During this rather unusual election season, some of you may need a little good news. Here it is: You may not realize it but conservatives and free-market advocates have actually achieve a significant victory in slowing down the amount of corporate welfare in this country. First, they managed to shut down the Export-Import Bank for a few months for the first time in its way-too-long crony history. Second, while the bank’s charter was reauthorized as a result of a very disappointing alliance between Republicans and Democrats in the House and Senate, the crony program is only partially operational.
This outcome is mostly the result of the efforts of Senator Richard Shelby, the chairman of the Banking Committee, who is refusing to advance any of Obama’s nominees for the Ex-Im board until other more important positions are filled. Until the Bank has three board members, it can’t extend loans and approve deals larger than $10 million. This is a significant reduction in cronyism right there considering that the Bank’s data show that traditionally over 80 percent of its transactions are above the $10 million threshold. Not a bad outcome overall.
Now, anti-cronyism victories don’t sit well with special interests, and many of the ones that benefit from the Bank’s business are upset. When they’re upset, they turn to their friends in Congress to demand that they fix it. And they ask these friends to exert pressure on the people getting in the way of their handouts — in this case Senator Shelby.
Here’s an example of the kind of pressure the senator is subjected to. It comes via a letter sent by Senator Tammy Baldwin of Wisconsin to Shelby. Better yet, here’s the press release showcasing both the interest group (Wisconsin Manufacturers and Commerce) and the politician who serves it. There are many more examples of this type of pressure all over the web, including I’m sure, the pressure that happens behind closed doors. I am picking on this particular example because it demonstrates a common tactic used by the defenders of a crony program — or any other government program for that matter: It highlights the benefits of the Ex-Im Bank to the beneficiaries while 1) ignoring the cost of the program overall, and 2) failing to put these benefits into perspective. The point is, of course, to make the benefits of the program look much larger than they actually are, while ignoring any cost to the non-beneficiaries.
See for instance this paragraph:
Since 2007, the Export-Import Bank has supported 27,131 Wisconsin jobs by helping 218 Wisconsin businesses, including 128 small businesses, export $5 billion worth of goods and products made in Wisconsin.
All benefits, no cost. Also, by looking at these numbers you would think that Wisconsin’s exports would collapse without Ex-Im, and that the Bank is a giant booster to the economy thereby justifying this blatant form of corporate welfare. Not so.
For example, the claim is that 27,131 jobs were supported by Ex-Im — presumably between 2007 and 2016. I wish I knew where that data came from since Ex-Im doesn’t advertise jobs-created-per-state numbers on its website anymore. But let’s roll with it for a moment: 2,713 jobs a year. First, let’s not forget that, as GAO noted in its report, there is no evidence that these jobs wouldn’t exist without Ex-Im. Second, in 2014 124,913 jobs were supported by exports from Wisconsin. That suggests that in 2014 only a tiny portion of 1 percent of Wisconsin export jobs were backed by Ex-Im.
Also, based on the most recent data, in 2013, 8,737 companies exported from the state that year. The Ex-Im website shows that in 2013 it supported 89 exporters from Wisconsin. This makes me wonder where the “218 Wisconsin businesses” number comes from. Either way it means that most Wisconsin businesses — 99.9 percent, in fact — exported without Ex-Im’s help.
The last year Ex-Im functioned at full capacity — in 2014 — Ex-Im supported $396 million in export value, while Census data shows Wisconsin businesses exported $23,428 million worth of goods and services. That means, in 2014, Ex-Im backed only 1.6 percent of Wisconsin exports. In other words, 98.4 percent of Wisconsin exports happened without Ex-Im subsidies. And from 2007 to 2015, 2.45 percent of Wisconsin’s exports were backed by Ex-Im. In means that over the period, 97.55 percent of all Wisconsin exports happened without Ex-Im backing — all while facing unfair competition from some exporters who got a leg up from the government.
So let’s see Ex-Im for what it is: an agency that artificially boosts the bottom line of a ridiculously small numbers of companies in Wisconsin, while a vast majority of companies in the state are competing without any help from the government. That’s unfair and, ultimately, destructive to free markets.
Ex-Im & Wisconsin: Exporters Doing Just Fine