[Note: The above video is from 2008, before Obama loved the Export-Import Bank.]
OMNI SHOREHAM HOTEL, WASHINGTON, DC -- President Obama’s export-subsidy chief this morning railed against conservative critics of his agency, which provides taxpayer-backed loans and loan guarantees to U.S. exporters.
This morning, at the annual conference of the Export-Import Bank – a federal agency whose renewal was defeated in the Senate last month – Ex-Im Bank President Fred Hochberg dedicated most of the opening remarks to battling the agency’s detractors, declaring that taxpayer-backed financing doesn’t count as “corporate welfare” or even a “subsidy.”
“We still hear criticisms of Ex-Im that frankly make no sense to me,” Hochberg told the crowd, made up of about 1,000 representatives from banks, manufacturers, and export-industry companies. “Some critics don’t think Ex-Im should exist at all. They think we are just engaged in crony capitalism, that we’re just peddlers of corporate welfare.”
I am one of those critics (and, as the video above shows, so was a certain Illinois senator four years ago), and so I was interested to hear Hochberg’s counterargument.
“Really? Corporate welfare?” he asked rhetorically. “We don’t spend taxpayer money,” he said.
This claim is based on the fact that a few years back, Congress stopped appropriating new funds to back up Ex-Im loans and loan guarantees. Ex-Im covers its own operations with fees from its deals and with repayments of previous loans.
But Fannie Mae and Freddie Mac didn’t spend taxpayer money for decades – as long as things were going smoothly and defaults were near zero. Now those GSEs have cost taxpayers dearly
“Corporate welfare costs taxpayer money,” Hochberg’s repeated, as a way of protecting Ex-Im from this charge. But even before it costs taxpayers money, it’s still corporate welfare, because it is government transfering wealth from some parties to others. When Ex-Im guarantees a private loan to a Boeing customer, that means that less private financing is available for companies besides Boeing.
A vast majority of Ex-Im’s loan guarantee dollars subsidize Boeing sales, so Ex-Im is a government agency that redistributes financing from other businesses to Boeing – even if the money is private bank money rather than taxpayer money.
But Hochberg’s next claim was even bolder: “We don’t provide subsidies.”
Ex-Im, backed by the “full faith and credit of the United States,” as Hochberg put it in the same talk, guarantees private-bank loans and issues its own direct loans to foreign buyers so that those buyers will buy American goods. This allows for lower interest rates for the exporters than they would get in a free market. And taxpayers bear the risk. How is this not a subsidy?
Hochberg’s strongest argument was what I call the West Side Story argument – the Sharks are going to bring guns to this fight, so we have to, even though we don’t want to.
Hochberg repeatedly said it would be “unilateral disarmament” if Ex-Im were allowed to expire. Europe and Asia both subsidize their exports, so we have to, also. “We’ve got to compete in the world as it is, not as we’d like it to be.”
Here, Hochberg made his most interesting argument, almost implying that he would support multilateral disarmament.
Of Ex-Im critics, Hochberg said:
They just don’t like the idea of a government-backed export credit agency. I offends them philosophically. They say America should counter state-backed financing with tougher commercial diplomacy and more trade deals.
You know what? I agree. So does President Obama.
He then spoke of trade negotiations.
So Obama says export subsidies – which aren’t subsidies – are crucial. But now team Obama is suggesting we could wind them down if other countries do the same? If so, that’s progress.