Here’s a letter to a correspondent who professes to have a “practical, pragmatic and realistic” commitment to free markets. Note that his argument for keeping the U.S. Export-Import Bank alive is very much like an argument that Paul Krugman has recently offered for keeping that great geyser of cronyism alive.
Mr. Frank Rowe
Thanks for e-mailing me. With respect, I disagree that “closing the Export-Import Bank should wait until we have stronger US job growth.” If a policy generally harms the economy, it should be abolished ASAP. Assertions of possible short-run benefits yielded in exceptional circumstances by such a policy ought not obstruct opportunities to cleanse the body politic of that harmful policy.
You’ll dismiss my argument as being (to use your term) “ivory towerish.” Before doing so, however, consider the following scenario. Suppose that Uncle Sam long ago adopted the economically harmful policy of preventing any American from saving more than one-half of one percent of his or her annual income. Suppose further that political developments make possible, for the first time in ages, the elimination of this destructive anti-saving policy. Would you favor reauthorizing this policy simply because today’s job market is sluggish? Because you agree that this policy generally harms the U.S. economy, do you really believe that whatever buoyancy it might today add to the job market is a benefit sufficiently great and certain to justify the indefinite continuation of this policy – a policy that on the whole obstructs the operation of the market, stymies capital formation, and slows economic growth?
If (as I suspect) you would seize an opportunity to end this hypothetical anti-saving policy even if that opportunity arose during a slack job market, then you should reconsider your argument that today’s slack job market is sufficient justification for keeping the Ex-Im Bank open.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
For Cafe readers – and I’m sure that there are some – who would indeed oppose ending the anti-saving policy during a down economy, I have a follow-up question: would you support the creation and imposition of such an anti-saving policy during a down economy?