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.
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.
Yet in the political rhetoric that has succeeded in defunding the ExIm bank, the reality is the reverse. The bank wastes taxpayer money; it exposes the taxpayer to huge risks; it badly distorts markets; and stopping it is a step toward rolling back the over-extended crony-capitalist state.
For the most reasonable-sounding, University of Chicago version of this argument, please see the previous entry. That one also included a response from Robert Rackleff, a former Bank staffer (and longtime friend of mine), on the realities of how the bank operates. Now, a few more logs on the fire.
Mike Lofgren was for many years a Congressional budget staffer, mainly working for Republicans. He has become well known through his book The Party Is Over, an essay on “The Deep State,” and an upcoming book on the deep-state theme. He writes:
Robert Rackleff is absolutely correct. The premiums and interest ExIm receives serve to reduce the federal deficit that conservatives and libertarians profess to be so horrified about, demonstrating that this is not about the functional competence of government (“the government can’t run a lemonade stand” is a perennial conservative dirge). It is, instead, about dogmatic theology operating in the minds of rigid ideologues.
When I was on the Hill, various Republicans made numerous runs against ExIm, but our empirical determination on the Budget Committee was that eliminating it increased the deficit, and that we would have to find savings elsewhere to offset the cost.
That was several years ago. Now, however, at least in the House, the circus is being run from the monkey cage, and GE is shipping jobs to Europe as a result.
Another reader writes to ask about what he considered an un-addressed point in the anti-bank critique:
One point your Ex Im bank critic made that I don’t think you have addressed is that these are loans that could be made by private lenders (banks, etc.).
Now, it’s been my understanding that some of the loans or loan guarantees made by the Ex Im Bank are made because the foreign purchasing entity insists that the loan or guarantee come from a state entity rather than a private entity. Is this correct? If not, why shouldn’t the private sector fulfill this function?
That is, if this function really was so important, wouldn’t companies as big and credit-worthy as Boeing and GE find other sources for their financing? I turned the question back to Rackleff, who replied that during his time at ExIm:
… foreign buyers preferred, and sometimes required, that Exim be part of the financing -- even if its terms for borrowers could be somewhat more expensive than some private financing alternatives -- for several reasons:
1. Exim due diligence and underwriting standards are reasonable, but strict, in determining creditworthiness and market conditions, so participants know that the deal is financially sound.
2. With Exim participation, foreign governments and businesses like the idea that the U.S. government is involved and will be supportive and reliable. This gives them confidence that red tape can be cleared more easily. It also helps attract other investors.
3. Exim financing is predictable, compared to private lenders (who can precipitously call in loans), so there would be fewer ugly surprises.
4. Sometimes the borrowers simply want to diversify their array of lenders, so they add Exim to the mix.
In all the above cases, American workers win. Exim requires that at least 85 percent of a financed deal is domestic content, which means more American jobs
A Boomer-era reader in California writes to connect the tone of the immigration debate, with the anti-government fury, with the ExIm Bank controversy. He says:
The current Republican Party doesn't want to govern.
One evening during the last Presidential election I fell asleep watching C-SPAN while they were running election speeches. It must have been around 2 AM, as I was starting to wake up but still half asleep, I began to listen to the speech currently on the TV.
I was struck at how agreeable it sounded and wanted to know which politician it was. Turns out it wasn't a contemporary politician. C-SPAN had switched to showing historical speeches and what I was listening to was President Eisenhower's Republican Convention Nomination Acceptance speech in 1956.
If you want to see how far the Republicans have fallen just read that speech.
Which I did! Quite a speech. A few passages of Ike’s, to match up with current rhetoric. Its heart was a presentation of five reasons why the GOP was the Party of the Future, not of the past. Here is one of them:
The Republican Party is the Party of the Future because it is the party that draws people together, not drives them apart.
Our Party detests the technique of pitting group against group for cheap political advantage. Republicans view as a central principle of conduct--not just as a phrase on nickels and dimes-that old motto of ours: "E pluribus unum"--"Out of many--One."
Our Party as far back as 1856 began establishing a record of bringing together,. as its largest element, the working people and small farmers, as well as the small businessmen. It attracted minority groups, scholars and writers, not to mention reformers of all kinds, Free-Soilers, Independent Democrats, Conscience Whigs, Barnburners, "soft Hunkers," teetotallers, vegetarians, and transcendentalists!
Not sure any national-level politician since then has referred to the Transcendentalists (well-regarded here at the Atlantic!), let alone the “soft Hunkers.” But how about that clarity of detests for the tactic of sectoral divisiveness. (“They’re sending rapists...”)
And one more reason why, according to Ike, the Republicans owned the future:
It is the Party which concentrates on the facts and issues of today and tomorrow, not the facts and issues of yesterday….
The present and the future are bringing new kinds of challenge to federal and local governments: water supply, highways, health, housing, power development, and peaceful uses of atomic energy.
With two-thirds of us living in big cities, questions of urban organization and redevelopment must be given high priority. Highest of all, perhaps, will be the priority of first-class education to meet the demands of our swiftly growing school-age population.
The Party of the young and of all ages says: Let us quit fighting the battles of the past, and let us all turn our attention to these problems of the present and future, on which the longterm well-being of our people so urgently depends.
This was the Eisenhower Republican tradition that I actually grew up in. This is a kind of reality-based resistance to hysteria we could certainly use more of. And what did Ike think about ExIm? He was a fan. Here is his message to its employees on its 25th anniversary, in 1959:
The record of this Bank is for fair dealing, for human understanding, and for acting in a businesslike, canny way--not only for the welfare of the United States but for other nations. Your record of repaid loans and repayable loans, your infinitesimal portion of written-off loans is one that I can do nothing except to say congratulations to your Directors, the President, and to all of you.
RINO. But right.