The S.C. General Assembly has thrown its support behind a federal agency that free market advocates decry as a corporate welfare shop for politically connected mega-corporations.
The issue has drawn attention to one of the biggest beneficiaries of the agency, and the recipient of the largest incentives package from the Legislature, in recent years – the Boeing Co.
The matter also has split the Palmetto State’s U.S. Senate delegation.
At the end of May, the operating charter of the U.S. Export-Import Bank is scheduled to expire.
Known as Ex-Im, the bank provides federally backed loans and loan guarantees to overseas buyers of American-made products who face difficulty obtaining private financing.
Ex-Im was created in the Depression era. It derives its operating funding by retaining a small percentage of the loan amounts the agency issues.
Supporters say Ex-Im creates jobs by boosting U.S. exports, helping American companies compete against foreign rivals that enjoy far more generous subsidies from their governments.
Opponents say Ex-Im amounts to unfair, inefficient government interference in the free market, enabling large companies with political connections to benefit at the expense of other firms.
In the modern era, Boeing has been a principal beneficiary of Ex-Im.
“Over the last two years Ex-Im has issued $25 billion in loan guarantees, and nearly $17 billion has gone to subsidize Boeing sales,” Tim Carney, senior political columnist for the Washington Examiner, said in an appearance on MSNBC’s The Dylan Ratigan Show in March. “That’s almost two-thirds.”
In that same time period, Chicago-based Boeing has cashed in on state subsidies, too.
In a rare special session in October 2009, the Legislature hurriedly and with no debate approved a whopping nine-figure incentives package for Boeing’s 787 Dreamliner plant in North Charleston.
The giveaways, conservatively valued by The Nerve at $500 million, included $270 million in bonds – free money for the multinational defense and aerospace giant that state taxpayers must return with interest.
With Ex-Im nearing expiration, meanwhile, the debate about the agency has manifested in Congress, which is considering proposals to extend the agency’s charter and increase its lending authority.
The ideas generally enjoy bipartisan support, but some congressional Republicans want to let the agency go the way of the dinosaurs.
The Legislature Weighs In
Here in South Carolina, against the backdrop of Boeing’s large presence in the Lowcountry, the Legislature has decided that the fate of Ex-Im is important enough to officially voice its support for the agency.
In the past two weeks the House and Senate have passed a concurrent resolution urging the state’s congressional delegation to support legislation reauthorizing Ex-Im.
“If South Carolina’s manufacturing base is to grow, we must continue to expand our ability to export goods from South Carolina facilities,” the resolution says. “Given the key role the Bank plays in facilitating export sales, failure to reauthorize it would be devastating to existing industry and to those that we hope to create in the future.”
Sen. Paul Campbell, R-Berkeley, is chief sponsor of the measure, S. 1356.
On second reading, the most crucial of three, the Senate approved the resolution 32-2. Sens. Tom Davis, R-Beaufort, and Lee Bright, R-Spartanburg, were the two opponents.
The House adopted the resolution without taking a roll-call vote on it, according to the chamber’s Journal.
That resolution, however, is just one of five such proposals introduced in March. Senate President Pro Tempore John Courson, R-Richland, authored two of the other resolutions imploring South Carolina’s congressional delegation to support extending Ex-Im.
House Speaker Bobby Harrell, R-Charleston, floated the other two.
To some degree, though, the delegation is split on the issue, with U.S. Sens. Lindsey Graham and Jim DeMint, both Republicans, taking opposing stances on it.
Graham has fought to continue the Export-Import Bank.
“The reauthorization of Ex-Im will directly benefit South Carolina’s job creation efforts and manufacturing industries,” Graham said in statements thanking the Legislature for the resolution it passed.
“I wish we didn’t need an Ex-Im bank,” Graham said. “But other countries have far more aggressive financing regimes in place. The United States cannot and should not unilaterally disarm.”
DeMint argued the other side in a guest column published recently in the Washington Examiner.
“In free market finance, we all benefit as businesses compete for investment that follows those with the best innovations, highest quality, at a price buyers are willing to pay, DeMint wrote.
“Not so with government-run finance where funding decisions are made more often based on politics instead of economics. That’s why corporate welfare is so inefficient.”
Bringing Home the Point
Several South Carolina newspapers, as well as the state Chamber of Commerce and the South Carolina Manufacturers Alliance, have editorialized in favor of keeping Ex-Im as a key economic development tool.
Not surprisingly, Boeing has weighed in on it similarly.
“Ex-Im plays a crucial role in the export of commercial airplanes, including the 787 Dreamliner, which, as you know, is now manufactured in the Palmetto State,” James McNerney, the company’s president, CEO and board chairman, wrote in a recent letter to Graham.
“In fact,” McNerney continued, “eight out of every ten Dreamliners now built in South Carolina are expected to be purchased by international customers who are eligible for and regularly seek export credit from Ex-Im.”
Be that as it may, critics contend that sometimes, rather than facilitating domestic job creation, Ex-Im works the other way, helping to outsource American jobs.
Carney of the Examiner made this point in a March 19 blog post, citing cases of Ex-Im subsidizing a relocation of General Electric and Chrysler factories to Mexico.
In his appearance on The Dylan Ratigan Show, an MSNBC program, Carney said Ex-Im supporters “forget that the lending capital Ex-Im steers towards Boeing would go to other enterprises if Ex-Im weren’t involved.”
Continuing, he said, “So Ex-Im might create jobs and profits at the politically connected mega-corporations it subsidizes, while also shielding big banks from the risks of capitalism, but the agency makes financing harder to come by for those smaller guys who can’t afford a lobbyist.”
Boeing has five registered lobbyists at the State House this legislative session, according to S.C. Ethics Commission records.
Carney concluded his remarks on The Dylan Ratigan Show saying, sardonically, that the Export-Import Bank serves as a rare case of bipartisanship in Washington.
Ratigan, a highly respected financial journalist disillusioned with the machinations of big business and big government, agreed. And Ratigan said Carney’s Ex-Im sound-off speaks to a conversation the nation needs to have.
“There is a conversation though not about Democrat versus Republican, but Democrats and Republicans who want the state to control everything that happens,” Ratigan said. “They just want to argue about who gets to control the state, and the rest of us are of the delusion we live in a free country.”
Reach Ward at (803) 254-4411 or eric@thenerve.org.