Pete Smith – a faithful patron of Cafe Hayek who teaches American Government and Economics at Trinity Christian School in Pittsburgh – recently assigned to his high-school senior students this recent Wall Street Journal report on that great geyser of cronyism, the U.S. Export-Import Bank. He asked his students to read this WSJ report, to do some additional research, and then to submit to him a brief analysis.
Here is the submission of high-school senior Grace Keibler – shared here in full with Ms. Keibler’s kind permission. It’s excellent! (I thank Mr. Smith for alerting me to his student’s superb work.)
Thinking critically about what I’ve heard and read about this bank, I have reached the conclusion that I do not favor its reauthorization. In my mind, the bank mainly benefits large companies and does little to boost or support small business which is important to today’s economy. The Export-Import Bank revolves around subsidizing the sales of some of the country’s largest companies. Fifteen large companies typically account for a large percentage of the loans issued or guaranteed by the bank, with Boeing alone estimated to account for half. Although Boeing is said to account for a great amount of business with the Ex-Im bank, I don’t think its exports would tank to zero without subsidies from the bank.
Another argument is that the bank is earning revenue for the government but when all things are considered, the federal government is among the lowest cost borrowers and therefore can almost always make money by borrowing and then lending to other borrowers at an interest rate between what the government pays and what the other borrower pays. This may mean a good profit but it also means favoring some businesses at the expense of others. Those with access to Export Import Bank loans get lower cost credit, but because credit has been diverted to these favored customers, other borrowers will pay more. This hardly seems to support the claim of those in favor of reauthorization. In addition, it’s not even clear that the bank will increase total exports. Since it gets foreigners to spend their dollars on Boeing planes and Caterpillar’s tractors, they have less money to buy the products produced by other companies. The total impact of the loss of the bank is not easily determined but the arguments against reauthorization come down pretty strongly.
Bravo! Young Ms. Keibler exhibits far greater wisdom, better judgment, a superior grasp of economics, and deeper insight than is exhibited by most elected operatives on Capitol Hill.
Oh – and I can tell that Ms. Keibler is very fortunate to have a teacher as dedicated and as intelligent as Mr. Smith.