| The Honorable Justin AmashUnited States House of RepresentativesWashington, DC 20515 | The Honorable Mike LeeUnited States SenateWashington, DC 20510 |
Dear Congressman Amash and Senator Lee:
On behalf of the 362,000-member National Taxpayers Union (NTU), I am honored to offer our endorsement of your legislation, the Export-Import Bank Termination Act (H.R. 2263 in the House of Representatives and S. 1102 in the Senate). This well-constructed and thoughtful proposal would, within three years of its enactment, phase out the U.S. Export-Import (Ex-Im) Bank and allow for the orderly wind-down of the institution’s obligations after that point.
Members of Congress on both sides of the aisle have already expressed legitimate concerns about Ex-Im’s activities, culminating with provisions in last year’s reauthorization bill requiring the Treasury to report on negotiations with other countries over ending export and aircraft financing subsidies. Unfortunately, these and other well-intentioned directives aimed at transforming Ex-Im’s role cannot serve as a substitute for truly free market-driven export development. H.R. 2263 and S. 1102 would cultivate such an environment at a time when evidence has continued to accumulate about Ex-Im’s potential for financial risks to taxpayers, political malleability (especially with “green energy” projects), and distortion of the private-sector economy.
For one, a Congressional Budget Office study last year warned that accounting rules for federal loan programs generally fail to factor in market risk. This finding casts doubt on the assertion that Ex-Im and other federally chartered schemes operate at no peril to taxpayers (and helps to explain why massive debacles like the failures of Fannie Mae and Freddie Mac can escape proper scrutiny until their onset is imminent). According to a Massachusetts Institute for Technology analysis, applying more accurate “fair value” accounting standards would show that Ex-Im is operating at an annual loss of $200 million. Furthermore, in September of 2012, Ex-Im’s Inspector General uncovered serious deficiencies in the Bank’s risk-management and governance procedures. The Government Accountability Office echoed some of those risk-management issues in a report released in May of this year.
Ironically, for all these shortcomings, Ex-Im’s practices can often appear to enrich admirals of corporate welfare, not empower future captains of industry. As an NTU commentary from December 2012 put it, “In order to keep its portfolio from sagging and putting taxpayers on the hook for future Solyndras, the bank must often invest in large, established firms that are already highly profitable. Over the years this has included firms such as General Electric, Caterpillar, and Dell.” Nowhere is this trend more evident, however, than with the aircraft industry, which in FY 2010 accounted for nearly half of Ex-Im’s exposure. The consequences to our own economy are severe: U.S.-based carriers are put at a competitive disadvantage against foreign airlines that can buy Boeing’s planes at subsidized rates and better terms due to Ex-Im’s largess. Airlines for America asserts that job losses with domestic airlines attributable to Ex-Im policies could be as high as 7,500. Just last week, a federal appeals court ordered Ex-Im to demonstrate that its lending practices toward Air India didn’t harm airlines in the United States – but this limited prospect for relief may be too late in coming.
At a hearing of the House Financial Services Committee earlier this month, Chairman Jeb Hensarling (R-TX) stated that he “could not agree more” with President Obama’s 2008 characterization of Ex-Im as “little more than a fund for corporate welfare.” NTU has long shared these sentiments. Instead of underwriting the ambitions of the politically connected with taxpayer-backed loans, policymakers should concentrate on removing or avoiding government impediments to our nation’s economic prosperity at home and abroad. Reforming the uncompetitive U.S. corporate income tax system, and easing the increasingly difficult-to-bear regulatory burden on businesses, are two important steps toward doing so. Public officials should at the same time oppose other federal supply, demand, or price control schemes that sabotage export opportunities.
Regardless of the additional steps they do decide to take, Members of Congress should be able to agree on swift passage of the Export-Import Bank Termination Act. NTU’s staff and members look forward to building support for this important legislation among your colleagues, and urge all of them to cosponsor H.R. 2263 and S. 1102.
Sincerely,
Pete SeppExecutive Vice President