Keith Hennessey was director of the National Economic Council in George W. Bush's second term. He was also a top GOP Hill aide for years. He's no flame-throwing Tea Partier. His resume is thoroughly establishment Republican. But he's also smart, serious, and honest about how federal policy affects the U.S. economy. And today Hennessey writes: "Export subsidies should be eliminated and the Ex-Im Bank should be killed. Export credit finance should be done, without subsidies, by private markets."
His argument is crystal clear and, in my view, devastating. In short, he argues that U.S. export subsidies help the exporter and the country to which the export goes, while hurting the U.S. economy as a whole. "There’s a difference between what’s good for America and what’s good for one firm in America."
Some important writers and public figures who take economics seriously have flirted with defending the Export-Import Bank, whose charter expires this fall. (I'm thinking of Joe Weisenthal at the Business Insider among others.) They should all click on Hennessey's piece, which is a joy to read.
If you take economics seriously, you should also read my American Enterprise Institute colleague, economist Michael Strain. Strain writes:
Some argue that the bank creates jobs by gaining more customers for export-based American firms. The case for this claim is weak. The trade deficit and export-based jobs are determined by the savings and investment behavior of American households, firms and the government, and not by trade policy in general, or export subsidies specifically.
Ultimately the argument for Ex-Im is not an economic one, but a political one:
The subsidies allow politicians to take credit for some corporate revenue, and thus some jobs. Those subsidized deals replace other deals, which would also generate jobs and revenue. But politicians wouldn't be able to take credit for these ones!
It's becoming harder and harder for serious people to support Ex-Im.