Update 174 — Recess Reading
Trump Shifts on Ex-Im
In a move contradicting Congressional GOP orthodoxy and 2016 campaign rhetoric, Donald Trump seemed to throw his support last week behind full re-authorization of the Export-Import Bank of the United States. Trump suggested that he recently learned that the bank actually makes money for the United States and that it might be in our business leaders’ interests to keep it.
The Bank aims to subsidize American exports, which is a boost for manufacturers in the United States, and it can make loans that private lenders won’t because of political risk, lack of collateral, or size.
Lawmakers were aware of the president’s flip flop several months ago, when he pledged his support for the Bank in a private meeting. Trump kept silence about his support for the Bank up until his interview with the Wall Street Journal last week, where he publicly endorsed it.
Yet shortly after supporting a revival of the bank, the president went on 48 hours later to nominate former GOP House member and staunch Ex-Im Bank opponent Scott Garrett to head the institution. He also nominated to its board former Alabama Congressman Spencer Bachus III, a Bank supporter
The GOP has long sought to shutter the Bank as an example of “crony capitalism,” a waste of taxpayer money and an unnecessary addition to federal bureaucracy. The GOP-led Senate consistently rejected former President Obama’s nominees to head the Bank, further stifling the banks functionality.
If Trump is serious about its revival, this initiative could garner bipartisan support, as Democrats have shown support for the bank in the past. It would also generate support from large employers and special interest groups.
What Does Trump Want?
Trump’s platform — to the extent discernible — is largely centered around job creation. Throughout the campaign and during his first hundred days, the president has suggested that he will create millions and millions of jobs. At one point, he said he will be the “greatest jobs president that God ever created.”
But as unemployment hovers around 4.5 perfect, there is no clear indicator that we actually are in a recession or could even afford to add that many jobs at the pace the president wants. With labor participation down, it’s not easy to predict how willing people are to reenter the labor force and whether they will do so at the rate of job creation.
While some argue that the Bank is a tool for “crony capitalism” as it promotes corporate welfare, as Trump’s nominee to head the bank once did, it should be noted that the bank does generate revenue and create jobs for the United States. Whether those jobs are small business jobs or jobs from conglomerates like Boeing is another debate, but this much is clear: Ex-Im is a US job creator.
Given that the administration has been exaggerative in its ambitions for job growth but has yet to have anything to show for it in its first hundred days, the bank may very well be a good starting point.
If Personnel be Policy
While the president has recently flip flopped on his stance on the bank, his nominees to head the institution are a signal that he might be sticking with his campaign promises. Scott Garrett voted consistently during his long House career against renewing the bank’s charter, claiming that it’s simply just a form of corporate welfare.
Similarly recently former GOP Congressman Spencer Bachus III, on the other hand, voted in favor of reauthorizing the banks charter as consistently. Bachus was nominated to sit on the banks board, having previously served as Chairman of the House Financial Services Committee. In Congress, Bachus supported the bank, saying that it “is available to help those small businesses compete and win in the global marketplace.”
Trump’s Next Steps
During the course of the campaign, Donald Trump had bashed the Ex-Im Bank, saying that it was a “ridiculous thing.” The position aligned him with conservative Republicans, as the Tea Party wing had more or less turned the bank into a piñata. Recently, however, Trump claims to have come to the realization that the bank makes money for the United States, saying, “But actually, it’s a very good thing. And it actually makes money, it could make a lot of money.”
The Export-Import Banks reauthorization under President Obama is set to expire in 2019 and so the Trump administration will have to grapple with which direction it wants to see the bank go. Closing the bank entirely is estimated to cost business owners, both small and large, billions of dollars in exporting opportunities and exporting credit support. According to the bank itself, 90 percent of its customers are small businesses.
Yet while the bank was reauthorized, it is stifled at every corner. The bank has been operating with only two board members for almost two years, making it difficult to approve large scale projects. In order to green light transactions greater than $10 million, for example, the bank needs at least three board members. This leaves the bank in a quorum failure, as it cannot be functional on the large scale it needs to be in order to be productive.
There are 67 countries with trade finance agencies to give their companies an edge in world markets. If the United States opts to close down its bank, it would only put American manufacturers and other businesses at a disadvantage. While the Tea Party advocates closing the Bank, House Financial Services Chair Jeb Hensarling introduced a bill to close the Bank in 2015. Some Democrats, however, also see the bank as a facilitator of corporate welfare.
As one of the banks largest subsidiaries, Boeing is heavily invested in the future of the banks. The amount of subsidies it receives from Ex-Im are currently being targeted in a House tax plan to reform corporate border taxes. Boeing is frequently accused of benefiting from the banks “corporate welfare program,” but few can argue that it doesn’t result in job growth in the United States.
With Trump’s pick to head the bank, there is reason to be skeptical of his embrace for the Ex-Im Bank’s revival. After all, Garrett once accused the bank of embodying “the corruption of the free enterprise system.” Although as we’ve learned with other cabinet appointees like Rick Perry, some people don’t grow to appreciate an agency until they sit at the head of the table.