A controversial government agency intended to boost U.S. exports and jobs could go out of business at the end of June unless Congress takes action.
The Export-Import Bank is supposed to help foreign companies buy U.S. exports by providing financing, insurance or technical assistance. The political dispute pits some Republicans in Congress against many of their usual allies in the business community.
Reauthorizing the bank is the subject of hearings this week before committees in both houses of Congress.
Corporate Welfare Or Small Business Aid?
Conservative Republican critics like Representative Jeb Hensarling of Texas say the Export-Import Bank (Ex-Im) is "corporate welfare" that uses taxpayer money to help huge corporations that don't need assistance.
But Ex-Im President Fred Hochberg says most of its customers are small companies that pay for the services they use.
One example is Bassetts Ice Cream, which has been selling its sweet product since 1861, making it the oldest ice cream company in America. The company employs up to 30 people, taking orders and scooping many flavors in a popular market in Philadelphia.
Bassetts President Michael Strange is the fifth generation of the Bassett family to run the company and he is exporting one-fifth of its product to China with help from the Export-Import Bank. He says Ex-Im sells him a kind of insurance that protects Bassetts in case a foreign customer can’t pay.
Bassetts sends about 3,200 9.5 liter tubs of ice cream to China each month. If Bassetts did not get paid for a large order, it could seriously damage the firm.
Strange says losing Ex-Im would hurt his business and might force him to consider layoffs.
“I’m terrified that they are not going to renew the Ex-Im Bank’s charter. For us, it gives us the ability to extend normal trade credit terms to our customers internationally and still not put our business at risk,” he said.
The complex process of mixing and chilling ice cream ingredients is done at a dairy plant in rural Pennsylvania, where workers craft strawberry, vanilla, chocolate chip and many other popular flavors. While the export tubs are carefully labeled with Chinese characters, some of the ice cream is exactly the same as the product sold in the U.S. market.
Michael Strange says Bassetts also has developed flavors, like green tea, that are specifically blended for Asian palates.
Squabble Between Big Companies
Aircraft manufacturer Boeing is a very different kind of company that is many times the size of Bassetts, but it also gets help from the Export-Import Bank, which makes it easier to sell U.S.-made planes to foreign airlines. That angers officials of U.S.-based Delta Airlines, who says Ex-Im destroys U.S. jobs by helping its foreign competitors save $20 million on each Boeing plane they buy.
Delta officials say lower financing costs mean lower ticket prices for foreign airlines; lower fares translate into fewer passengers for U.S.-based Delta, and fewer passengers mean fewer jobs for Delta's staff.
Delta CEO Richard Anderson brought uniformed pilots and flight attendants to a congressional hearing to illustrate American jobs that he says are at risk. Anderson told members of Congress the bank needs major changes despite previous reform efforts.
Hensarling, the House Financial Services Committee chairman, is one of Ex-Im's strongest critics. He says the market, not the government, should be picking companies that are economic winners and losers. Hensarling says slashing taxes and regulations, and boosting U.S. energy production, would do more to increase exports and create jobs than any bureaucratic agency.
Ex-Im supporters say scores of other nations have agencies dedicated to boosting exports, and ending such aid for American firms would be a form of unilateral disarmament that could hurt the U.S. economy.