The debate over reauthorizing the Export-Import Bank has become the latest proxy battle between the conservative and establishment wings of the Republican Party. However, this issue should not be used as an ideological litmus test. Instead, it should evoke a practical and constructive dialogue about how best to level the playing field for American businesses overseas while protecting taxpayers here at home.
Founded in 1934, the Export-Import Bank’s mission has not changed throughout its 80-year history. Its raison d’être has always been to create jobs at home by financing the sale of American goods and services abroad. Ex-Im Bank does not compete with private-sector lenders, but rather seeks to match the foreign government support that U.S. firms’ foreign competitors enjoy.
{mosads}When I served in the bank’s leadership in President George W. Bush’s administration, our overarching goal was to steer the bank between two beacons — one focused on creating jobs and the other on protecting the taxpayers.
We believed, as did members of Congress on both sides of the aisle, that an ideal way to navigate these two beacons was to convert the bank into one of the only truly self-sustaining government agencies.
By making the bank stand on its own two feet and rely solely on its revenue stream to fund its operations, we not only made it possible for companies to grow high-quality domestic jobs, but we earned a profit for the taxpayers. Few government agencies can claim to have reduced the deficit, a fact that should be especially welcome during the current era of austerity.
Nevertheless, some of the bank’s congressional detractors argue that it distorts the market by providing a subsidy. It’s true that in a perfect market, subsidies should not exist. But unfortunately, the real world is not a perfect market. Most countries that meaningfully benefit from international trade provide varying degrees of export subsidies. Some identify specific firms as their national champions and others, like China, even provide financing on terms more akin to development assistance.
To put it another way, should the U.S. unilaterally disarm just because atomic weapons are undesirable? Of course not. We need a nuclear arsenal because other countries have them. The same is true for maintaining an export credit agency. Ex-Im Bank’s role is to ensure that U.S. exporters get a fair chance to compete based on quality, price and service, rather than on the basis of financing assistance. Given this opportunity, there is no doubt that our firms will continue to thrive in an increasingly globalized economy. After all, America remains the largest manufacturer of any country in the world.
Still, the bank’s skeptics are only being prudent to raise concerns over potential risks to the taxpayers, despite a net default rate of less than 1 percent, even after having its mettle tested through the Great Recession. It was not too long ago that Fannie Mae and Freddie Mac were making money hand over fist until they suddenly required an unprecedented government bailout.
Just as we worked with a Democratic Congress to restructure the bank to be self-sustaining by operating within its means, this current reauthorization process is an opportunity to strengthen taxpayer protections while allowing the bank to pursue its mission of creating jobs by financing U.S. exports.
Notwithstanding the bank’s historical success in managing its portfolio, it is in the business of taking emerging market risk and Congress should reexamine whether Ex-Im Bank has enough of a capital cushion to do so.
Congress should also carefully study how the bank’s portfolio has grown substantially in recent years due to the global financial crisis. As private-sector activity continues to recover, the bank should experience a natural reduction in business.
These are but a couple of suggestions that can help keep the bank piloting squarely between the two beacons.
Despite conservatives’ efforts to let the bank’s charter expire on September 30, many of the same lawmakers will also be unwilling to support a stopgap spending measure that will avert another government shutdown at the same time. This creates an opportunity for Democrats to demand a short-term reauthorization of the bank from House Republican leaders in exchange for their help to keep the government open. But, as has become all too often the case in recent years with issues across the board, Congress still would not be squarely addressing the matter at hand. Rather, they would be kicking the can further down the road, prolonging uncertainty for the private sector.
The key is for Congress to spend their time addressing the bank’s future with the goal of making a real difference, rather than just a political point. In a world where global trade is becoming steadily more important to economic success, both our nation’s manufacturers and taxpayers deserve nothing less.
Myrow served as senior vice president and chief of staff of the Export-Import Bank from 2006 to 2008 and is managing partner of Beacon Policy Advisors LLC, an independent policy research firm.