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Home Publications Blogs Beat the Press The Export-Import Banks Claims Need Not be Taken at Face Value

The Export-Import Banks Claims Need Not be Taken at Face Value

Tuesday, 26 August 2014 04:01

A New York Times article on the role that the debate over the Export-Import Bank is playing in the North Carolina senate race told readers that the bank:

"says it makes a profit and supported more than 200,000 jobs with $37.4 billion in transactions last year."

It would have been worth including the views of someone other than the bank who could have put these claims in context. If companies did not have access to the Bank's loans at below market interest rates, most of these sales would still take place. The companies would just have lower profit margins. As a result, the number of jobs that would be lost is a fraction of the number cited here.

Furthermore, in standard models it would be expected that with fewer exports subsidized by the bank, the dollar would fall in value, which would make other exports more profitable. The net effect on jobs and GDP would be close to zero and quite possibly positive. It would be possible to construct the exact same story about any industry that is subsidized by the government with loans offered at below market interest rates.  

Comments (1)Add Comment
Getting the MNCs Off the Unemployment Couch and Back to Work
written by Last Mover, August 26, 2014 6:10

Exactly. As any economist knows, NC should eliminate the Ex-Im bank subsidies from MNCs the same way it did for unemployed freeloaders sitting on the couch waiting for unemployment compensation rather than looking for work.

Forcing freeloaders back into the labor to work is no different than forcing MNCs to accept less for the same sales that would have occurred anyway due to inelastic demand.

In fact export-import sales will actually increase the same way output increased when the unemployment rate in NC went down as more available workers jumped eagerly to fill the empty slots begging to produce added value from the unfilled demand that was always there.

Therefore the 200k jobs created by the Ex-Im bank is actually a gross underestimate of true potential once more freeloading MNCs are forced off the couch and back to work.

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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.