Notes

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Defunding the ExIm Bank
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Below are all the Atlantic notes, primarily from James Fallows, on the U.S. Congressional battle over defunding the Export-Import Bank.

Show 3 Newer Notes

It's a New Fiscal Year! And the Same Old ExIm Impasse

A new month; a new federal fiscal year; a last-second approval of a federal budget; but still no movement on getting the Export-Import Bank back into business.

As for why you should care about this seemingly beyond-boring topic, please see the previous messages collected on this page. On what it all means, a few more installments from readers — plus this headline just now from the Dallas Morning News, about complaints from businesses in Texas to one of the GOP hardliners opposing the bank.

From the Dallas Morning News: businesses in Texas are complaining about the ExIm standoff  

Now let’s hear from the readers.

It’s all about infrastructure. A reader who had heretofore been spared thoughts about ExIm now says it connects to bigger governance questions:

I join the ranks of your readers who know next to nothing about the Ex-im Bank. I didn't even know there was a controversy before your first post, and had no clue what it does or why. 

But from what I've gleaned from these posts, the Ex-im bank sounds like it plays the same role as infrastructure, and the argument against it seems to be consistent with arguments against rebuilding our highways, railroads, power grids and telecommunications systems.  

Any rational being alive before Reagan and the Roberts Court would have understood that the government had a role in creating a viable structure within which commerce could function.  (cf. Constitution Article 1 §8 "The Congress shall have the power to...provide for the...general welfare of the United states... to regulate Commerce with foreign Nations, and among the several States...")

Most Americans have lived their lives in blissful ignorance of the Export-Import Bank, founded under Franklin Roosevelt and still based in Washington D.C.

But people in international commerce have relied upon its backstop and confidence-building role for decades. Customers making multi-year, multi-billion-dollar purchases have preferred the idea that governments are also standing behind the deal, even when the world’s biggest corporations are involved.

That all changed this summer, when a rump group of Tea Party Republicans plus some allies on the left (notably including, to his discredit, Bernie Sanders) succeeded in blocking the previously uncontroversial reauthorization of Exim. The notes collected on this page go into the ramifications of this move. The Exim bank can still administer its old loans but not issue any new ones. Here’s how its homepage looks now:

Why does this matter? To repeat the point, since it’s left out of so many public discussions, it’s because high-stakes, big-ticket international commerce often depends on governments backing or at least blessing the deals. We’re talking about the billion-dollar sales of large numbers of aircraft; about years-long programs to build power plants or transport systems; about deals that are enormously consequential from both the buyer’s and the seller’s perspective, and where they foreign purchases are often governments (or government-related) themselves.

The ExIm Bank actually makes money for the U.S. government, rather than costing money. For students in Ec 101, this might suggest that some private bank could just step in to fill the gap. But, again, in the real world, purchasers in Europe or China or Latin America or the Emirates want to know that the U.S. government is standing behind the transaction. That is How The World Works.

The ExIm’s opponents can’t be bothered with any of this, because they think that in theory companies “shouldn’t” need ExIm’s help. And they shouldn’t. But they do. Thus we have what I described yesterday as a drive toward the failed state, in which basic functions of governance are undone. Below are more real-world accounts of the damage such zealotry is doing.

From Krugman’s column this morning

Here’s another challenge for the press — and members of the American public, and people in the rest of the world affected by U.S. debates — in reckoning with this moment in U.S. political history. It’s one that Paul Krugman, with whom I’ve sometimes disagreed about politics, mentions almost as a throwaway line in his column early today, as shown at right.

The United States still has two major parties. But one of them is no longer interested actually in governing. And we’re dealing with the consequences.

Running any government, in any country subject to any kind of non-Kim Jong Un-style checks and balances, involves compromises, tradeoffs, making the best of imperfect choices. As John Boehner put it yesterday (a phrase I didn’t imagine myself writing) in explaining his frustration with his fire-breathing caucus, “You know this is the part that I really don't understand. Our founders didn't want some parliamentary system where if you won the majority you got to do whatever you wanted to do. They wanted this long, slow process.”

That Republican party competition now is over positions — who can be more anti-Obama (and Obamacare), pro-Israel, anti-Planned Parenthood, anti-climate science and EPA — rather than over policies, which imply the tedious work of operating a government, is a familiar point. Here are two less familiar reminders than the momentum in the party is not about this or that policy detail but effectively against governance itself.

Thanks to our new threaded-notes feature, you should see all previous installments in this series below. The purpose of this one is to give some answer to the question “Why on Earth should I spend two seconds thinking about the Export-Import Bank??” for the 99% of the U.S. population that has never previously spent even a single second that way.

A Scot in unusual headwear, producing a distinctively keening bagpipe sound. Also shown: a bagpiper with kilt and sporran. (Hardee har!) Everything Donald Trump has said about immigration could, with equal “accuracy,” be applied to the Export-Import Bank. (2010 Reuters photo / David Moir)

Here’s why: you could think of it as a parallel to the immigration debates, or in different ways to the culture wars, or the impending struggle over shutting down the government, or other extremism-vs.-centrism pressures in national politics and within the GOP. In all these cases, we have real-world trends that indicate one thing, and fevered political rhetoric that indicates another.

In immigration, the real world trends are:

  • illegal immigration from Mexico has long been falling;
  • in a number of recent years more people have moved from the United States to Mexico than the other way;
  • immigrants (legal and illegal) have lower rates of criminality than native-born Americans; and
  • the process of assimilating outsiders, which has always been disruptive throughout U.S. history (involving German and Irish in the mid-19th century, Eastern Europeans after that, Chinese before and after, a broad sampling of the world’s people since the 1964 reforms that reduced the preference for white-European immigrants; Latinos through the southwest; refugees from the Soviet empire and Cuba and Vietnam and Somalia and elsewhere), has overall been a tremendous source of American economic and cultural success and vitality. There is no evidence that the assimilative process is proving less effective now than it was in the 1840s or the 1880s or at other high-inflow times.

But immigration as it appears in the GOP debates is a two-minutes-to-midnight threat to everything precious in the country. (“They’re sending rapists” etc.)

So too with ExIm! In reality it makes money for the federal government (let me repeat that: it pays money into the federal treasury, rather than drawing it out); it matches in much less intrusive ways what other governments do; it gives no evidence of causing serious distortions in market workings; and it has been part of the successful ecosystem both for some of America’s largest and most generally admired tech giants (Boeing, GE) and also the smaller-company supply chain they buy from.  Presidents of both parties have supported it. Through the George W. Bush era funding measures passed the House and Senate by unanimous or overwhelming votes.

Want to read more about international trade in big-ticket items like commercial aircraft? Here’s a place to start!

Thanks to the Atlantic’s new-ish Thread feature in this Notes section, I think you will see the previous items in this ExIm discussion grouped along with this one. Just in case you don’t, here’s the precis: No. 1 is “Idiocracy: It’s Not Just a Movie Any More”; No. 2 is “When Is It Fair to Call a Policy Position Idiotic?”; No. 3 is “Another Thing to Blame the Boomers For?”; and No. 4 is “Complex Facts and Intense Feelings.”

By the way, about No. 4: only one reader ever figured out the actual identity of “the Atlas Shrugged guy” whose writings I quoted extensively back during the 2012 election cycle and who now lives in Alabama (and who never carried out his threat to close his company if Obama got a second term). But yesterday three people immediately wrote to say that they had figured out the real name and location of the profanity-bound West Point grad I quoted recently, prompting me to further vague-up the description of him in the post.

Two reader messages this time. The first is from an ExIm bank critic. He thinks, incorrectly in my view, that there has been no discussion of the substance of how the bank works. But let’s hear some specific criticisms from him:

If you’re joining us late, there turns out to be an impressively passionate range of views on the future of the Export-Import Bank. For background reading: No. 1 in the series is “Idiocracy: It’s Not Just a Movie Any More,” my initial broadside against the effort to defund the bank; No. 2 is “When Is It Fair to Call a Policy Position Idiotic?,” a response from readers flustered by No. 1’s harsh tone; and No. 3 is “Another Thing to Blame the Boomers For?” which is self-explanatory.

This next installment is meant to represent the range of incoming sentiment. We begin with someone in the insurance business, who addresses the point of whether ExIm is for giant corporations only:

This reader appreciates your use of the cautionary Mike Judge film to call out the anti-Ex-Im Bank extremists.

My company brokers over 500 Ex-Im Bank export credit insurance policies, more than any other insurance broker in the country. Most of our trade finance business is underwritten in the private sector, but small business exporters find the support they need only at Ex-Im Bank.

Walter Lippmann would have had thoughts on ExIm mess. (Wikipedia)

Here’s the background: No. 1 is “Idiocracy: It’s Not Just a Movie Any More,” an initial broadside against the Tea Party-ites who (fanatically and destructively, in my view) have managed to defund the Export-Import Bank. No. 2 is “When Is It Fair to Call a Policy Position Idiotic?,” a response from readers flustered by No. 1’s harsh tone.

Now several readers with a different angle—namely, that we’re seeing another front in the Boomers-against-the-world generational struggle. Let’s start with this one:

[The original] Ex-Im bank piece made perfect sense to me.  I’ve been in international trade the last 10 years or so.  You are completely correct regarding both mercantilist policies and the idiocy of some of the right-wing blather about them.

I wonder, is this more an overall generational issue than anything else?  Specifically, I think these policies may be an effort on the part of Baby Boomers to get theirs while the getting is still good, meaning while they are young enough to benefit from policies but old enough that the bill will effectively not come due during their lives.

Fred Hochberg, CEO of the now-defunded ExIm Bank (ExIm photo)

Last night I wrote an impolite item arguing something I actually believe: that the Tea Party-led effort to defund the Export-Import Bank represented the destructive triumph of ideological posturing over real-world effectiveness.

Summary version of the case: Sure, in principle, big, rich companies like Boeing, GE, and Caterpillar “shouldn’t” ever have to rely on taxpayer subsidy. Also, government support can bring gross corruption at worst and market distortion at best; and the public costs of mercantilist policies often outweigh the public benefits.

Those are the principles, which I recognize well enough from my economics courses.

But the principles are a poor match for real-world complications.

Because I have been wrapped up in print-magazine obligations (check your mailbox in one month, and subscribe in the meantime, including for our great new issue), I didn’t stop to mention the idiotic Congressional effort to defund the Export-Import bank while that debate was underway.

The anti-ExIm push has succeeded for now, and the results of this self-inflicted folly are starting to come in. The GOP/TeaParty case against ExIm was that it was another case of big government over-reach, and crony capitalism as well. As one of the Koch brothers-originated lobbying groups working against the bank piously puts it:

FreedomWorks explains it to us

Let’s not stop to marvel at this spectacle: an industrial combine whose mining, pipeline, refinery, and other operations have been intimately connected with, and frequently protected by, government policies, inveighing against the crony-capitalist state.

Instead let’s look at the results.