy of the good. Ex-Im should be reauthorized promptly, and sensible reform efforts embraced.

Bowe is president of Ellicott Dredges LLC and Ellicott Dredge Enterprises LLC.