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When Bipartisanship Is A Dirty Word
In a blog post I wrote about two years ago, I said “Usually when I hear that a policy proposal has bipartisan support, I instinctively check for my wallet.” At that time I was lauding a bipartisan proposal to shut the USDA’s market access program (although it seems that idea didn’t get much traction) under the heading “When Bipartisanship Is Good News.”
I should have trusted my instincts; i.e., that “bipartisanship” is code for either:
(a) “we’ve just renamed a post office”;
(b) “cough up, because we’ve agreed to spend more of your money”;
(c) “brace yourself, because we’ve agreed to violate more of your liberties”; or
(d) both b and c (see, e.g., the Department of Homeland Security).
Last night we were treated to an example of (b), when the U.S. Senate in a 78 to 20 vote elected to follow the House’s lead (330 to 93, in that case) to re-authorize, with a bigger budget, the Export-Import Bank of the United States until 2014. (Please do click on the previous two links to the roll-calls so you can see how your friendly Representative or Senator voted on this taxpayer-funded slush fund for the biggest corporations in America, by the way). The bill will now go to the President for his signature.
Allow me a few comments. First, this is incredibly disappointing. One would think that this is an excellent time to shut down the Ex-Im Bank, what with bailout-fatigue, trillion dollar deficits and all. But this bill “had the backing of business and labor groups,” as this Washington Post article makes clear, and despite all of the rhetoric from both sides, it seems that Congress and the President loves them some special interest group pleadings.
Second, the fairly easily debunked talking points of Ex-Im supporters obviously resonated. Ex-Im Bank president Fred Hochburg (who one can hardly expect to do anything other than protect his job) showed an excellent ear for PR when he said “there are no Democratic or Republican exports. There are exports that create jobs. Good, middle-class jobs.” Exports! Jobs! Middle class! What’s not to love? And in the interest of non-partisanship, here’s a quote from Senator Lindsey Graham (R-SC) in response to the arguments made by what the WaPo article called ”tea party conservatives”:
“I live in the real world and the real world is that these financing mechanisms have to be available to American manufacturers to have a share of the overseas market”
Actually, Senator, I’m glad you raised “the real world”. Because in “the real world” stuff costs money, money that isn’t manna from heaven but taken from other people. And in the real world, regulations or other market interventions distort the economy, reallocating resources from their most productive uses as identified by volunteers putting their own money at risk and towards uses directed by political entities, responding to lobbying and other features of public choice. In the real world, there is nothing special about manufacturing per se, with lots of middle class (or “upper class” jobs, if the class system is something that matters to you) created in the service sector. Also in the real world? Private finance. Lots of it, as you would know if you spoke with any of the folks producing the 98 percent of U.S. exports that don’t rely on Ex-Im.
Third, and this is somewhat parenthetical, not one — NOT ONE — Democrat in either chamber voted against corporate welfare. Interestingly, according to the roll call for the 2002 re-authorization of the Ex-Im Bank, 26 democrats voted against re-authorization 10 years ago. So there was some opposition back when President Bush was in charge, but now that President Obama (as opposed to Candidate ”The Ex-Im Bank is little more than corporate Welfare” Obama) is supportive, apparently taxpayer guarantees for big business are ok. The following Democratic members switched their vote from “Nay” in 2002 to “Yea” (or should that be “Yay!”?) in 2012: Andrews, Baldwin, Conyers, deFazio, Jackson (IL), Kaptur, Matheson, Nadler, Owens, Pallone, Peterson (MN), Stark, and Waters (with Kucinich not voting in 2012, but voted “Nay” in 2002). I’d be curious to hear about what caused the change of heart.
Ex-Im Reauthorization Vote Expected Tomorrow
House legislators have reached a “compromise” deal to reauthorize the Export-Import Bank of the United States until 2014 and at an increased funding level ($120 billion, with a possible increase to $140 billion). The compromise builds on a bill crafted by Rep. Eric Cantor (R-VA) I blogged about in March, but seems to largely be a win for the pro-bank folks judging by the increased funding levels, with the “compromise” part being not much more than pathetic sops to those concerned about the bank’s mission, if not its very existence.
Inside U.S. Trade [$] has more details:
House Republican and Democratic leaders late last week announced that they had a reached a compromise deal to reauthorize the Export-Import Bank through fiscal year 2014 and immediately raise its lending cap to $120 billion, with the possibility of further increases to $140 billion during that period if default rates are kept low and other conditions are met. The House expects to consider the bill on Wednesday (May 9) under suspension of rules, a House GOP aide said.
The bill contains a longer reauthorization, and a higher lending cap, than what was included in an initial draft bill floated by Rep. Eric Cantor (R-VA) in March. That draft bill would have renewed the bank’s charter only through June 2013, and would have raised the lending cap to $113 billion, up from the current level of $100 billion.
At the same time, the compromise bill reflects some of the demands of Cantor and other Republicans who are wary of reauthorizing the activities of a bank they say puts taxpayer money at risk and distorts the free market.
For instance, it conditions further increases in the lending cap, to $140 billion for fiscal year 2014, on the bank maintaining a default rate on outstanding loans that is below two percent and submitting other required reports. It also includes language from Cantor’s draft instructing the president to enter into negotiations with other countries to substantially reduce official export financing in general and for aircraft in particular, with the goal of ultimately eliminating such financing altogether.
Under suspension of rules, which is a procedure typically reserved for non-controversial legislation, debate is limited to 40 minutes and the bill must garner a two-thirds majority to pass.
The article goes on to describe all of the ostensible brakes that the Republican leadership have insisted placing on Ex-Im, but they really amount to the usual Washington ways of pretending they are implementing real reform: calls for the bank to issue business plans, address GAO concerns, be more transparent, etc. Nothing, unfortunately, about changing the accounting rules under which the bank operates let alone setting a path to winding down the bank altogether.
In short, the “compromise” is just fiddling while Washington is awash in red ink, and the federal government encroaches more and more into what should be private markets.
House Republicans—Including ‘Tea Partiers’—Support Ex-Im
A group of 30 House Republicans, including a few members who ran as Tea Partiers according to this article by CQ, have sent a letter to the House Republican leadership calling for the reauthorization of the Export-Import Bank. (I’ve written here and here on why that’s a bad idea.) Their names are right there at the bottom, folks.
The signatories trot out the usual talking points in support of the bank, including the pretty easily debunked line that it “returns money to the U.S. Treasury,” and plenty of mercantalist nonsense. I wonder which part of the limited government, free market philosophy supposedly guiding the Tea Party movement would justify a government agency that acts as financier to some of the largest corporations in America?
Save the EWG Farm Subsidy Database!
When the Environmental Working Group released the 2011 edition of its groundbreaking farm subsidy database, they asked for my comment to use in their press release. I was more than happy to do so, and I had this to say:
I can think of fewer initiatives that have had as big an impact on the American farm subsidy debate as EWG’s database. By shedding light on just who gets these subsidies, how much they get, and where they reside, the EWG has exposed U.S. farm programs for what they are: expensive, outdated, distorting, regressive ways for politicians to shovel money to their powerful special interest friends. When American agriculture is finally free of the shackles of government intervention, it will in large part be thanks to the folks at the Environmental Working Group.
No good deed goes unpunished, of course, and the wonderful work of the EWG has annoyed many in the farm lobby. But it is a crucial part of the farm bill reform effort, not to mention a good way for taxpayers to learn where their money goes. And judging by the bill voted out of the Senate Agriculture Committee yesterday, it seems we’ll need every piece of ammunition available if we are to see any reform to U.S. agricultural policy. The Committee’s bill would end direct cash payments—based on historical production and not linked to current production or prices, and therefore relatively less distorting—but increase the role of subsidized crop insurance that would protect farmers from falls in revenue. (Here’s Chuck Abbott from Reuters with a nice summary).
Adding insult to injury, the fact that farm support seems to be turning towards a greater emphasis on crop insurance is not good news for taxpayers who thinks they have a right to know where their money is going. That’s because the Federal Crop Insurance Act (in SEC. 502. 7 U.S. C. 1502 (c), available here) prohibits the Risk Management Agency of the United States Department of Agriculture from disclosing information about who receives crop insurance subsidies, other than in aggregate form. And a Freedom of Information Act request won’t help, because the FCIA has stated that crop insurance subsidy information is exempted from FOIA provisions (in 5 U.S.C. § 552(b)(3)).
So, in short, the more we move toward crop insurance, the less EWG—and the public—will know about where money is going.
It’s considerable money, by the way: the USDA (i.e., you) spent $7.4 billion on crop insurance subsidies in 2011, plus $1.3 billion in administrative and operating expenses for insurance companies. The federal government pays an average of 62 percent of the total premium costs (up from 37 percent in 2000). The Government Accountability Office released a pretty damning report on crop insurance last month, saying that the RMA doesn’t do enough to prevent fraud and abuse of the system, and calling for cuts to premium subsidies. According to the report (pp. 19-20), one farming business (of course, we don’t know who, thanks to the FCIA) received $1.8 million in premium subsidies in 2010, plus an extra gift from the taxpayer in the form of a $309,000 payment to insurance companies to administer the farm’s insurance policies. Another farmer insured crops in eight counties and received about $1.3 million in premium subsidies. The largest recipient was a corporation that insured nursery crops across three counties for a total of about $2.2 million in premium subsidies and over $800,000 in administrative expense subsidies.
I’ll stop there before I start a riot, and return to my main point, which is this: I suspect my opinion on the proper role of government differs from that of many staff at the EWG, and I disagree with parts of the platform they are proposing for the upcoming farm bill. But I’ve nothing but respect for the good folks working there, and nothing but profound admiration for the fine work they’ve done. If we are to see any change in agricultural policy in this country, the EWG must be allowed to continue that work, and to have access to the information that enables it. It’s nothing short of shameful that politicians want to limit that access.
The Washington Post Pulls Its Punch
The Washington Post editorial board yesterday weighed in on the Ex-Im Bank’s controversial reauthorization. After listing quite comprehensively the bank’s many failings and the spurious grounds for its very existence, the WaPo courageously comes down on the side of “Everyone else does it” (yes, that is a direct quote). It all raises the question: if the Ex-Im bank is motivated by poor policy and poor economics, then why should we wait for other governments to stop subsidising export credits before we do the same? (Don Boudreaux comes to a similar, if more colourfully worded, conclusion here.)
In other news, and as the WaPo editorial alludes to, a Delta airlines subsidiary will benefit from a recently-approved loan guarantee from Ex-Im to a Brazilian airline, to finance the shipping of their aircraft engines to Atlanta for repair. Will this in any way affect Delta’s erstwhile opposition to Ex-Im activities (on the grounds they harm jobs in American airline services)? Time will tell, but Delta is unmollified, according to this recent article in Politico.
Ex-Im Shenanigans, cont’d
Kudos to Tim Carney, who has a great piece in the Washington Examiner today highlighting some of the politics and policy substance behind the fight over reauthorisation of the Ex-Im Bank. It’s gratifying to see a journalist take a stand against outrageous corporate welfare. If only it were more common (I’m looking at you, New York “the bank is self-financing” Times).
My new paper on Ex-Im, in which I expand on this blog post from a few weeks ago, was released yesterday. You’ll find even more evidence –as if it were needed — of why the Ex-Im Bank, rubber stamped through Congress by both parties on behalf of their rent-seeking friends for almost 80 years, has got to go.
House GOP Leadership Takes Brave Stand on Ex-Im…
…and agrees to wind down the bank maybe in a year. Not exactly a profile in courage. From The Hill blog earlier this week:
House Majority Leader Eric Cantor (R-Va.) plans to bring a bill to the floor by the end of March that could eventually end Ex-Im “subsidies.”
“We are working toward a bipartisan solution for the Export-Import Bank that will include reforms and begin to set a long-term policy goal to eliminate these subsidies going forward,” a GOP leadership aide said. “The legislation continues to be developed and we hope to consider it on the floor by the end of March.” [emphasis added]
(More details from Inside U.S. Trade [$]). When Mr. Cantor says “begin to set a long-term policy goal to eliminate these subsidies going forward,” I think we can all assume that the ”bipartisan solution” he is proposing would come into effect at around the same time, to quote P.J. O’Rourke, that the pope sits shiva.
As I described in a paper last year, the Ex-Im Bank is a perfect example of unnecessary and damaging corporate welfare, and of an agency engaging in activities in which the federal government has no business. It has been around for almost 80 years. It’s current charter expires at the end of May, which seems like a convenient time to let it die. Why the delay, Mr. Cantor? What exactly are you waiting for?
In case you missed it, the Wall Street Journal had a great editorial on Ex-Im last Saturday. And here’s Veronique de Rugy’s take.
Senator Harkin’s Definition of Success
At a Senate Agriculture Committee hearing earlier this week, Senator Tom Harkin (D-Iowa), gave somewhat parenthetical comments (the main focus of the hearing was energy, rural development and crop insurance) on federal nutrition programs. Parenthetical they may have been, but I think they signify something important.
Harkin’s remarks on nutrition programs (or “food stamps” as they are more commonly, if less accurately, called) begin at about 52:30 and end at about 53:35 or so of this video. The part that most struck me was when the senator was describing a meeting he had with some Iowa consitutents. He had this to say [an official transcript is not yet available, but my trusty intern Ian Yamamoto listened to Harkin's remarks and transcribed them for me]:
I just had my weekly breakfast this morning with Iowans. Had a big group there from the diocese of Davenport, a Catholic dioceses, and that’s what they wanted to talk about: was not backing off of our support for low-income people who are facing tough times now, with high rates of unemployment, that need the supplemental nutrition assistance program, or as it’s called, food stamps. And I thought one of the statements made there was kind of profound they said ya know, someone’s accusing this president of being a food stamp president. One of them said well he ought to wear that as a badge of honor…
OK, hold it right there. Really? The fact that millions of this nation’s people depend on the federal government to feed themselves is a badge of honor? Can we all agree, please, that regardless of how you feel about the federal government’s role and responsibility in providing a safety net—of food stamps or anything else—that this is not a situation to be proud of? According to Lisa Levenstein and Jennifer Mittelstadt, writing in the New York Times earlier this month, the food stamp program feeds 46 million Americans, about 15 percent of the U.S. population. But they point out that if everyone who was entitled to the program actually used it, we would see 20-25 percent of Americans on food stamps. They also, by the way, see the high numbers using food stamps as a good thing: “Conservatives are trying to smear Barack Obama by dubbing him the ‘food stamp president.’ He should not run from the label but embrace it…”
I don’t mean to pick on food stamps here—it’s not the policy hill on which I would choose to die. But I really do object when politicians or welfare advocates start celebrating dependency. We should all be talking about ways to cut the number of people needing food stamps in the first place.
Senator Harkin has form on this issue, by the way.
President Obama To Promote Possibly Limitless Corporate Welfare
The Wall Street Journal reports today that President Obama will formally announce his intention to let Beijing set U.S. export credit policy [$] at, fittingly enough, a Boeing plant. Boeing is obviously feeling a bit of political heat about the fact it benefits from almost half of Ex-Im’s disbursements, though, so they are pledging to commit more than $700 million to small business so they can better access credit. They’ve also stepped up their lobbying efforts, this time hiring a Republican-aligned lobbying firm to help them squash some mutinous feeling among Republican ranks.
Here’s Don Boudreaux’s take; spot-on, as usual.
The End of the Ex-Im Bank?
I’ve been getting a few inquiries lately from folks interested in hearing more about my ideas on closing down the Export-Import Bank of the United States. This is encouraging: Ex-Im typically sails through Congress unchallenged. It is quote-unquote self funding, so is not target number one when it comes to deficit reduction. And it has some powerful backers, including the Chamber of Commerce and Boeing. But in the aftermath of Fannie, Freddie, and Solyndra, people are — finally — beginning to ask questions about just how safe Ex-Im’s activities are for taxpayers, and what the dangers might be of increasing the amount of loans made to risky companies, as the Obama administration is pushing [$]. That move seems to fly in the face of Ex-Im’s admittedly dubious mission of financing only safe transactions (while, and this makes it especially incredible, supposedly only financing transactions the private sector won’t touch). Similarly, while the administration argues that we need to increase funding for Ex-Im to match increased export credit activity by countries such as China, I would argue that allowing Beijing to set the terms and pace of export credit policy in the United States is foolhardy at best.
U.S. airliners have launched a legal case against Ex-Im, arguing that its subsidized loan guarantees to foreign state-owned airliners such as Air India put American carriers at a disadvantage (a possibility I warned about in my paper). This provides a real-world, commercially significant example of the long-standing and self-evident charge that Ex-Im picks winners and losers in the American economy with, unsurprisingly to anyone with even a cursory familiarity with public choice theory, the most politically connected getting the support.
The bottom line is this: either politicians are serious about reducing the size and scope of the federal government or they are not. If they are, shutting down the Ex-Im Bank should be a no-brainer, especially in a political age when ”Don’t worry everybody — these loan guarantees are completely safe and pay for themselves” no longer convinces. And corporate welfare is distinctly on the nose.
Agriculture and Trade Links
- A very good editorial on Bloomberg.com on farm subsidies, and why the “let’s swap direct payments for crop insurance” proposal is a bad deal for taxpayers.
- American Farm Bureau Federation President Bob Stallman isn’t exactly a poster child for the farm program reform movement, but here he writes something I didn’t think would ever flow from his pen: “Not only would ["shallow loss"] programs be a nightmare for local Farm Service Agency offices to administer, but farmers would have the ability to cherry-pick which program works best for them. Because of distortions in price, we’d have a system of farmers deciding what to produce based on government payments rather than market signals.” [emphasis added] Uh, ok, but doesn’t that happen already, Mr Stallman?
- I’m not quite sure the LA Times gets the concept of federalism.
- United States Trade Representative Ron Kirk complains that “countries need to do a better job of explaining the benefits of trade in order to help sell ambitious trade deals to a skeptical public” [$]. I must have missed the part when Obama gave a detailed, principled endorsement of free trade in his SOTU address last week. Or, you know, ever.
SOTU and Trade: the Good, the Bad and the Ugly
President Obama’s State of the Union address last night was, in my opinion, pretty awful (although James Pethokoukis at the American Enterprise Institute thinks it could have been worse). I know SOTUs are political theater at its worst, and I watch them always with something not unlike disgust, but I found almost nothing to like in the substance last night. The electioneering, partisan, self-aggrandizing tone didn’t help.
Let me turn specifically to trade policy, which was more thoroughly covered last night than in recent SOTUs. In an election year, and from a president who is ambivalent (at best) on trade, a trade-heavy speech is not always a good thing: trade policy can get caught up in broader political arguments about inequality, unemployment and economic growth. And rarely does that combination work well for those of us who want and promote free trade between people regardless of the political borders behind which those people happen to live.
But first, the Good news from last night’s speech. President Obama did make a passing and veiled reference to the need for Congress to extend Permanent Normal Trade Relations to Russia, necessary for the United States to treat Russia as any other member of the World Trade Organization when it joins the body later this year (i.e., allowing Americans to access Russian goods and services more readily). And at least he painted the recent passage of the trade agreements with Colombia, South Korea and Panama as a positive development, albeit on mercantilist grounds (more on this later).
The Bad? The president said precisely nothing about the Trans Pacific Partnership negotiations currently underway with nine other Asia-Pacific countries (with Canada, Mexico and Japan interested in joining in the future). The TPP is supposedly the crowning achievement of his administration’s trade efforts and a deal that he was itching to complete in 2012. What does it say about his priorities that it warrants not a mention in his main speech of the year? Maybe his political supporters in organized labor aren’t buying this “21st century trade agreement” stuff any more than I am and he sees merit in keeping it quiet. But that then raises worrying questions about the ability of the negotiations to be completed on schedule if they don’t have full-throated political support at the highest level. The president made no mention of the World Trade Organization or its struggling Doha round of trade liberalization negotiations, either, although maybe there he is simply showing acceptance of the round’s (near) death, an assessment he would share with most trade watchers.
And the Ugly? Once again the president displays no appreciation for the true benefits of free trade – the benefits from specialization and exchange. They include the economic benefits that come from increased competition, and from access to cheaper and more variable goods and services for Americans. From his silly (and, I suspect, futile) goal to “double exports in five years” to his rhetoric about how America can “win” if the playing field is level (what does “winning” mean in that context anyway?), the speech was peppered with nationalistic, misguided and quite frankly inflammatory rhetoric that will not help trade relations – let alone lead to enhanced trading opportunities for Americans – one bit. Creating yet another government agency, this time to “investigat[e] unfair trade practices in countries like China”, will just add to tensions. Claiming the tires debacle as a model of trade enforcement success is yet another example of how the concept of unintended consequences is apparently lost on this president.
Matthew Yglesias has some excellent things to say on the mercantilist nonsense in Obama’s message, and the ill-conceived manufacturing fetish he conveyed. And Obama managed to combine both economic illiterate concepts when wailing about the unfairness of having to compete with “foreign manufacturers [who] have a leg up on ours only because they’re heavily subsidized.” (He then, inevitably, went on to include all sorts of subsidies or tax breaks that he would like to extend to certain American firms/industries – Chris Edwards has amply covered the tax stuff here). Overall, I give this speech a “D” on trade. Must try harder.
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