In my final interview from AFP’s Defending the Dream summit in Dallas, I spoke for a few minutes with Rep. Jeb Hensarling (R-TX), chair of the House Financial Services Committee, about two pressing issues for Congress when it returns to work this week. With the FY2015 budget on the table, a decision has to be made whether to reauthorize the Export-Import Bank, the government-supported exchange that ostensibly assists American companies in selling their products and services abroad. Critics allege that Ex-Im really exists as a crony-capitalism crutch for the biggest corporations, which gives them an unfair competitive advantage over smaller firms and wastes taxpayer money on efforts the big players could afford on their own.
Count Hensarling among the latter. He has pushed back hard against funding Ex-Im this summer, and one of its biggest beneficiaries has pushed back just as hard: Boeing. Hensarling brought up the aerospace giant in this interview. “If you delve in deeply,” Hensarling advised, “what you will find is the US companies who benefit from this tend to be some of the largest, most well-financed companies in America — like Boeing.” Hensarling argued “most of these companies could finance exports on their own,” and should.
Supporters of Ex-Im claim that the bank doesn’t actually cost taxpayers any money, but Hensarling disagrees. Ex-Im uses “funny Washington” accounting, not true-value GAAP accounting, which the CBO says would show that Ex-Im really does cost taxpayers. The real point, according to Hensarling, is that Ex-Im conducts political and ideological lending, not free-market lending. “Ultimately, this is about bureaucrats making decisions about credit allocations,” Hensarling said, “and not free people in a competitive marketplace. They do ideological lending,” Hensarling continued. “I mean, they’ve got a “green” quota. They have a no-coal policy. They have a sub-Sahara African lending mandate. … And then, there’s all the cronyism.” Since 98% of all exports are financed outside Ex-Im, the argument that closing Ex-Im will seriously damage the American economy isn’t serious, Hensarling argued.
The correct way to level the economic playing field is to reform the tax code and enact tort reform. Liability costs are more than twice as high in the US as they are abroad, Hensarling points out, and the corporate tax burden both the highest and most complicated in the world. If the US flattened the tax system and leveled the playing field on liability, whatever perceived need for Ex-Im that exists would evaporate, along with the crony-capitalism leverage that exists right now. That brought up the topic of tax inversions, which have escalated recently with Medtronics and Burger King both escaping the US for tax relief. That’s the right approach, and it’s also “for voters to punish President Obama and his supporters in the next election,” Hensarling said. “For over two hundred years,” he pointed out, “business enterprises have been trying to get to America. … After a few years of Barack Obama, they’re trying to get out. That’s the real tragedy here.”