By Eric Peterson
Bipartisanship is often in short supply in the nation’s capital – but when it comes to corporate cronyism, lawmakers on both sides of the aisle have been working together for decades to funnel taxpayer backed benefits to foreign companies and multi-national corporations through a little-known institution called the Export-Import Bank.
Since 1996 the Export-Import (Ex-Im) Bank has doled out more than $280 billion in taxpayer goodies, including billions to some less-than-friendly countries like China ($7.7 billion), Russia ($3.3 billion), Venezuela ($2.4 billion) and Saudi Arabia ($10.4 billion). In 2013, the bank gave out $27.3 billion, all for corporate interests under the pretense of supporting jobs. This generosity flows to big companies – both here and abroad – and comes courtesy of the American taxpayer.
The Export-Import Bank disperses this largesse in two forms: loans and loan guarantees. The loans awarded bear low interest rates and come with charitable repayment schedules. The loan guarantees are far more perilous for the taxpayer, as the federal government assumes the default risk of the loan. If the company fails to repay the loan, they are bailed out by the taxpayer. According to Los Angeles Times, the Export-Import Bank previously sought a $3 billion bailout in 1987.
Although the average American doesn’t benefit from the Ex-Im Bank, some of the world’s largest companies do. These corporations profit as foreign businesses receive taxpayer backed loans to purchase their products. Many of these domestic companies often boast billions of dollars in profit and are hardly in need of a handout. Many foreign conglomerates receiving these publicly funded windfalls are state-run corporations, such as Pemex, the behemoth Mexican state oil company with a total asset worth of more than $400 billion.
According to Ex-Im Bank’s 2013 annual report, Pemex received over $1.5 billion in taxpayer-backed loans to purchase “Equipment and Services for Oil and Gas Field Projects.” While that may make economic sense to the international finance bureaucrats who underwrote the loan, it no doubt leaves many Americans scratching their heads. After all, if the Mexican government isn’t willing to risk their taxpayers’ dollars on equipment for their projects, why is our government so eager to sign the check?
The world’s business elite also love Export-Import Bank loan guarantees. The richest person in Australia, Gina Rinehart (worth an estimated $17.7 Billion), recently secured almost $700 million in loans from the Ex-Im bank (incidentally, Australia – not exactly what most Americans would describe as a “developing country” has received more than $5 billion from Ex-Im over the last two decades). Hoping for a similar arrangement, Russian billionaire Gennady Timchenko hired a high-powered DC lobbying firm to lock up EX-IM funding, spending $50,000 to obtain loans to purchase luxury jets. That deal fell through, but the incentive remains for billionaires to shift risk to the taxpayers.
The companies benefiting the most from the Ex-Im Bank are some of America’s—and the world’s—strongest businesses. Rather than exporting tax dollars to overseas companies in the hopes that they will import more U.S. products, government should concentrate its efforts on removing harmful barriers to competition, destructive domestic regulations and tax provisions that inhibit the ability of businesses to grow and succeed.