Pollsters are predicting that Kavanaugh’s confirmation has galvanized Republicans and enhanced Senate Majority Leader Mitch McConnell’s (R-Ky.) chances of retaining Senate control.
Meanwhile, for the last three years, and with little notice, McConnell has deployed tactics to contravene the support of the president and bipartisan congressional majorities to cripple the U.S. Export-Import Bank (EXIM).
{mosads}As the official U.S. export credit agency (ECA), EXIM provides loans, guarantees and other financial assistance (export support) to facilitate foreign purchases of U.S. exports. Seventy-nine countries outside the United States have ECAs.
Because of McConnell’s block of board nominees, EXIM lacks the quorum needed to support deals over $10 million, which historically comprise 80 percent of bank lending.
Ten years ago, EXIM responded to the Great Recession by tripling export support, financing $30 billion annually of U.S. exports over a five-year period, creating over a million jobs.
Because big deals make money, EXIM made a $3.8 billion profit under Obama. But without a quorum, authorizations fell to $3.4 billion last year. Limited to small, less-profitable deals, EXIM now costs taxpayers money.
To block EXIM, McConnell’s Senate has pulled out the Supreme Court playbook. Similar to the Merrick Garland nomination, with McConnell’s support, Sen. Shelby (R-Ala.) held no hearings on Obama nominees, and nominations expired.
The Senate went further when Sen. Toomey (R-Pa.) put holds on Trump nominees and McConnell never scheduled votes to remove holds that — given EXIM’s two-thirds support in the Senate — would have passed.
In a Republican Senate, Toomey would likely chair the Finance Committee where he could block EXIM’s upcoming reauthorization next year. The U.S. would be the only economy larger than Nigeria without an ECA.
A review of key Senate races provides a sobering outlook for EXIM and the jobs it supports.
In North Dakota, EXIM doesn’t look like an issue because Sen. Heitkamp, a Democrat, and her opponent, Republican Rep. Kevin Cramer, support EXIM.
Heitkamp spoke at EXIM’s annual conference this year. Cramer participated at a 2017 meeting where President Trump supported restoring EXIM’s authority and co-sponsored a bill to give EXIM full authority with a lesser quorum.
But if a Cramer win lets McConnell keep Senate control, his support won’t matter to North Dakota where EXIM now supports one-third as many companies as it did before.
Export support has declined similarly in states of 67 Senators who supported EXIM, including 24 Republicans, many of whom played roles in Kavanaugh’s confirmation.
In Sen. Lindsey Graham’s (R-S.C.) home state, EXIM once supported jobs at General Electric facilities that have experienced recent layoffs and could lose more jobs to countries with ECAs.
Ironically, job losses would disproportionately affect Republican-dominated rural areas where manufacturing employment has declined. In two key Senate races, Republicans have worked against their states’ interests.
Rep. Marsha Blackburn (R-Tenn.) was a minority in the House and her own party in opposing EXIM. Tennessee’s exporters include Caterpillar and 100 other important exporters that EXIM has supported and whose workers Blackburn would place at a disadvantage.
Sen. Ted Cruz (R-Texas) is seeking re-election in the country’s largest exporting state, a beneficiary of $3.5-billion per year in EXIM support after the Great Recession. Bank support is now one-fourth of that and could fall to zero. Cruz and McConnell were among the senators to oppose EXIM.
The economic damage EXIM’s closure would cause would be significant. As Scott Schloegel, former acting EXIM chair said:
“With each passing day, that EXIM isn’t fully functional, it is like waves eroding under the foundation of American exporters. When an economic storm blows in, the once-strong EXIM will be significantly weakened — if not completely collapsed — and unable to assist American exporters when commercial bank liquidity dries up.”
A strong economy may make such peril seem distant, but in rural America, with manufacturing’s share of overall employment at an all-time low, the economy seems weak. The year’s stock market gains are gone, and many economists warn of a looming recession.
Those not seeing a threat are overlooking the facts and the lessons from 10 years ago when EXIM helped save U.S. jobs.
John L. Schuster is president of JLS Capital Strategies LLC, an advisory firm specializing in raising capital for infrastructure projects worldwide, and the former vice president of EXIM’s Structured Finance Division.