Bowing to the most conservative fringes of the Republican Party, incoming House Majority Leader Kevin McCarthy announced his intentions Sunday to mothball an 80-year-old federal lending agency that supports U.S. exports.
The Export-Import Bank, which supports loans to exporting small businesses and protects the credit commitments of buyers overseas, is a self-funding agency, owned by taxpayers, that helps numerous large businesses as well as small ones. Its charter expires in September.
Conservatives--including Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee--say the agency wastes taxpayer money and is an example of corporate cronyism. Defenders of the agency, which include the White House and the traditionally right-of-center U.S. Chamber of Commerce, say it creates jobs and helps small businesses conduct business in foreign markets. Closing the bank will harm U.S. exports, they say, particularly as the economy struggles to regain its footing.
McCarthy had this to say about the bank on Sunday, according to the Wall Street Journal:
Asked on Fox News Sunday if he would allow the bank's charter to expire, Mr. McCarthy replied, "Yes, because it's something that the private sector can be able to do."
The California Republican added that "one of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do. That's what the Ex-Im Bank does."
Conservatives have latched on to an alternate financial accounting example from a Congressional Budget Office report released in May, which shows the bank is likely to cost taxpayers $2 billion over the next 10 years, and they are using that accounting scenario to justify closing the bank.
According to the CBO, a perhaps better accounting method, which loops in the advantages the U.S. Treasury has in making loans, forecasts the agency will be in the black $14 billion over the next ten years.
Shutting the bank down, observers say, will do extensive damage to the trade competitiveness of all U.S. companies, which compete globally against companies that rely on similar supports. The Export-Import Bank of China, for example, is one of three government-chartered banks in China with similar trade objectives, which collectively support 11 times as much trade financing as the U.S.
According to the U.S. Chamber of Commerce:
Small businesses account for 87 percent of Ex-Im's transactions; further, these small business transaction figures do not include the tens of thousands of small and medium-sized businesses that supply goods and services to large exporters. In FY 2011, Ex-Im provided more than $6 billion in financing and insurance for U.S. small businesses--an increase of nearly 90 percent since FY 2008. Ex-Im has set the goal of providing $9 billion in annual small-business export financing and adding 5,000 new small businesses to its portfolio by 2015.
McCarthy's stance is in marked contrast to outgoing Majority Leader Eric Cantor, who lobbied extensively to keep the bank up and running in 2012, the last time its charter came up for review. At that time, McCarthy joined 147 Republicans to reauthorize the bank's charter.
In a White House briefing on Monday, Press Secretary Josh Earnest said the White House favors reauthorization of the bank's charter, and noted that Ex-Im has supported 1.2 million jobs in the U.S. and approved 3,413 transactions for small businesses in 2013, helping them enter new markets.
The bank also provides substantial assistance to large companies such as Boeing and Caterpillar.