President Obama is stepping up pressure on Congress to renew the charter of the Export-Import bank, claiming that its expiration has put small and medium-sized businesses at a competitive disadvantage, an argument that does not hold water, one expert suggests.
Obama is hosting 10 small-business owners that have pushed for the bank’s renewal at the White House on Wednesday, arguing that the entrepreneurs will suffer without the assistance of the Ex-Im bank. The bank, whose work many critics refer to as "corporate welfare," underwrites loans to foreign companies that purchase American products.
However, according to an expert, an overwhelming majority of the funds does not assist small businesses, but rather props up major corporations.
The Export-Import bank’s fiscal year 2014 report claims that of over 3,700 authorizations the bank made last year, more than 3,300—or nearly 90 percent—directly served small businesses. Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, said this claim is deceptive and that just 24 percent of the bank’s total funds went to small business.
"The value of the authorizations was $20,482,747,763.60 with $5,062,548,168.62—or 24 percent—going to small business," de Rugy said via email. "That means that 75 percent of the bank financing benefited large companies. In 2013, 64 percent of the money benefitted 10 giant companies. Considering these numbers, it is strange anyone would claim the bank is about small business."
Twenty percent of the bank’s finances assist small businesses, while 80 percent goes to finance projects over $10 million in 2014. The Boeing Company, which has been pushing for the bank’s revival, accounted for 40 percent of the bank’s total authorizations last year.
The bank also claims that since 2007, 84 percent of authorizations involved funds going to small business. In reality, only 22 percent of funds have gone to small business during that time, according to de Rugy.
The bank says that in fiscal year 2014, 545 American small businesses were first-time recipients of Ex-Im assistance, and that nearly half of all small business authorizations from Ex-Im involved amounts less than $500,000.
De Rugy noted that more than 80 percent of the bank’s total funding goes to projects of over $10 million.
"In fiscal year 2014, 529 firms that had not received Ex-Im assistance in the prior year received small business funding. 1,379 authorizations out of 3,366 small business related authorizations (40.97 percent) had small business authorizations that were less than $500K," de Rugy said. "However, 1,747 authorizations out of 3,366 small-business-related authorizations (51.90 percent) had small business authorizations that were less than or equal to $500K. It is worth noting that over 80 percent of the financing goes to projects over $10 million."
"The Ex-Im Bank is in the business of big businesses," she said.
The Export-Import bank’s charter expired last month after Congress refused its reauthorization. However, Senate Majority Leader Mitch McConnell (R., Ky.) said he is not opposed to attaching its renewal to the six-year highway and transit bill.