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john e. sununu

The silence is deafening on Ex-Im Bank demise

We’re all familiar with the proverbial question about a tree falling in the forest with no one around: Does it make any noise? But what if a tree actually does fall without making a noise – does anyone notice? Last week’s expiration of the US Export-Import Bank Authorization may soon provide an answer, as rhetorical claims about jobs that supposedly depend on the Ex-Im’s subsidized financing finally confront reality. And should that economic “noise” fail to materialize, the government chartered bank may well go gently into the good night.

For 80 years, Ex-Im has provided easy credit to international customers that purchase big ticket items from American manufacturers. Proponents argue that without this financial backing, multinational firms like Boeing and General Electric would be at a disadvantage when selling products overseas. Critics respond that the bank’s services easily could be replaced by private sector lenders. Equally problematic, the subsidies distort markets and competition. Delta Airlines, for example, notes that the subsidized financing benefits foreign carriers competing head-to-head with Delta for routes around the world.

Authorization expired on June 30, preventing Ex-Im from offering new credits, although guarantees signed before that date will still be honored. Jeffrey Immelt, CEO of General Electric, terms this a “catastrophe.” He should do more math. Ex-Im helps finance less than 2 percent of exports; exports represent just 13 percent of GDP. The resulting impact upon one-tenth of one percent of the economy would be hard to measure for even the most exacting economist. The numbers get even worse for Ex-Im boosters: Both G.E. and Boeing — responsible for more than half of the bank’s activity — have promised to continue extending the financing guarantees using their own balance sheets. So much for that “catastrophe.”

This lack of economic noise bolsters the arguments of Ex-Im opponents led by congressman Jeb Hensarling and Senator Richard Shelby. They sit atop the House and Senate banking committees, and view the bank’s legacy as corporate welfare for the dozen or so firms that constitute roughly 80 percent of the bank’s activity during any given year. In Washington, however, even the most redundant and obsolete programs hang on for generations. For example, the complex federal bureaucracies created in the 1930s to encourage expansion of electrification and wireline telephone service still exist today, despite the fact that electricity and telephone service are available . . . everywhere.

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Democrats, sensing an opportunity to look “pro-business” — as opposed to “pro-market” — have unanimously rushed to support Ex-Im. Along with a handful of sympathetic Republicans in both chambers, they just may have the votes to tack new authorizing language onto the upcoming highway bill. In their opposition, the banking chairmen will find leadership allies in Kevin McCarthy and Steve Scalise, the number two and three ranking Republicans in the House, and they’ll need the help. Letting go of the Ex-Im Bank may be good for markets, but nothing brings politicians together like spending money on roads.

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Should conservatives prevail, it will be a hard-fought victory, albeit a modest one. But that small step could set the stage for bigger things to come. The federal budget is thick with forests of corporate welfare built up over decades. Energy subsidies target ethanol, wind, and fossil fuels. Agriculture supports exist for producers of milk, sugar, and just about every crop imaginable. There’s even a taxpayer-funded office promoting American tourist destinations. Sounds terrific until you consider that most businesses get no such thing — leaving taxpayers and consumers to foot the bill.

When Congress starts acting pro-market instead of pro-business, these programs could finally face honest scrutiny. There will be plenty of political whining, but should these trees ever begin to fall, you’ll be hard pressed to notice.

John E. Sununu, a former Republican senator from New Hampshire, writes regularly for the Globe.

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