Crony capitalism only Boeing could love: Column

Recently, I stumbled across a surprising statistic. According to a January Rasmussen poll, 71%of Americans believe that "government gives special treatment to companies with the most political connections." I was initially surprised that this number was so high. Now, after watching the unfolding fight in Washington over the U.S. Export-Import Bank, I'm surprised it wasn't higher.

The little-known agency is one of the business community's favorite federal programs. It provides taxpayer-backed financial support to foreign and domestic companies, supporting less than 2%of American exports along the way. It has also become politically toxic over the past decade. In 2008, then-candidate Barack Obama called it "little more than a fund for corporate welfare." A small group of Republican legislators made the same argument prior to Ex-Im's 2012 reauthorization. After that, opposition to the bank grew so quickly that in 2014, legislators only reauthorized it for nine months. The bank's charter is now set to expire at the end of June.

Today, two high-profile campaigns are trying to sway Congress on the bank's future. On the one side are a large number of federal lawmakers, prominent business associations, and an army of lobbyists, all of whom benefit from Ex-Im's existence. On the other side are grassroots activists, non-profits such as Freedom Partners Chamber of Commerce, which I support, and a smaller group of elected officials, including almost every Republican presidential candidates, who point out that the bank isn't what it claims to be.

The weight of evidence is on their side.The claims made by the bank's backers and beneficiaries frequently don't add up.

One example in particular stands out: the bank's insistence that it primarily serves small businesses. This is perhaps its favorite talking point, if Ex-Im's annual reports are any indication.

Put aside, if you can, that Ex-Im defines a small business as having up to 1,500 employees or $21 million in annual revenues, depending on the industry. That may count as a small business in Washington, D.C., but you'd be hard-pressed to find anyone in my home town of Raleigh, N.C. who'd agree. A look at the bank's own data raises additional problems. In 2014, small businesses received only a quarter of Ex-Im's money. In 2013, they received less than a fifth. And according to a news report last year, the bank also potentially mischaracterized hundreds of big businesses as small ones, including firms owned by Warren Buffett and Carlos Slim Helu, the second and third richest individuals in the world.

The real beneficiaries are major companies across the globe. In 2013, nearly two-thirdsof the bank's assistance benefited only ten companies —and nearly one-third benefited only one company, Boeing. These same companies are now donating to politicians and hiring lobbyists in an effort to keep Ex-Im's doors open.

As for the bank's foreign beneficiaries, a staggering number are state-owned, from Russia to China to Saudi Arabia to other countries around the globe. Strangely, America's Export-Import Bank even sends our taxpayer dollars to its counterpart in China. So much for "small business."

This is hardly the only area in which the bank's claims don't match up with reality — see the argument that it makes money for taxpayers. While the bank contributed$1.6 billionto the federal treasury between 2007 and 2012, this wasn't always the case. Ex-Im failed to turn a profit at any point between 1982 and 1995. In 1991, its total accumulated deficit was some $6.2 billion. The Congressional Budget Office now projects that the bank will likely return to the red in the next decade, during which time it could lose some $2 billion.

Considering that the bank's portfolio has grown by 92% from 2008 to 2014 — from $58.4 billionto $112 billion— it isn't difficult to see how Ex-Im's cost to taxpayers could quickly increase in our unpredictable global economy. Also at play are the bank's internal failings, which other government agencies have frequentlynoted. Its own inspector general stated in 2012 that Ex-Im "lacks a systematic approach to identify, measure, price, and reserve for its portfolio risk." This shouldn't fill American taxpayers with confidence.

Nor should we be confident that Ex-Im "supports jobs," another common claim. When the bank sends taxpayers' hard-earned money overseas, it often helps one company at the expense of another.

Take the bank's role in financing the sale of commercial airliners to international customers — the bank's biggest function in terms of dollars spent. Yes, this benefits domestic manufacturers, but it simultaneously harms domestic airlines. The Air Line Pilots Association has estimated that Ex-Im's support for just two airlines — Emirates and Air India — eliminated some 7,500 American jobs. Whether it's airlines, mining, or any other industry in which Ex-Im is involved, the global economy is simply too complex for the bank to accurately claim that it helps the U.S. job market.

No wonder the Export-Import Bank has become a major political issue in recent years. It encourages the sort of government-sponsored cronyism that only lobbyists and their clients could love — and that the rest of us see and despise.

If Americans are ever going to stop believing that government and big business work together at rest of the country's expense, then Washington needs to eliminate the places where such collusion occurs. They can start this summer by letting the Export-Import Bank expire.

Robert Luddy is the founder and CEO of Captive Aire Systems. He is a supporter of Freedom Partners Chamber of Commerce .

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