Less Government, Less Leverage Over the Global Economy - OZY | A Modern Media Company

Less Government, Less Leverage Over the Global Economy

Less Government, Less Leverage Over the Global Economy

By Emily Cadei

Free-Marketeers vs. Pro-Government Regulators


Conservatives’ beliefs about the proper role of government could curtail direct government support for global economic engagement. Opponents say that will just hurt the U.S. economy.

By Emily Cadei

What’s the surprising result of Republican House Majority Leader Eric Cantor’s upset loss in the Virginia primary election? Aerospace giant Boeing Co. saw its stock price tumble sharply

The connection: Cantor has been one of the GOP’s staunchest supporters of a relatively unknown government agency, the Export-Import Bank, that’s suddenly become a political hot potato. And who is the bank’s main beneficiary? None other than Boeing, which estimates the government-run creditor’s loans will help it sell roughly $10 billion worth of airplanes and other gear to foreign countries and companies in 2014.

More and more conservatives in Congress say the government shouldn’t play that role, to the dismay of their more business-friendly Republican brethren and the big business lobby, which argues that the agency plays a critical role in helping U.S. companies that is not easily replicated by the private sector, and costs taxpayers nothing.

Conservatives aren’t stopping there.

planes on field outdoor during the day

Export-Import Bank Holds 2014 Annual Conference

They’ve also got their knives out for the Overseas Private Investment Corporation (OPIC), a government financier for U.S. private investment in the developing world, and the International Monetary Fund (IMF), the body that has played global fireman to shore up the world’s economic stability since World War II.

At the root of the assault is a combination of small-government ideology and an innate distrust for multinational engagement. It’s a mindset that is “part of this trend towards withdrawal to fortress America,” Sen. John McCain told OZY. The Arizona Republican has been one of the loudest voices within his party for more international involvement.

The worry is that conservatives may wipe out some of the U.S. government’s most important tools for promoting American companies and economic priorities around the world, but not gain anything.

Some critics of the organizations say it’s worth it. The Ex-Im Bank, as it is known, and OPIC have been labeled “crony capitalism” or “corporate welfare” by anti-spending groups Club for Growth and Heritage Action. They object to using taxpayer money (even though it’s ultimately paid back to the Treasury) to finance favorable loan rates for foreign buyers of American goods, or to fund insurance or financing for private U.S. companies to invest in emerging markets. As Rep. Kevin McCarthy, Cantor’s replacement as House majority leader, told Fox News earlier this week, “It’s something that the private sector can be able to do.”

It hardly helps that four Ex-Im employees are now being investigated for corruption and kickbacks.

The IMF, meanwhile, has spent too much money bailing out profligate European governments during the Eurozone crisis earlier this decade, the thinking goes. And there are concerns that new IMF governing reforms give too much influence to countries like Russia and China, which have different views on the global financial system. 

An outright elimination [of the Export-Import Bank] leaves U.S. jobs in peril.

But is the answer to simply demolish mechanisms like Ex-Im and OPIC and block reforms to the IMF indefinitely — which is what a block of conservatives in Congress are pursuing?

Plenty of politicians, Republican and Democrat, say that goes too far. 

“An outright elimination [of the Export-Import Bank] leaves U.S. jobs in peril,” warned Rep. Randy Hultgren, a Republican from Illinois, earlier this week. Reform of the bank is a better approach, Hultgren suggested. “I’m committed to working together to put a viable alternative forward.”

Indeed, while boosters point out that Boeing, which earned $87 billion in revenue last year, may have been the top recipient of Ex-Im aid by value, nearly 90 percent of loan transactions (and others, like loan guarantees and insurance) went to small businesses in 2013, according to the Congressional Research Service.

Supporters also warn that giving programs like Ex-Im and OPIC the boot would amount to “unilateral disarmament” in the trade sector, as Democratic Rep. Brad Sherman put it Wednesday, since major exporters like Germany and China have even bigger government agencies to help sell their goods abroad.

“Unilateral disarmament” could also be an apt description for what might happen to U.S. influence at the IMF if Congress fails to act this year, since the U.S. could potentially lose its status as the only country with veto power over IMF decisions.  

The Obama administration has tried and failed several times to win Congressional approval for IMF reforms, arguing, most recently, that it was necessary as the IMF helped bolster Ukraine, which has secured a $7 billion bailout from the fund. U.S. allies like Egypt, Tunisia and Jordan all rely on IMF support to shore up shaky economies.  

The Export-Import Bank has become so politically toxic that even McCain and other Republican internationalists are wary of coming out in support.

So it’s hard to argue that the IMF doesn’t advance U.S. interests. Yet a number of Republicans are wary of signing off on the governing changes (which wouldn’t affect U.S. veto power) and the level of risk involved in investing U.S. tax dollars in the fund.

Other countries are losing patience. After their spring meeting in Washington in April, world powers gave the United States a year-end ultimatum and threatened to find ways to move ahead without the Americans if it isn’t met. That could risk the United States’ singular position in the organization; it’s already hurting its standing and influence in global economic circles.

The U.S. faces even earlier deadlines for the Ex-Im bank and OPIC, whose authorities expire on September 30. Congress is now debating legislation to reauthorize both bodies, and OPIC looks like it may squeak through. The Export-Import Bank, however, has become so politically toxic that even McCain and other Republican internationalists in the Senate like Bob Corker of Tennessee are wary of coming out in support.

So yes, Republicans may have plenty of reason to criticize the White House’s handling of the conflicts in Ukraine and Syria. But to suggest Obama is the only reason U.S. influence in the world is on the wane … well, they may want to have a look in the mirro

Sign up for the weekly newsletter!

Related Stories