Smackdown: Conservatives vs. Big Business

U.S. Export-Import Bank Deputy Inspector General Michael McCarthy (bottom L) and Export-Import Bank President Fred Hochberg (bottom R) testify before a House Financial Services Committee hearing on the Export-Import Bank's reauthorization, on Capitol Hill in Washington June 3, 2015. A small government subsidy program has wound up at the heart of a conservative battle. Jonathan Ernst/Reuters

“I don’t know why I’m here,” Republican Representative Billy Long, the stout auctioneer-turned-congressman from southwest Missouri, declared to laughter last week at a press conference on Capitol Hill.

It was a reference to the infamous quote by Vice Admiral James Stockdale, Ross Perot’s running mate, during the 1992 presidential campaign, but Long thought it was apt for an entirely different debate that has consumed Washington this year—over an obscure government agency called the Export-Import Bank. Long, a defender of the bank, called it “a dreamed-up problem that’s spun out of control.”

Indeed, from the outside looking in, it’s hard to see why Republicans are at one another’s throats, or why multinational corporations are throwing millions of dollars into the “Ex-Im” fight, as it’s known. The nearly 80-year-old federally run bank covers its own costs—even generating a surplus—thanks to the interest it collects on loans. It claimed to support $27.4 billion in U.S. exports last year, less than 2 percent of all American exports. And its highly technical line of work offering export-related loan guarantees and export credit insurance to exporters and banks is hardly the sort of subject that’s going to galvanize the American public.

And yet, thanks to the growing clout of a group of Tea Party–inspired members of Congress and their allies around the country, Ex-Im has become the latest litmus test of fiscal conservatism. Those trying to kill the bank, whose charter expires at the end of the month, believe its demise can be a springboard in their bigger fight to remake Washington.

“This is the ‘Bridge to Nowhere’ of corporate welfare,” says Ohio Representative Jim Jordan, in a nod to the infamous bridge project in remote Alaska that would have cost taxpayers more than $300 million. Instead, it became the poster child of wasteful federal earmarks, the special projects lawmakers would slip into government spending bills, and the national embarrassment helped bring down the age-old Washington practice. Jordan, head of the new House Freedom Caucus and one of the Export-Import Bank’s biggest opponents, believes shutting it down could trigger a similar death spiral for what he and allies dub “corporate cronyism.”

“This is a small thing; it’s not very big in the grand scheme of things,” explains Barney Keller, who, as communications director at the anti-government-spending group Club for Growth until last year, was involved in the early days of the fight against Ex-Im. “But if the Republicans can’t get rid of the Ex-Im Bank, how do they expect to reform Social Security?” Not to mention other entitlement reforms or the tax overhaul they have their sights on, he says.

Critics’ main beef is that the largest beneficiaries of the bank, dollar-wise, go to big, well-connected companies like Boeing and General Electric, who should be able to fend for themselves. To counter that argument, defenders like the Chamber of Commerce and the National Association of Manufacturers have been sending legions of small-business owners who’ve also benefitted from the bank’s lending and insurance to lobby their representatives. Bottom line, defenders say, is that the bank fills a gap left by the private sector finance and helps create jobs.

The business lobby is bringing its considerable weight to bear on Capitol Hill to try to save the bank. “Our message to Congress is, this is a test,” Jay Timmons, president and CEO of the National Association of Manufacturers, said at the press conference with Long. “You’re either with us or against us.” But they’ve been playing catch-up. It wasn’t until 2011, after all, that they even had to worry about the bank being reauthorized. It was more or less automatic.

While criticism of the Export-Import Bank would pop up here or there over the course of its existence—President Obama, opponents gleefully point out, knocked the bank on the campaign trail in 2008—pro-business backers say it had never attracted much interest or controversy. But when it came up for a reauthorization vote in 2012, it caught the Club for Growth’s eye.

Andy Roth, the club’s vice president for government affairs, says he distinctly remembers coming across a July 2011 report from the libertarian-leaning think tank the Cato Institute entitled “Time to X Out the Ex-Im Bank.” For someone who embraces small government, the arguments “all made sense,” he says. Since it was going to be coming in front of Congress, he, Keller and others decided to dig into it further, and they did not like what they learned. Together with Heritage Action for America, a new advocacy wing of conservative Heritage Foundation, the club raised the bank’s profile with briefings, grassroots outreach and media campaigns. And they made lawmakers’ position on the Ex-Im Bank part of their standard for evaluating and rating them each Congress.

In May 2012, 93 Republicans voted against the Export-Import Bank’s reauthorization. It still passed easily, with 330 votes. But Michael Needham, CEO of Heritage Action, says the vote “was a win in and of itself,” because it forced lawmakers to debate the issue, rather than just pass it with no discussion and no recorded vote, as Congress did in the past.

Three years later, the Export-Import bank’s opponents count about the same number of opponents in the House. But there’s been one big shift. In 2012, the leaders of the House Financial Services Committee and Majority Leader Eric Cantor were all backers of Ex-Im. They’re all gone now, replaced by Republicans who are keen to wind it down. “I think that has been a really huge factor in the seriousness of the opposition to the reauthorization,” says one of the lobbyists for a pro-business group that supports the bank.

With just a few weeks left in Ex-Im’s charter, it’s starting to look more and more likely that the bank will expire, at least temporarily. But Jordan says he’s worried supporters may try to revive it as part of legislation supporting the Obama administration’s free-trade negotiations. “There’s a block of us conservatives,” he says. “We’re not going to vote for trade unless you can guarantee you’re not going to bring up the Export-Import Bank.” And that could create an even bigger problem for the pro-business community. 

Correction: An earlier version of this story incorrectly referred to the National Association of Manufacturing. The correct name of the organization is National Association of Manufacturers.