Suppose we proposed giving President Obama the option to put modest tariffs, say 2-3 percent, on imports of various categories of goods and services, if he felt it was important for the economy. Every right-thinking person would denounce this as crude protectionism. The argument for the export-import bank is essentially the same as the argument for selective tariffs.

The big difference is that all sorts of people who would be among the protectionist denouncers are making the case for the Ex-Im Bank. Today's effort comes from Joe Nocera.

His story begins, "In the real world, markets aren’t perfect." He then goes on to tell us that the Ex-Im Bank doesn't just help Boeing sell planes, it also helps thousands of small businesses export their goods.

Let's get out President Obama's selective tariffs. Suppose he imposes a 3 percent tariff on planes and aircraft parts. Defenders of the Obama tariffs will point out that this tariff is not only helping Boeing, but hundreds of small businesses that provides parts and services for these planes. See, in the real world, markets aren’t perfect.

We can point out that the government is actually making money off these tariffs, just like it does with the loans provided through the Ex-Im Bank, what's the problem?

At this point our free traders would jumping up and down yelling that we are paying higher prices for planes because of the tariffs. The government may be making money, but consumers are paying the price.

That's a good argument, but if our free traders have taken intro economics they would know that by diverting capital to the winners picked by the Ex-Im Bank, we are raising the price of capital for other firms. (Increased demand leads to higher prices.) This means that all the small businesses that are not privileged with subsidies from the Ex-Im Bank are now penalized by paying higher interest rates than would otherwise be the case.

In fact, we could actually treat interest rate subsidies and tariffs as interchangeable forms of protection. We can tell the plane and aircraft industry that it will have the option of either a 3 percent tariff on imports or a 3 percentage point reduction (this may not be the exact number) on the interest rate it pays on borrowing by getting loans through our protectionist bank. Is everybody happy now?

(In fairness, in the current economic environment of zero short-term interest rates and considerable unemployment, the impact of subsidized loans on borrowing costs for others would be essentially zero. However it is also easy to show that protectionist measures would increase output and employment in the current economy.)

Anyhow, it is possible to make an argument for the Ex-Im Bank, but it is an argument that people who like to boast about being free-traders should be embarrassed to make. See you at the Neanderthal dance.