For several decades now, blind adherence to ideology has all too often gotten in the way of clear thinking about what contributes to prosperity and jobs. A recurring example is the up-again down-gain uncertainty about the fate of the U.S. Export-Import Bank http://exim.gov. In 2014-15, a knock-down, drag-out battle royal raged in Congress over the continued existence of this little-known and less-understood U.S. government agency that has arguably created more jobs, including legal and JD Advantage jobs, than any directed government job-creation policy.
History: The “Ex-Im” Bank has been around since 1947 and is one of those “little engines that could.” It has been a huge success, contributing significantly to economic growth both at home and abroad.
The Bank provides financing for foreign companies (“export credits”) to purchase U.S. products. Its 14 congressional reauthorizations since 1947 had been automatic and totally non-controversial. Early on, the Bank played a major role in implementation of the Marshall Plan’s reconstruction initiatives in a Western Europe threatened by Communist expansion. The Plan’s success opened up vast markets for American goods and services. Reauthorization of the bank was automatic because it helped thousands of U.S. companies sell their products abroad while helping to create and sustain millions of American jobs.
And Then… Despite that stellar record, the 2014-15 congressional reauthorization was anything but non-controversial. In fact, Congress failed to reauthorize it by the Fiscal Year 2015 deadline. A continuing resolution temporarily funding the government at prior year levels kept the agency on life support while debate raged on. Uncertainty about its survival prompted numerous U.S. export-reliant firms to put expansion and hiring plans on hold, and forced the laying off of thousands of workers, including lawyers.
With more than a year to go prior to the reauthorization deadline, congressional conservatives began attacking the Bank, arguing that it was the poster child for “crony capitalism,” dispensing unneeded corporate welfare to big multinational firms. Their argument was based on the fact that the Bank gave a boost to Boeing, by far the largest U.S. exporter, a firm with an outsize influence on the U.S. economy. A bad month for Boeing can cause major dips in the national economy. Boeing experiences fierce competition from Europe’s Airbus, one of the most heavily government-subsidized firms in the world, and will soon face a similar rivalry from China’s government-nurtured aviation industry. The reality is that aiding Boeing broadly aids the U.S. economy. Moreover, Boeing’s supply chain includes 16,000 companies with hundreds of thousands of employees. If Boeing lost Ex-Im Bank support, many of these companies along with many others could face existential threats. During the battle on Capitol Hill, a number of the world’s airlines switched their orders from Boeing to Airbus, worried that the U.S. airplane manufacturer would not be able to meet their needs.
It did not matter to the Bank’s zealous opponents that:
- the Bank is self-financing and does not cost taxpayers a dime. It generates its income from loan interest payments and customer fees, and transfers all of its profits ($1 billion each of the prior two years) to the U.S. Treasury;
- eliminating the Bank would make it tougher for U.S. exporters to compete with foreign firms that benefit from similar help from their countries;
- the Bank does not compete with or displace private lenders because the latter typically don’t want to undertake the risks of export financing;
- the Bank is prohibited by law from competing with commercial banks; or that
- the default rate on Ex-Im Bank loans is under 2 percent (versus over 4 percent for commercial bank business loans).
All of this fell on deaf ears. Reauthorization should have been a no-brainer. Instead, it took a Herculean effort to save it via an eleventh-hour agreement that was inserted into an omnibus budget bill just before Congress adjourned in late December 2015.
The choice between renewing or scuttling the Ex-Im Bank was, at its heart, a choice between ideological purity and pragmatism, fidelity to a dubious ideal versus flexibility in response to global challenges and opportunities.
And Now…? Former Representative Scott Garrett (R-NJ), one of the leading critics of the Ex-Im Bank during the 2014-15 battle, has been formally nominated by President Trump to lead the Ex-Im Bank. Because Republicans control the Senate, he will likely be confirmed.
Having dodged the most recent bullet from outside, the Bank now faces an internal threat that may yet bring it to its knees.
If you aspire to work for one of the thousands of U.S. companies overly dependent on Ex-Im Bank export financing, you might want to factor this latest peril into your legal job search equation.