President Obama, picking up where President Bush left off, is quietly expanding the federal government's role as the financier of America's economy.
A top Obama export official told reporters recently that the administration is preparing "a paper" to lay out when the U.S. government can use export-subsidy programs to promote even domestic sales.
Obama plans to use the Export-Import Bank -- a federal agency that gives taxpayer-backed loans and loan guarantees to foreign buyers who buy American goods -- to subsidize U.S. manufacturers even when they are selling to other American companies.
This would be a significant step in the federal government's transformation into a venture capital firm and investment bank involved in all corners of the economy. It's private profit and public risk. Conservative Sen. Jim DeMint calls it "venture socialism."
Ex-Im has been financing exports for decades. Taxpayer-backed loan guarantees push down interest rates for foreign buyers, thus greasing the wheels for U.S. manufacturers and eliminating risk for U.S. banks.
But Washington plays in many other politically favored sectors. The federal government got into housing finance, for instance, through government-sponsored enterprises Fannie Mae and Freddie Mac. The Federal Housing Administration insures mortgages, protecting lenders from risk.
Congress has spent decades creating a slew of government loan programs to subsidize agriculture. Last month, Congress renewed the notorious sugar program, which gives growers generous nonrecourse loans with sugar as collateral.
George W. Bush and Barack Obama have also tried to boost wind and solar power with government money. The 2007 energy bill created a loan guarantee program in the Department of Energy, and Obama's 2009 stimulus expanded the program, ultimately putting Solyndra's losses and other green energy busts on the taxpayers' back.
Obama and his closest allies have proposed more Solyndra- and Ex-Im-type loan guarantee programs for favored industries. Obama and Democratic Sen. John Kerry have each proposed some sort of "Infrastructure Bank" modeled after Ex-Im.
Obama's top economic adviser, Alan Krueger, was an advocate of an infrastructure bank and the champion of a convoluted program called "Build America Bonds." BABs basically allowed Washington to underwrite local governments' borrowing, along the way subsidizing banks and government contractors.
The Center for American Progress, a liberal think tank and close Obama ally, has proposed a "Green Bank" that would provide taxpayer-backed loans and loan guarantees for business undertakings deemed to be "green."
Bush and Obama have resorted to plenty of ad hoc venture socialism, too. The bailouts of AIG, Wall Street and Detroit all put the Treasury or the Federal Reserve in the role of investment banks, buying equity or debt in major companies.
In February, Obama announced his plan to expand Ex-Im financing to domestic sales in certain circumstances. If Brazil, for instance, were subsidizing the sale of an Embraer jet to Southwest Airlines, Ex-Im might step in and match Brazil's subsidy, offering U.S. government-backed financing if Southwest bought a Boeing instead.
When Congress reauthorized Ex-Im in May, the law empowered the agency to do such domestic financing when foreign governments were engaged in "noncompetitive financing" -- subsidies that would violate international trade agreements.
Ex-Im President Fred Hochberg, after a June event at the Center for American Progress, said his agency is trying to figure out if it can subsidize domestic sales even when not competing against excessive foreign subsidies.
Big Business loves all these forays into venture socialism. The Chamber of Commerce lapped up the Troubled Asset Relief Program, the Detroit bailout, the stimulus, the infrastructure bank and Build America Bonds. The chamber also was the key lobbying force to win over Republicans during Ex-Im's reauthorization earlier this year.
Banks, of course, enjoy the opportunity to reap profits while taxpayers bear the risk.
This broad support from the manufacturing and finance sectors makes government underwriting very popular in Washington. Politicians get to steer the flow of money to the sectors they like while making their lobbyist friends and campaign donors happy.
Turning government into a financier has another key political advantage: hiding costs. Fannie and Freddie never cost taxpayers a dime -- until they imploded. Loan guarantees also get favorable treatment in budgets.
And Ex-Im proclaims that it operates "at no cost to the taxpayer" because in recent years fees and interest payments have exceeded the costs of defaults. For this reason, Hochberg snapped at me last month when I used the S-word: "We don't give subsidies," he scolded me, "that's a fact."
Hochberg is wrong -- the World Trade Organization's definition of "subsidy" includes any government loan guarantee that benefits a private company.
But whatever you call this government financing, expect to see more of it soon.
Timothy P. Carney, The Examiner's
senior political columnist, can be contacted at firstname.lastname@example.org. His column appears Monday and Thursday, and his stories and blog posts appear on washingtonexaminer.com.