Journal content

Mission Creep Infects Taxpayers’ Import-Export Bank | EDITORIAL

Ronald Reagan once joked, “No government voluntarily shrinks. Government programs, once started, never go away. In fact, a government office is the closest thing to eternal life we ​​will ever see on this earth. A corollary to the observation of the former president could be that the mission of a bureaucracy is constantly evolving.

Take the Export-Import Bank, created by FDR in 1934 on the pretext of creating foreign markets for American products. The theory was that the US government – ​​read: US taxpayers – could inflate the economy by lending money to foreign countries to buy products made here.

A decade later, the bank has become an independent agency that requires periodic reauthorization from Congress. Over the years, it has become a source of cash for large US corporations that already have access to plenty of private capital, and its loans remain backed by taxpayers. The Wall Street Journal reports that “some 65% of the bank’s funding went to 10 major companies in 2014” such as Boeing and General Electric.

While the bank’s portfolio now includes a higher percentage of small business loans, it has from time to time drawn attention from left and right for its business welfare operating model. In 2019, a handful of Republicans launched an effort to kill the bank, but failed when then-President Donald Trump backtracked and passed reauthorization. Congress agreed and the bank will now operate until 2026.

But, as Mr. Reagan knew, the bureaucratic instinct for self-preservation is indestructible. Just like the mission envy creep. So Ex-Im Bank this month unveiled a new initiative aimed at “creating new financing opportunities that spur manufacturing in the United States, support American jobs, and strengthen America’s ability to compete with countries like China.

Yet, as Eric Boehm of Reason.com noted, “there has been little clarity about what the program will aim to do, which companies might benefit from it, or how its results will be judged.” There is another impending problem. Even if the Fed raises interest rates to fight inflation, capital remains abundant. Yet this new program requires applicants to demonstrate that there is no private funding available. “Translation,” Boehm writes, “the government will throw taxpayers’ money into investments that private capital markets have deemed too risky.”

Is anyone in Congress paying attention? There is little evidence that American commercial interests would be harmed without this Depression-era creation. Private lenders are much better equipped to make capital allocation decisions than a taxpayer-backed government bank. Instead of allowing the Im-Ex Bank to venture into new territory, Congress should ultimately shut it down.