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Caterpillar Rebounds: No Need to Reauthorize Ex-Im After All
Despite our fragile economic recovery, Caterpillar, maker of ubiquitous yellow construction equipment, is doing better than ever!
Caterpillar has money to spend. The company reports first quarter earnings on April 25, with analysts expecting $2 billion of profit on $16 billion in sales, or a 47 percent increase in earnings over the entire course of 2009. Revenue this year is expected to top $71 billion, which would be $20 billion more than the company reaped in 2008.
"We came out of the recession much stronger and faster than expected," Caterpillar Chief Executive Doug Oberhelman said in a company report in March. "I'm not one for passing up sales, so we really had to ramp up production quickly."
Key to this optimism is Caterpillar's record order backlog of $30 billion, three times higher than it was in 2009. Some customers will not get trucks they have ordered until as late as 2014.
To anyone paying attention to the Export-Import Bank (Ex-Im) reauthorization debate, it’s easy to see how this could come as a surprise. Fans of the bank go on at length about how Ex-Im helps small businesses, businesses that wouldn’t be able to sell things if it weren’t for the bank – the way they go on, one would expect trade and capitalism as we know it to collapse without their loans.
So what is so surprising about Caterpillar’s recent success? Caterpillar is one of the Ex-Im’s largest beneficiaries. In fact, it ranks in the top 10 largest recipients of Ex-Im and taxpayer largess with $453,897,359.95 in total disbursements. Though to hear Ex-Im defenders, it would be easy to think that Ex-Im’s customers would go under without the bank, not that Ex-Im funds have contributed to less than one percent of Caterpillar’s expected revenue this year.
Remind me again why the government should be giving handouts to private businesses in this way?
A closer look at Caterpillar’s neighbors in the top dollar ranks doesn’t answer where Congress has the authority to be doing this – but it does explain why these companies got such big bucks and a big part of why Ex-Im continues to operate.
Alongside Caterpillar are companies like John Deere ($544,452,847.89 in Ex-Im disbursements), Ford ($500,000,000.00), and GE ($213,352,417.29). Like Caterpillar, all are well known for their cronyism and rent-seeking tactics (though, to Ford’s credit they did resist the siren song of the Auto Bailout.) At one time, they were all members of USCAP, the United States Climate Action Partnership – a big business/big government partnership that lobbies for cap and trade. Caterpillar, John Deere, and Ford all left USCAP, only when the policies the group was advocating for became policies that might hurt their bottom line. GE, the company of Obama-BFF Jeffrey Immelt, is still a proud member because their profits would skyrocket when customers are forced to buy their expensive “green” products.
It is also notable that two of the biggest advocates for Ex-Im, the Chamber of Commerce and National Association of Manufacturers, have board members that also sit on the boards of or work for Caterpillar, GE, Ford, and Boeing. Though not a member of USCAP, Boeing is the single largest recipient of Ex-Im funds with total disbursements approaching $30 billion, and received more than 40% of total Ex-Im financing in 2010. It probably doesn’t hurt that Boeing CEO Jim McNerney “chairs the president’s Export Council.” Or that “Former White House chief of staff Bill Daley served on Boeing’s board of directors…”
And that’s not the end of the crony capitalism. The Washington Free Beacon reports that the bank Candidate Obama said was “corporate welfare” is “run by political donors for the benefit of political donors.”
The bank’s board of directors—appointed by the president and approved by the Senate—is stocked with large political donors and campaign bundlers.
Ex-Im Bank chairman and president Fred P. Hochberg, for example, has personally given more than $100,000 to Democratic candidates and committees since 2007, including almost $10,000 to President Obama.
That is on top of the money he bundled for the Obama campaign in 2008—between $100,000 and $200,000.
Vice chair Wanda Felton has given more than $9,000 to Democrats since 2007, nearly all of which went to the Obama campaign.
They are joined by ex officio members Ron Kirk, the president’s trade representative, and John Bryson, who Obama recently appointed Secretary of Commerce.
Kirk bundled between $50,000 and $100,000 for Obama in 2008, and personally contributed more than $7,000 to the president’s campaign.
With new examples emerging weekly of taxpayer dollars wasted on bad bets like Solyndra and co., or used to bailout private corporations and homeowners, or to shore up Fannie Mae and Freddie Mac (two entities that, like Ex-Im, were supposedly independent, self-funding, and no risk to taxpayers), it is difficult to see why anyone in Congress would continue to abuse their responsibility towards taxpayers and continue to expose our hard earned dollars to increasing amounts of risk, especially in light of the fact that the companies who receive the most are exactly the companies that don’t need cheap government loans and loan guarantees.
These are resources that should be provided by private banks and institutions, not the government. And if the loans made by Ex-Im are as profitable and safe as proponents claim, there is no reason (other than the fact that Ex-Im distorts the marketplace and they might not be able to compete with Washington’s cut-rate cash) why private investors wouldn’t be thrilled to make the same kind of proceeds.
As frustrating as it is, in the face of so many bad examples and flagrant corporate welfare, there are still those in Congress, people who should know better and who claim to stand for limited government, that are still fighting for Ex-Im to be reauthorized. Last week, RedState.com revealed that Majority Leader Eric Cantor is pushing a deal to re-up Ex-Im:
Roll Call is reporting that Eric Cantor is negotiating with Steny Hoyer in an effort to reauthorize the Export-Import Bank, which is set to expire May 31. What’s worse is that GOP leadership is seeking Democrat support for a “compromise” to circumvent the lonely 50-70 Republicans who might block the reauthorization:
The finely calibrated deal under discussion, as described by lobbyists and aides working on the issue, would grab enough Democratic votes to overcome a bloc of 50 to 70 Republicans who strongly oppose reauthorizing the bank’s lending authority. Such a result would signal at least an appearance of centrism.
“We are working to formulate a bipartisan bill to reauthorize the Ex-Im Bank that includes needed reforms and accountability measures,” Cantor spokeswoman Laena Fallon said.
Even worse, the article goes on to state that a group of RSC members, members of the conservative Republican Study committee, are “preparing a letter supporting the bank’s reauthorization.”
It is no coincidence, that after leading a vocal outcry against Ex-Im, Delta is one of the latest recipients of Ex-Im subsidies. One can only imagine what Ex-Im and its allies have offered these others for their support.
Still, not all in Congress are so easily bought. In the House, Congressmen Amash and Flake, and in the Senate, Senator Paul, are offering “Terminate Ex-Im” legislation that provides a dignified death to an institution that has overstayed its welcome. These legislators, and those that side with them, should be applauded for their leadership on this issue – especially when even their erstwhile allies are undermining them. All three are 2011 NTU Taxpayers’ Friend Award winners and it is clear they deserve this title.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Paul Ryan on Taxes, Growth, and Obama Budget
Only $780 Billion
From the CBO Director's Blog: "The federal government incurred a budget deficit of almost $780 billion in the first half of fiscal year 2012...." The good news, if this can be viewed as such, is that the deficit is $53 billion less than it was at this point last year. It's too bad that the deficit is still projected to exceed $1.2 trillion for the entire fiscal year.0 Comments | Post a Comment | Sign up for NTU Action Alerts
Look Maryland, No Tax Hikes! Virginia Shows How It Can Be Done
This week, Virginia gives preliminary approval to a new budget proposal absent of major tax hikes and free of most gimmicks. Yet, neighboring Maryland is seeking another round of record-setting, job-killing tax hikes.
It is an old story, but not a good one for taxpayers, as the Maryland State Senate and Governor O’Malley continue to mislead citizens by claiming tax hikes offer the only path to a balanced budget. A familiar refrain, reminiscent of the talk in states like Illinois and California, that have forsaken any shred of budgetary discipline.
Maryland continues to risk going down this economically damaging tax and spend path. Indeed, Virginia was tempted to take this direction as well, but its leaders chose a different approach. It may not be perfect, but promises a more prosperous destination for its citizens.
Some stark examples of how Maryland and Virginia's policy differences have impacted both states:
Virginia lawmakers deserve praise for making the right decisions on their budget. On the other side of the border, taxpayers and businesses must keep fighting to prevent Maryland politicians from perhaps permanently crippling their economy.0 Comments | Post a Comment | Sign up for NTU Action Alerts
U.S. Exports to China Up Despite Dwindling Ex-Im Bank Funds
Knowing that the Export-Import Bank (Ex-Im) will reach its $100 billion lending cap in the near future has sent defenders of the corporate welfare institution into a tizzy. Yet, despite worries that trade and perhaps even capitalism will grind to a complete halt, trade has continued to flourish. The Washington Post reports that “American exports to China have increased by 468 percent since 2001, when the country joined the World Trade Organization, and are up by nearly 50 percent since 2008.”
Surely, these amazing numbers are the product of our government’s “lender of last resort” and the taxpayer backed dollars we loan to businesses that were unable to get private funding?
Sadly, for those who are pushing reauthorization, no.
China imported more soybeans from the U.S. because people’s living standard has improved and they need more nutritious food,” said Zheng Fengtian, a professor of agriculture and rural development at Beijing’s Renmin University. Importing soybeans “satisfies people’s needs for meat, eggs and milk,” he said.
The effects of China’s newfound wealth and tastes are showing up elsewhere in the food business, to the benefit of American exporters. For the first three quarters of 2011, the Agriculture Department saw increases in exports to China in four categories: snack foods, pork, dairy products, and beer and wine.
“You’re seeing the impact of the economic growth in China that has brought much of the population into that middle-income consuming status,” said Scott Sindelar, Agriculture Department consul at the U.S. Embassy in Beijing. “It’s the growing population of middle-income consumers who are changing their food preferences and moving more and more to a meat diet.”
Total U.S. exports in 2011 came to $2.1 trillion. During the same year, Ex-Im approved $32.7 billion in loans. Though these are both HUGE numbers, when you do the math, Ex-Im rates just over one and a half percent of those exports and its impact is negligible. What is making an impact, however, are free markets – simply people with more money with the ability to buy more new things. The markets could always be freer of course, but it’s hard to see how a government entity here is responsible for more consumers in another country.
NTU sent an open letter to Congress last week urging legislators not to reauthorize more wasteful spending on Ex-Im. And for more, excellent, information, I urge you to read Cato’s Sallie James on the Ex-Im Bank here.0 Comments | Post a Comment | Sign up for NTU Action Alerts
*Important note: NTU has not endorsed and will not be endorsing any Presidential candidate, nor is this post intended to suggest support or opposition for any Presidential candidate.*
There's been a lot of attention paid to NTU's annual Rating of Congress recently with regard to the Republican Presidential candidates. Since 1979, NTU has performed an annual Rating of Congress where we look at every vote on tax and fiscal policy, weight it from 1 to 100 based on importance, and calculate a percentage score indicating a Member's support for limited government (We did ratings before 1979 too but used a "key vote" system that's not directly comparable to our modern Rating). You can look at the entire record post-1992 (the year we began issuing letter grades) on our website, and our 2011 analysis will be available in a few weeks.
To clarify the record given the recent coverage, we released this statement yesterday where we published the entire Rating history for Rick Santorum, Ron Paul, and Newt Gingrich going back to 1979.
In last night's debate, Rick Santorum cited NTU in an exchange with Ron Paul...
"Ron, The Weekly Standard just did a review, looking at the National Taxpayers Union, I think, Citizens Against Government Waste, and they measured me up against the other 50 senators who were serving when I did and they said that I was the most fiscally conservative senator in the Congress in the -- in the 12 years that I was there.
The analysis to which Santorum is referring was performed by Jeffrey Anderson, a writer for the conservative Weekly Standard. Anderson did a couple of interesting things with the data, some of which I think are insightful and some of which I think are misguided. I'll try to lay my thoughts out in detail here, but it would really behoove you to go read his piece first for reference.
The first thing Anderson did was to confine his comparison of Santorum only to other Senators that served the entirety of his twelve year tenure in the Senate (from 1995 to 2006). While I suppose he would say he was trying to compare apples to apples, I think the end result is a bit of data cherry-picking which paints Santorum in a more positive light than would otherwise be the case. This restriction necessarily compares Santorum only to long-serving Senators, many of whom (like Robert Byrd or Daniel Akaka) had decidedly poor records based on NTU's metrics.
Anderson also converted each Senator's letter grade to a "grade point average," not unlike that which terrified you during your high school days. Anderson's conversion yielded a GPA of 3.66 on a 4-point scale for Santorum, a result which sounds quite good to anyone who remembers college applications. The problem with this is that it converts a short-hand measurement intended to give readers a general sense of a Senator's voting record to a precise number when our analysis already has precise numbers that do a better job. For example, Santorum's lifetime average score out of a maximum of 100% was 75.2%, including his House and Senate years. His Senate-only average was about 77.7%.
Another very instructive metric that doesn't garner quite enough attention, in my view, is the average rank. In addition to letter grades and percentage scores, we indicate how a Member compared to his or her peers by including their rank within the Chamber. To illustrate how useful it can be, look at Santorum's last year in the Senate, 2006. He received a grade of B+ and a score of 80%, but how did that compare with his peers? Well, it yielded a rank of 27th out of 100 Senators, meaning that 26 Senators had more conservative voting records that year and 72 had less conservative voting records. Santorum's average rank in the Senate was 19.5, which reflects a decent record (after all, he never received a grade worse than a B) but also one with a fair amount of variance (he ranked as high as 3rd overall in 2002 and as low as 33rd overall in 1999). Perhaps I'm biased because I work on the Rating, but I think these numbers are more instructive than the converted short-hand GPA from Anderson's analysis.
Beyond these quirks, Anderson actually did something quite interesting in comparing Santorum's voting record to how conservative (or not conservative, in this case) his state was...
"Based on how each state voted in the three presidential elections over that period (1996, 2000, and 2004), nearly two-thirds of senators represented states that were to the right of Pennsylvania. In those three presidential elections, Pennsylvania was, on average, 3 points to the left of the nation as a whole. Pennsylvanians backed the Democratic presidential nominee each time, while the nation as a whole chose the Republican in two out of three contests.
Among the roughly one-third of senators (18 out of 50) who represented states that — based on this measure — were at least as far to the left as Pennsylvania, Santorum was the most fiscally conservative. Even more telling was the canyon between him and the rest. After Santorum’s overall 3.66 GPA, the runner-up GPA among this group was 2.07, registered by Olympia Snowe (R., Maine). Arlen Specter, Santorum’s fellow Pennsylvania Republican, was next, with a GPA of 1.98. The average GPA among senators who represented states at least as far left as Pennsylvania was 0.52 — or barely a D-.
But Santorum also crushed the senators in the other states. Those 32 senators, representing states that on average were 16 points to the right of Pennsylvania in the presidential elections, had an average GPA of 2.35 — a C+."
This is a rather novel way to look at things, and one I'd admit hadn't really occurred to me before. It is, of course, true that a Republican Senator from Utah can "afford" to vote in a much more conservative manner than a Republican Senator from Massachusetts and still keep his or her job. The cynic in me decries the fact that politicians test the winds before casting votes, but it is an undeniable fact of life and it manifests itself time and again in Congress.
While I've spent most of this post talking about Rick Santorum, I'd be remiss if I didn't mention Ron Paul, with whom Santorum had the debate exchange. On our Congressional Rating, Ron Paul is almost without peer. His lifetime average is over 90%, he has snagged the top spot four times, ranked 2nd overall seven times and has never ranked lower than 10th overall in the House. In other words, in his "worst" year on our Rating, he still had a more fiscally conservative voting record than 425 out of 435 Representatives. I haven't done any in-depth analysis on this question, but the only Members I can think of that could claim to equal his performance would be Jeff Flake (92.4% lifetime average, 1st overall eight years in a row, never lower than 2nd overall) and Jim Sensenbrenner (85.9% lifetime average, 1st overall twice, 2nd overall four times, never lower than 13th overall).
The only issues I can think of on which Ron Paul might have harmed (obviously only by a very small amount) his Rating would be free trade agreements (which he generally votes against and NTU supports) and the myriad earmark elimination amendments that Jeff Flake carried from 2006-2009 (which NTU supported and he generally voted against). But on the whole, his record is exemplary.
Hopefully this is helpful in adding to the debate, and stay tuned for our 2011 Congressional Rating release in a few weeks.3 Comments | Post a Comment | Sign up for NTU Action Alerts
Today, the Senate Finance Committee is marking up their transportation bill with an eye toward adding billions in tax increases to cover the overspending in the bill. More spending, more tax hikes to pay for it. Stop me if you've heard this before. But there are two proposals in particular that gave me a little bit of policy deja vu.
First, the so-called "Chairman's mark" includes a $3 billion retroactive tax increase targeting the "carrying forward" of credits claimed back in 2009. You might remember 2009 as the year before the year before this year. The halcyon days when we passed a "stimulus" bill that was going to help our economy boom by 2012. The optimistic times when we could totally afford a trillion-dollar government-run health care program and our debt was "only" $10-11 trillion (as opposed to $15 trillion and counting today). Some on the Senate Finance Committee apparently would like to relitigate tax policy from that wonderful era in American history and enact a retroactive tax hike.
Now, it should be noted that the two credits they're targeting (the alternative fuel mixture credit and the cellulosic biofuel producer credit) are not ideal tax policies by any stretch of the imagination. Particularly the alternative fuel credit, given that it's "refundable" and thus acts like government spending rather than simple tax reduction. A smart tax code wouldn't include either of these policies but would levy low, consistent taxes across the board for all types of fuels and producers. But enacting retroactive tax increases is a much more egregious violation of principles of sound tax policy than either of those dumb credits.
The second effort, a proposed amendment to the Chairman's mark from Senator Robert Menendez (D-NJ), would target the oil and gas industry for punitive tax treatment by eliminating provisions like the Section 199 manufacturer's deduction or the "dual capacity" credit for them alone. If we've written it once, we've written it a hundred times: singling out oil and gas companies for higher taxes is bad tax policy and it's bad energy policy. Thankfully, the Congress has thus far largely agreed with us as the dozens of attempts in recent years to impose Menendez-like tax increases have all failed at one point in the process or another.
The Senate Finance Committee will be taking up these issues this afternoon and we hope they focus their efforts on reducing wasteful spending and not on retroactive tax hikes or tired attempts to punish an unloved industry.0 Comments | Post a Comment | Sign up for NTU Action Alerts
FAA Conference Report: Positive Steps, Missed Opportunities
Later today the Senate will vote on the Conference Report on the Federal Aviation Administration (FAA) Reauthorization Act. Although the bill takes many positive steps forward, it ultimately missed several opportunities for savings and reforms that fiscal conservatives had sought.
Since 2007 the FAA has been lurching from short-term extension to short-term extension (23 in all), which has become a serious logistical impediment for the aviation sector’s attempt to modernize and grow. The Conference Report would reauthorize FAA operations and programs for four years, thus creating a more stable funding path for the agency and predictability for the aviation sector. Moreover, it does so without worsening the already onerous tax burden on air travel. Given that consumers can often face a higher effective tax rate on their airline tickets than they do on their 1040 tax returns, it’s too bad Congress couldn’t go one step further and actually provide relief from this heavy tax load.
The bill makes incremental (and in some cases solid) progress on a number of other issues. Although funding for the wasteful Essential Air Service has not been eliminated, the modest eligibility restrictions in the legislation could provide a starting point for deeper reforms. Language was also included to increase airports’ ability to hire private security screeners in place of Transportation Security Administration (TSA) workers. Furthermore, the package would make improvements to a National Mediation Board rule so as to better balance labor organizations’ attempts to unionize a workplace with the rights of workers to not participate in union activity.
Despite this progress, the Conference Report’s elevated authorization levels remain a major concern. NTU has previously expressed its support for the House-passed FAA Reauthorization Bill, which would have funded the FAA at 2008 levels. By contrast the Conference Report would extend FAA funding at inflated 2011 levels – a $3.8 billion increase. At a time when taxpayers are expecting government agencies to do more with less, the Conference Report could have been more aggressive at restraining expenditures and reinforcing a private sector-driven model that allows our aviation industry to more effectively innovate and evolve. Bottom line: even as lawmakers line up to vote for this compromise legislation, Congress could have done – and in the near future will need to do – more to ensure aviation policy is on a fiscally and economically desirable flight path.1 Comments | Post a Comment | Sign up for NTU Action Alerts
So President Obama's 2012 State of the Union is over now and everybody's analyzing the details of what he said (including our NTU Foundation, where researchers are working on figuring out exactly how much his proposals would cost for taxpayers). For someone who claims to be laser-focused on economic growth and job creation, we couldn't help but notice that he left a few things out that SHOULD have been in the speech. For example...
The Keystone XL pipeline
The President conveniently neglected to mention that his Administration just last week denied a permit to build the Keystone XL pipeline, a project to safely deliver Canadian energy resources to the American market. Construction of Keystone XL could have generated as many as 20,000 jobs while bringing much-needed energy to a hungry domestic market that has faced obstacle after obstacle from this Administration. We've been calling for its approval since last summer, but unfortunately for taxpayers and consumers, the President ignored those calls and put the kibosh on the project.
Unlocking valuable spectrum
Cost-free to taxpayers, beneficial in reducing our staggering deficit, and absolutely vital to the continued growth and innovation of technology and the internet. What no-brainer policy am I talking about? Competitive spectrum auctions. Did the President talk about it last night? Of course not! There have been rumblings from both sides of Capitol Hill and both sides of the aisle about spectrum for some time, but some Presidential leadership could work wonders in ushering a win-win policy to completion.
Allowing businesses to...you know, conduct their business
This one's sort of a personal pet-peeve, but of course the President failed to mention the meddling in which his Administration has engaged/will engage in private business operations. Things like the AT&T - T-Mobile merger (which NTU supported) that his Justice Department and FCC squashed last month. Or the ongoing FTC antitrust investigation into Google, a company which charges its users exactly $0 to access its search engine and other services. Or the ongoing process of the Express Scripts - Medco Health Solutions merger. Keeping the federal government out of the way, by and large, is the best way to foster economic growth, but this Administration has time and again shown a tendency towards populist intervention that is unhelpful to say the least.
An energy strategy not centered on subsidies
The President did talk about energy last night, and some of it was commendable. He talked about opening up some more areas under federal control to energy exploration, though I'll await further details before judging. But most of what he said focues on how we should be showering even MORE subsidies on energy technologies that are to the liking of Barack Obama (namely: solar, wind, anything vaguely "green" or "renewable"). And of course he did it while taking swipes at the "Big Evil Oil Companies" he so frequently derides. Funny side note: the biggest of the oil companies that are the focus on Obama's vitriol was just passed as the most valuable company in the U.S. by Apple. The wife of the late Steve Jobs sat beside the First Lady during the speech and got a specific shout-out (a positive one!). I guess he doesn't mind that they're "the 1%" of companies and that they're sitting on tens of billions in largely idle cash reserves, another practice he has criticized elsewhere.
Any serious discussion of bipartisan spending reductions
The President made some vague remarks about "working together" in a bipartisan fashion, along with some passing comments about reducing waste in the federal budget. But he didn't come anywhere close to making it a serious and substantive part of his speech. Too bad. We already worked with the liberal U.S. Public Interest Research Group to give him a $1 trillion head start on spending cuts that left and right could agree upon and stand ready to assist him. Let's just say I'm not eagerly awaiting his call.
What else should the President have covered if he were serious about economic growth and job creation?1 Comments | Post a Comment | Sign up for NTU Action Alerts
Laudable Goals but Lack of Facts Hamper Obama's State of the Union
“A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we're in control of our own energy, and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off, and responsibility is rewarded.”
That’s the vision that President Obama laid out in his State of the Union speech. What he didn’t was any path to achieve those goals.
When it comes to education, the Department of Education’s spending is at an all-time high. Since fiscal year 2000 it has grown from $29.4 billion to $64.1 billion in 2010. But our enormous investment has seen little return. Academic achievement levels have stayed flat. What we need is not more spending, not more programs, but smarter spending and careful reforms.
Similarly, in manufacturing and energy the answer is not more government spending, but instead, finding clearing the way for private sector investment.
We’ve already seen that Washington makes a terrible investor. Projects like Solyndra, Fisker Automotive, and countless other green initiatives were taxpayer-funded gambles that came up snake eyes. Rather than throw good money after bad chasing some campaign promise, Washington should lower corporate tax rates (which will soon become the highest in the world), pass legislation to remove the red-tape preventing entrepreneurs from accessing the capital necessary to get their ideas off the ground, and clear out the underbrush of regulations that is stifling private sector growth.0 Comments | Post a Comment | Sign up for NTU Action Alerts