Facts, not faith, in economics

The Export-Import Bank has been around for 81 years, providing loans and protections for American companies selling their products abroad. The bank's charter runs out at the end of June, and renewal has always been a noncontroversial bipartisan process.

Not this year. A cabal of right-wing activists -- linked to the tea party and the billionaire Koch brothers -- have decided to make killing the bank an ideological crusade. Their bullying tactics have won important converts among House Republican leaders, including Rep. Jeb Hensarling, chairman of the Financial Services Committee.

If the bank's charter ever came up for a vote, it would certainly pass. So Hensarling is simply sitting on the legislation, exercising a one-person veto.

Proponents still think the bank will eventually survive. But Hensarling and his henchmen are playing a dangerous game that can only damage American companies and workers at a time when the country's economic recovery remains fragile.

Opponents argue that the bank practices "crony capitalism" and distorts the free market. But they are preaching theology, not economics. Their arguments are based on faith, not facts. And even some fellow conservatives among House Republicans are appalled at their ignorance.



Rep. Chris Collins of New York told a press conference he was "befuddled" by the sudden jihad against the bank: "I can't figure out for the life of me why my party, the Republican Party, that stands for jobs -- and in every conference meeting, it's 'jobs' and 'the economy' -- and here I am, in the minority in my own conference, fighting to defend the Export-Import Bank, which is the best example of creating jobs in America."

Here are the facts: In the last fiscal year, bank underwriting supported $27.4 billion in U.S. exports and 164,000 jobs. Yes, much of that financing went to big corporations like Boeing, but 3,340 small businesses also benefitted.

These are good loans; the default rate is well below 1 percent, and they cost the taxpayers nothing. Repeat: nothing. Bank operations are financed by fees paid by loan recipients. Last year Ex-Im turned a tidy profit, returning $675 million to the Treasury.

Does the bank intervene in the marketplace? Yes. In a perfect world, would it be needed? Perhaps not.

But this is far from a perfect world. Commercial banks flinch from making the kinds of loans Ex-Im provides. More seriously, other countries, especially China, heavily subsidize their exporting industries. So in order to compete globally, American companies need the help Ex-Im provides.

"It's about jobs," Sen. Rob Portman, an Ohio Republican, told the Toledo Blade. "If you are not for the Ex-Im Bank, then you've got to explain why you think we should lose thousands of good-paying jobs in a state like Ohio. Our trading partners do it much more than we do."

Opponents denounce the bank for "picking winners and losers," and in a sense, that's true. But they are picking American winners and foreign losers.

A good example is Bassetts Ice Cream, based in Philadelphia. According to David Patti, president of the Pennsylvania Business Council, entering the global marketplace was "too risky" for Bassets without Ex-Im backing.

"If a foreign purchaser refused to pay, Bassetts would have to eat the loss," he wrote in the Pittsburgh Post-Gazette. "As a small company, Bassetts couldn't stomach such risks."

Then in 2008, it received $3 million in loan guarantees from the bank. "The guarantees sweetened the deal for Bassetts," says Patti. "Today, the small business sells thousands of gallons of ice cream to distributors in China, India and the Caribbean."

The Ex-Im fight reflects two larger issues in American politics. One is that outside interest groups repeatedly assert economic falsehoods and remain undeterred by reality. Douglas Holtz-Eakin, a loyal Republican economist, told The New York Times: "I think too many conservative arguments are made on the basis of ideology and faith."

And conservatives are not the only sinners. Trade unions are playing the same game, deriding foreign trade deals as bad for the economy when the opposite is true.

The second issue is the way Congressional districts are drawn, guaranteeing members of both parties clear sailing in a general election. Their only fear is getting attacked by more hard-line opponents from their own party, and anti-Ex-Im forces are using the threat of well-financed primary challenges to frighten lawmakers into opposing the bank.

Faith plays a critical role in American life, but when it comes to economics, facts are more important. And the facts say the Ex-Im Bank should be preserved.

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