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Friday, January 30, 2015
- U.S. Big Business is going all out to protect a favoured government agency, the 80-year-old Export-Import Bank (Ex-Im), from a full-fledged assault by the populist “Tea Party” wing of the Republican Party.
At stake is Congressional re-authorisation of the Bank, which provides loans, guarantees, and credit insurance to foreign buyers of U.S. exports. Last year, it approved nearly 4,000 such transactions with a record estimated value of 37.4 billion dollars in exports.
While the re-authorisation should easily pass the Senate, where it is supported by the majority Democrats and many, if not most, Republicans, the problem lies in the Republican-led House of Representatives, which has increasingly become a Tea Party stronghold.
Business groups were stunned over the weekend when the incoming House Majority Leader, Kevin McCarthy, announced he would oppose re-authorisation despite his two-decade-long record of supporting it.
When House Speaker John Boehner declined to take a position either pro or con, top executives of the powerful U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) went into overdrive on Capitol Hill.
“With Americans overwhelmingly focused on the need to create jobs and grow our economy, business owners are understandably perplexed by the inside-the-(Washington-)Beltway campaign against the Ex-Im Bank,” said Chamber president Thomas Donohue, in releasing a letter signed by more than 800 companies and industry associations in support of the re-authorisation.
Still, Tea Party advocates and lawmakers are not giving any ground. At a hearing on the Bank Wednesday, the chairman of the House Financial Services subcommittee, Texas Rep. Jeb Hensarling, charged that its programmes amounted to “corporate welfare” designed to benefit “some of the largest, richest, most politically connected corporations in the world.”
The battle has emerged as the latest focus of a persistent – and some say growing — split within the party between what is often referred to as “Wall Street” and “Main Street.”
Indeed, the Tea Party was born and energised by what its constituents viewed as the government’s giants “bail-outs” – under both Presidents George W. Bush and Barack Obama — of Wall Street banks and other huge corporations following the Sep 2008 financial crisis.
The more-establishment and populist wing of the Republican Party have also clashed over immigration, fiscal, trade, and education policies. Consisting of both social conservatives and anti-government libertarians, the Tea Party – to the degree it has maintained any ideological coherence — has generally tried to move the Republican leadership to the far right.
While its forces have suffered a number of setbacks this spring during Republican primary elections for Congress, the surprise defeat earlier this month of Majority Leader Eric Cantor, who favoured slightly more-mainstream immigration and fiscal policies – by an obscure and poorly financed Tea Party challenger shocked Washington insiders.
The insurgent candidate, a college economics professor named Dave Brat, campaigned on an anti-government platform that strongly opposed liberalising immigration laws and what he called “crony capitalist programmes that benefit the rich and powerful.”
So strengthened were Tea Party forces within the House Republican caucus by Brat’s victory that many Capitol Hill observers credited it with McCarthy’s surprising reversal on Ex-Im funding. His change of heart appears to have been a condition for his election by key caucus members to succeed Cantor as Majority Leader.
Created in the early days of Franklin Roosevelt’s “New Deal”, Ex-Im has survived and prospered under Republican and Democratic presidents alike. This, despite complaints from the right that its operations amounted to government interference in the free market and, from the left, that the Bank’s support for exporters amount to “corporate welfare”, a phrase ironically adopted by then-Sen. Barack Obama to describe the Bank when he ran for president in 2008.
As originally conceived, its mission has been to create jobs at home by financing sales of U.S. exports to buyers overseas. Over the years, it has become a model for similar institutions, called export credit agencies (ECAs), established by dozens of other major exporting nations.
In recent decades, its single biggest beneficiary by far has been the Boeing Co., the giant Chicago-based aerospace firm, which has long depended on Ex-Im’s support in its competition with Europe’s Aerobus Industries. Other major beneficiaries include Caterpillar, General Electric, and Bechtel.
While much of the Bank’s opposition in the past has come from Democrats who, like Obama in 2008, described it as a corporate giveaway, the party’s lawmakers voted for it unanimously two years ago and still support it, as does the Obama administration which has made boosting U.S. exports a top priority since taking office.
The country’s biggest labour union federation, the AFL-CIO, has also strongly supported re-authorisation.
While left-wing criticism is now virtually non-existent, the Bank has long been a target for Tea Party adherents, whose mobilisation played a critical role in giving Republicans their majority in the House since the 2010 Congressional elections.
In 2012, they tried, albeit unsuccessfully, to kill the agency, arguing that the subsidies and other help provided by the Bank to U.S. exporters makes them “less and less competitive in the global market,” as their then-champion in the Senate, Jim DeMint, contended at the time.
DeMint, now head of the far-right Heritage Foundation, has, along with the Club for Growth, spearheaded the current campaign against re-authorisation.
The campaign gained more traction this week with the revelation by the Wall Street Journal that four Bank staff members have been suspended or removed amidst investigations into reported kickbacks.
But the major business groups are fighting back hard, arguing that U.S. companies would be placed at a severe disadvantage in competing for business abroad if the re-authorisation wasn’t approved.
“Failure to reauthorize Ex-Im would amount to unilateral disarmament in the face of other governments’ far more aggressive export credit programs, which have provided their own exporters with an estimated one trillion dollars in financing support in recent years,” according to the letter signed by the business organisations.
“Export credit agencies in China, France, Germany, Brazil, and Korea have provided significantly more support for their exporters than Ex-Im has provided to U.S. exporters – in some cases, more than seven times what Ex-Im Bank has provided on an annual basis.”
Most observers here believe that the Bank will be eventually be re-authorised, as the Chamber and NAM mobilise endorsements from small and medium-sized companies which have benefited from its largesse. That could include reducing the amounts Ex-Im can lend to foreign companies and limiting its authority to aid companies owned by foreign governments.
Democrats, meanwhile, are clearly enjoying this latest battle between the Tea Party and the business community.
“This is a perfect example of ideology run amok,” noted Democratic Rep. Chris Van Hollen, a rising star in the party, said Wednesday of the Tea Party’s campaign against the Bank. “I think the business community is getting a little bit of a wake-up call because they’ve been thinking that Republicans are their friends on everything, and it just turns out that ideology is trumping pragmatism.”