Instead of Draining the Swamp, Trump Is Helping to Refill It

May 10, 2019
by Bob Adelmann

Among the many slogans Donald Trump's campaign used to propel him into the White House in November 2016, one stood out: Drain the Swamp.

Now, more than two years into his presidency, Trump is reneging on that promise, and slowly turning himself into a caricature of the very creature he railed against.

Perhaps the swampiest of all "swamp creatures" is the Export-Import Bank. It has lain fallow for four years, with its ability to guarantee loans limited to $10 million or less thanks to three vacancies on its governing board.

On Thursday, at the insistence of the president and the willing compliance of Senate Majority leader McConnell, the Senate filled those three seats. Now the bank is no longer limited to guaranteeing loans of $10 million but can go for the big stuff: billions upon billions, the vast majority granted to large American companies like GE, Caterpillar, and Boeing that don't need them (but are more than willing to take them).

The bank's charter expires on September 30. If, as appears likely, Congress extends it (as it has ever since its beginning in 1934), then not only will the biggest companies in America be able to obtain financing for their exports by putting the American taxpayer at risk instead of themselves, but their export partners will also benefit.

One of those export "partners" is communist China, Trump's adversary in the escalating trade wars. Trump's mouthpieces, Larry Kudlow and Peter Navarro (who have been pushing for the bank's resuscitation), claim that since China has its own ExIm bank, the U.S. needs one too, to "level the playing field."

As senior research fellow at George Mason University Veronique de Rugy warned last fall in The New American: "Nobody benefited more than the aerospace behemoth Boeing. Between 2007 and 2014 companies purchasing [aircraft and related products] from Boeing received 70 percent of all loan guarantees and 40 percent of all Ex-Im handouts, earning the agency the nickname "Boeing's Bank."

The agency's original mission was to help small businesses obtain financing during the Great Depression when they couldn't find it through regular lending sources. Mission creep has since put those small businesses in the background, with only about 20 percent of those loan guarantees going to them.

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Those loan guarantees also help the American companies' foreign purchasers, as they don't have to provide their own financing. The U.S. taxpayer will assume the risk instead. As de Rugy noted last September, if the agency is revived by filling those empty board seats, then "high level lending to large foreign companies at preferential terms will resume and continue to be backed by U.S. taxpayers. [The bank] will continue to feed the swamp and the government's corporate handout system."

De Rugy expressed her chagrin upon learning of the resuscitation of the nearly moribund agency:

Fools like me who believed that President Trump would "drain the swamp" in Washington have been enduring one disappointment after another. For the latest, he has exerted political pressure so the swampiest agency in town, the Export-Import Bank, can be restored to its full potential.

At bottom, the agency provides corporate welfare to companies that don't need it but are more than happy to take it. As de Rugy put it: "This agency inflates the profits of the politically connected on the taxpayer's dime. It also artificially grants an edge to foreign companies against which unsubsidized American businesses have to compete." It's crony capitalism at its very worst.

The subsidy is buried in those loan guarantees, but the cost is very real, amounting to about one percent of each loan that is guaranteed by the bank. In other words, on a $50 billion loan guarantee granted to Boeing the taxpayer subsidy is $500 million. Even for a company the size of Boeing that's a nice addition to its bottom line, not to mention freeing up its loan capacity for other projects.

It also assists foreign buyers like China. As de Rugy complained:

Restoring Ex-Im to its full board means reverting to a system that was subsidizing China. After all, the largest foreign Ex-Im beneficiary in 2014 was none other than China.

Now operating at full throat, the Ex-Im Bank's loan guarantees will once again start indirectly siphoning taxpayer dollars to America's largest corporations while helping one of America's mortal enemies at the same time. Instead of helping to drain the swamp, the president is working to refill it.


Sources: : White House Wins the Battle Over Export-Import Bank

The New York Times : Corporate Welfare Wins Again in Trump's Washington

The Wall Street Journal : Honey, We Shrunk the Ex-Im Bank

The New American : Will the Export-Import Bank Rise Again?

Background on the Export-Import Bank

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