The furious war of words in Washington currently waging over the Export-Import Bank is making a lot of people uncomfortable. It's causing so much discomfort because challenging the Ex-Im Bank not only threatens the crony capitalist arrangement that describes too much of our government's business, but it's also tearing down long-held and convenient stereotypes.
Let's first address the crony capitalism issue. The fact is, the Ex-Im Bank is a tool of only the biggest businesses. It hinders free market competitiveness, especially in the domestic market. The bank's supporters will correctly point out that it aids a large number of small businesses too, but that's still just playing with the numbers. The truth is that 76% of the Ex-Im's financial aid goes to the largest corporations, like Boeing, GE, and Bechtel. The argument that it's okay to support the biggest companies because they create the most jobs is also bogus. We know that it's the emerging and smaller companies that fuel almost all the net new job creation in America. As CNBC's Larry Kudlow explained more than a year ago, the Ex-Im Bank is very strong symbol of destructive corporate welfare.
But that kind of corporate welfare doesn't just appear overnight. Lots of lobbying, campaign donations, and plain old cronyism needs to go on before something as obviously favorable to the most powerful companies in the country can be established. That's why opposition to it from any part of Congress makes so many people in Washington angry and so nasty. If Ex-Im can be opposed and lose its authorization, then everything else the lobbyists and campaign donors strive to achieve and maintain is in danger too. That's why it's laughable to hear Senate Minority Leader Harry Reid accuse opponents of the Ex-Im Bank of just doing the bidding of the Koch brothers, as if support for the bank wasn't the result of many more years' worth of big campaign donations and other favors.
Reid's fierce defense of the bank is a great example of how crony capitalism is the most bipartisan phenomenon in Washington. The one thing Democrats in power and Republicans in power have in common is power. And crony capitalist companies don't care what party the power broker comes from as long as he or she is willing to use it on their behalf. That's why so many Democrats are supporting an entity that helps boost the salaries of the top executives at companies like Boeing, GE and Bechtel even as those same Democrats also rail against the the big salaries for the top executives at companies like Boeing, GE and Bechtel. It's also why so many Republicans who rail against "big government" also end up supporting an anti-free market entity that has "big government" written all over it. When it comes to big money, Washington's supposedly toxic partisanship has always been a helpful diversion for those on both sides of the aisle who are looking to maintain the status quo.
Anyone who looks to shake up that status quo had better be ready to take significant blowback for doing so. And that's the other reason why the Ex-Im story is suddenly heating up. The fact is that the only real opposition to the Ex-Im Bank comes from a group of mostly newly-elected Republicans. And that shakes up the traditional stereotype that Republicans are the party of the rich and big business while the Democrats are the party of the "little guy." I'm not sure that stereotype was ever really true, but a good deal of the voting public and just about all of the mainstream media still believe it. When people step out of the stereotypical box others have put them in, it's usually met with suspicion, anger, and even hatred. And the Republicans opposing the continued funding of the Ex-Im Bank threaten a deeply entrenched stereotype, so naturally they're the targets of suspicion, anger, and hatred.
Meanwhile, Democrats supporting the Ex-Im Bank get a pass. Reid, President Obama, and Secretary of State John Kerry are portrayed not as liberals violating the liberal revulsion against corporate welfare, but as paragons of economic responsibility and common sense. Instead, most of the anger, suspicion, and hatred is being directed at Texas Senator and Republican presidential candidate Ted Cruz. Cruz indeed did raise the stakes in this debate Friday by saying on the Senate floor that Majority Leader Mitch McConnell lied to him when he resurrected the left-for-dead Ex-Im Bank when he attached it to a crucial highway bill. But supporters of the bank and the news media are choosing to focus on the level of Cruz's insult to McConnell as opposed to the real issues surrounding the bank. The New York Times even conveniently portrays Cruz's battle against the bank as a schism between the conservative members of the party and the "pro-business" Republicans in Congress. The idea that the Ex-Im Bank might actually hurt most American businesses seems to have escaped the usual pundits and correspondents. They would rather portray Cruz, Senator Mike Lee and the other Ex-Im opponents as extremist firebrands rather than change their own politically partisan stereotypes and dig just a little deeper. I have no idea whether McConnell broke a promise to Cruz about not resurrecting the Ex-Im Bank. But that's not nearly as important as the arguments for and against the bank.
In another words, if you think Cruz and company are dead wrong about their opposition to the Ex-Im Bank, go after the facts surrounding the bank and its effects on the U.S. economy. Don't hide behind procedural rules of order in the Senate or the purported hurt feelings of Mitch McConnell. We at Power Lunch certainly expect Commerce Secretary Penny Pritzker to make a much more reasoned case for the bank during her scheduled appearance on the program tomorrow in the 1pm hour, Eastern Time.
I'm looking forward to her arguments, especially if she brings up some new points that I will hear with an open mind. But the fact is that based on economics and simple math, the Ex-Im Bank seems indefensible. Yet thanks to political cronyism, and all-too-easily held stereotypes, the bank looks like it will come back from its presumed death and continue the economically and morally harmful Washington status quo for years to come.