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Home Publications Blogs Beat the Press More Fun and Games With Export-Import Bank

More Fun and Games With Export-Import Bank

Tuesday, 29 July 2014 04:12

It is great fun watching the establishment get so upset over the possibility that Boeings' the Export-Import Bank may not be reauthorized to issue more loans. Just to remind everyone, the Export-Import Bank issues the overwhelming majority of its loans and guarantees to benefit a small number of huge corporations. It is a straightforward subsidy to these companies, giving them loans at below market interest rates. (Yes, they are almost all paid back. This means that our financial wizards have discovered arbitrage -- the government borrows at a lower rate than anyone else so it can show a profit any time it lends to anyone else by splitting the difference in borrowing costs.)

Anyhow, today's fun is a column in the NYT (major media outlets have an open door policy to anyone who wants to argue to preserve the subsidies) by William Brock, a former senator and trade representative under President Reagan. Brock tackles head on the argument made by folks like me that only a small portion of our exports are subsidized by the bank:

"Opponents of the bank say that it supports just 2 percent of all exports. Still, 2 percent amounts to $37.4 billion of American products made by American workers in American plants. That translates into tens of thousands of jobs from every state in the country."

Wow, that's pretty compelling. But wait, suppose we ended the subsidies to Boeing. Would it never sell another plane abroad?

Fans of economics everywhere know that the end of the Ex-IM subsidies simply means that it would stand to make less money on each plane. For the most part this would be a story of lower profits, but there would be some reduction in exports, probably in the range of 10 to 30 percent of the amount being subsidized. That translates into $3.7 to $11.2 billion in exports that we would lose without the Ex-Im Bank.

Is that a big deal? We can compare this to another export number that has been in the news recently. A new study showed that because of the sanctions against Iran, the United States has lost $175.4 billion in exports since 1995, with the estimated losses coming to $15 billion in 2012, the latest year covered by the study. So the jobs at stake with the Ex-Im Bank are about 75 percent of the number that could be gained if we ended the sanctions against Iran. In other words, if we think the ending of loans from the EX-Im Bank would be a hit to the economy, then we must think the sanctions to Iran are an even bigger hit.

Of course as a practical matter, if we really wanted to boost exports we would go the free market route and push down the value of the dollar against other currencies. That is how economies with a trade deficit, like the United States, are supposed to adjust towards balanced trade in a system of floating exchange rates. However we don't see this adjustment because other governments buy up large amounts of dollars in order to prop up its value and preserve their export markets in the United States.

We could negotiate for a lower valued dollar, but that would hurt the profits of companies like Walmart that have arranged low cost supply chains in the developing world. It would also hurt major manufacturers like Boeing and GE who now do much of their manufacturing overseas.

So, we don't read much in the papers about reducing the value of the dollar. Instead we get an endless drumbeat of news stories and columns about the urgency of preserving the Ex-Im Bank. The public may lack the political power to stop the re-authorization, but we can at least enjoy the show.


Note: It is of course net exports that add jobs, not just exports. (We don't create jobs if we import a car from Mexico and export it to Canada.) In both the case of the Ex-Im Bank and the Iran sanctions there also is a question of imports, which is going unaddressed.


Comments (4)Add Comment
William Brock Wants More WalMart Jobs for the American Middle Class
written by Last Mover, July 29, 2014 6:42


The title of this link is "The Increasing Irrelevance of Corporate Nationality", an excellent summary of how "American" corporations have lost all meaningful economic connections to America.

When William Brock says,
"Opponents of the bank say that it supports just 2 percent of all exports. Still, 2 percent amounts to $37.4 billion of American products made by American workers in American plants. That translates into tens of thousands of jobs from every state in the country."

What is he saying? In effect he is admitting the overwhelming leverage multi-national corporations wield over American employment on a global basis as well as domestically.

The 1%, .1% and .01% really do control it all through this kind of leverage, so high that Brock can correctly assert only 2% of exports from a few large corporations controls $37B of exports produced by Americans.

That would be like WalMart bragging because of its global monopsony market power supply chain it can award superior workers a $.60/hr pay increase and push them into the $9/hr bracket above the average hourly WalMart pay in America.

How insulting, degrading and humiliating does it have to get before the likes of William Brock are outed for who they are - sock puppets for their economic predator masters who never talk about:

Total jobs created/destroyed by MNCs globally;

Total imports and exports by MNCs, including intra-company tranfers to themselves;

Total cost, revenue, profits, and tax revenue incurred/avoided associated with MNCs.

Net impact of above on America.

The obvious question for William Brock is, how much larger could that $37B and associated American jobs be had MNCs not pillaged and plundered America to the bone under his oversight?

The answer is likely way too large for his corrupted mind to comprehend, but as any economist or sock puppet knows when issuing propaganda in the opposite direction to support "American" jobs created by "American" corporations, it must be a really, really big number.
Since When Is Boeing an American Company?
written by Larry Signor, July 29, 2014 6:56
...83 of the top 100 publicly traded corporations in the U.S. stash money offshore to dodge tax payments...The report also alleges that Boeing paid a tax rate of just 0.3 percent -- or $13 million in federal taxes on a $4.3 billion dollar profit in 2010 -- due to 42 subsidiaries based in tax havens.

written by Daniel, July 29, 2014 1:31
Love your work, Mr. Baker. Regarding your call for a "lower valued dollar", I'd suggest (in the spirit of Frank Luntz) that you begin calling for a "more competitive dollar". Don't know if it will help any, but I think that Americans like the idea of competitiveness more than they like the idea of a low-value dollar. Just my $0.02...
written by Incubus, succubus, gog and agog, July 30, 2014 6:54
I was thinking that maybe Dean Baker is a sock puppet. The question is if he's the puppet, who is the puppet master pulling the strings?

I think the first thing to do is to round up the usual suspects. The Koch Bros and George Soros come to mind. Hmmm.

Of course, he studied on the East Coast so there is a clear connection to Skull and Bones.

Then again, apparently he's a journalist and I can't think of a more typical cover if you wanted to be accused of espionage. Therefore now we know the truth. He's an undercover agent for the FBI.

Or, perhaps, he works for the Vatican. After all, Baker and Dean are both Catholic names.

At any rate, fascinating.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.