With Congress in recess until July 7, the Export-Import Bank will certainly lose its authority to extend new financing Wednesday, but the battle over the bank is far from finished.
“This is a small step toward renewing a competitive free-market economy and arresting the rise of the progressive welfare state and the cronyism connected to it,” Republican Rep. Jeb Hensarling, one of the bank’s leading congressional critics, said in a press release. “Now the challenge for supporters of a competitive free-market economy is to make sure Ex-Im stays expired.” (RELATED: Hensarling: ‘Momentum is in Our Favor’ for Ending Ex-Im)
Ex-Im is a New Deal-era government agency that provides financing assistance to American exporters, and while supporters claim the bank is vital to ensuring American competitiveness abroad, many conservative lawmakers and interest groups see the bank as a form of corporate welfare that creates more costs than benefits.
Although opponents in the House managed to prevent a vote on reauthorization ahead of the June 30 expiration of Ex-Im’s charter, the bank will continue to operate until its existing deals run their course, meaning backers will still be able to restore its lending authority in the future, according to Insurance Journal.
In the meantime, the bank’s 450 employees will continue to perform monitoring and compliance work on the bank’s $112 billion in outstanding financing arrangements, their activities funded by fees and interest from those loans.
The next attempt to reauthorize Ex-Im is generally expected take place next month, when supporters will most likely try to attach it as an amendment to a bill funding the Highway Trust Fund, which is projected to run out of money July 31. (RELATED: Sens. Graham, Cantwell Threaten to Torpedo TPA Over Ex-Im)
Whether such efforts are successful could depend on how lawmakers interpret the immediate effects of Ex-Im’s expiration—particularly with respect to whether exporters are able to find alternative sources of financing.
Don Nelson, president of California-based ProGauge Technologies, told Politico losing Ex-Im could cost his company a large project in the Middle East, and would also jeopardize other exports, which account for about 65 to 70 percent of total sales.
“If they’re not going to reauthorize it, effectively we won’t be able to export anymore,” Nelson claimed, though he also said the company would “continue going forward with the belief that Congress will reauthorize,” and would refrain from laying off any employees while the debate plays out.
On the other hand, Hensarling argues the bank’s largest beneficiaries will likely be able to find alternative sources of financing, undermining the argument that Ex-Im is an economic necessity.
Although officials of both Boeing and General Electric—the top two recipients of Ex-Im financing—have threatened to outsource jobs if the bank is not reauthorized, he points out that the companies have also indicated they would be able to self-finance in the event private lenders could not be found to replace Ex-Im. (RELATED: Boeing Threatens to Outsource Jobs if Ex-Im is Shut Down)
In addition, he cites a 2014 analysis by Standard & Poor’s claiming that, “the risk of Congress not reauthorizing Ex-Im is unlikely to affect our ratings on other U.S.-based exporters.”
“There’s no doubt some U.S. companies receive a benefit from Ex-Im, but there’s also no doubt Ex-Im hurts other companies and their workers,” Hensarling adds. “In fact, more are hurt than helped, and nearly 99 percent of all U.S. exports are financed without Ex-Im.”
Delta Airlines, for instance, asserts Ex-Im financing of Boeing exports gives foreign airlines a competitive advantage by allowing them to purchase aircraft at a discount, which savings can then be used to offer artificially-low rates on competitive routes. (RELATED: Boeing, Delta Square Off on Export-Import Bank)
“The few U.S. companies that actually benefit from Ex-Im,” Hensarling concludes, “do so at the expense of every hardworking taxpayer and all other American companies that are forced to assume the risks of Ex-Im’s loans and compete at a disadvantage.”
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