The Return of ExIm?

Editor’s Note: This article previously appeared in a different format as part of The Atlantic’s Notes section, retired in 2021.
A small South African airline flies some Boeing 737s and wants to buy more. Why the Tea Party’s crusade to eliminate the Export-Import Bank is now the main factor affecting this sale.


In the flurry of intra-Republican Party warfare last week, there was one clearly positive development. That was the decision by 40-plus House Republicans to break away from the Tea Partiers and “Freedom Caucus” members now blowing up the GOP, and instead join Democrats in backing a “discharge petition” that will force an up-or-down vote on reauthorizing the Export-Import Bank.

From the beginning of this standoff, all sides have understood that ExIm has strong majority support in the House, and probably greater than two-thirds support in the Senate. This is in keeping with its status as a mainstay element of U.S. foreign-economic policy from the FDR era onward, until the recent wave of intense minority opposition from libertarian purists and Tea Party anti-government groups. The goal for these opponents has been to keep its re-authorization from ever coming up for a vote (which they knew supporters would win). This, in turn, is why supporters finally resorted to the “discharge petition.”

Bi-partisan agreement on anything is novel enough these days that the discharge effect deserves mention on its own. In this case, the move also represents a small but significant step against anti-governance nihilism, in two ways.

Procedurally, it represents a triumph over the hostage-taking strategy that has become the Congressional right wing’s m.o. (Hostage taking as in, “Give us everything we want on our most polarizing issues, or we’ll refuse to pass a budget / honor the national debt / let the government operate / cooperate at all.”) And on the substance, it is a rebuff to the theory-driven, reality-blind ideological purism that conservatives used to mock liberals for. For an example, read on.

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Early this month Michael Lindenberger of the Dallas Morning News had the story about leaders of several dozen Texas companies who sent a joint letter to Rep. Jeb Hensarling, a Tea Party Republican from Texas. They said that his crusade against the Export-Import Bank might sound like a blow against Big Government but actually was costing them sales and jobs and could put some out of business. It’s very similar in tone to the letter from more than half the nation’s governors—Jerry Brown to Nikki Haley, Kate Brown to Paul LePage—urging re-authorization of the bank. The headline on the story was “Texas businesses to Jeb Hensarling: You’re killing us.”

Last week Lindenberger had a fascinating letter from the CEO of a small South African airline called Comair. It gives a small but vivid illustration of the damage that purists from the Ayn Rand Debating Club can do.

The Comair company has signed a contract to buy 16 Boeing airliners and has taken delivery on 5. But it says it may have to cancel the rest unless ExIm comes back to life. The details are in the letter below, but they revolve around something obvious in the real world but ignored in the Ayn Rand theories. This is the role of government guarantees in allowing private commerce to proceed.

Short version of what’s in the letter: Because Comair’s revenues are all in South African Rand, it needs to arrange financing for new planes in Rands rather than U.S. dollars, so as not to expose itself to impossible currency risk. But precisely because of those currency risks, foreign banks won’t lend in Rands. Banks in South Africa can and will — but for reasons the letter spells out, the Rand-based local South African financial community is too small to finance the purchase itself without violating technical “Basel III” regulations for disproportionate exposure.

Much as the FDIC can prevent bank panics by guaranteeing to cover the losses should one occur, ExIm can allow sales to proceed by guaranteeing the financing — and in the real world, the loans it backs fail so rarely that, year in and year out, ExIm earns rather than loses money for the government. In that same real world, in companies like this one in South Africa can’t get ExIm financing, either they won’t buy planes from anyone, or they’ll cancel the Boeing contract and instead buy from Airbus, whose European credit agency is happy to back the sale.

Here’s the letter spelling out the story.

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I can actually remember back to a time when liberals were derided for knowing or caring so little about real-world practicalities that they came up with cockamamie schemes that screwed up real businesses, jobs, and lives. Somewhere around that same time conservatives prided themselves on a practical-minded attention to detail, and a hesitation about any grand, self-confident, revolutionary theorizing that was impatient with the complexities of the real economy.

Maybe some of those 40 GOP House members are starting to remember that time too.