September 20, 2015
Joe Nocera seems to be obsessed with promoting the Export-Import Bank. Today he put out at least his fourth column on the topic, although this time he did refrain from calling his opponents “idiotic.”
His story is that Republican opponents of the bank are “job-killers.” (I’m not sure if this also applies to us non-Republican opponents.) Let’s think this one through for a moment.
The basic story is that we have huge companies like General Electric and Caterpillar that get the vast majority of the subsidized loans from the Ex-Im Bank. Does that sound like handouts to huge companies? Nope, Nocera tells us just because these huge companies get all the money doesn’t mean that they are the beneficiaries:
“‘At a time when we want to compete around the world, it is hard to believe what is happening in the U.S. Congress,’ said Jeff Immelt, the chief executive of General Electric.
“‘The ultimate irony is that we are on the verge of an American manufacturing renaissance,’ bemoaned Jim McNerney, the chairman of Boeing. ‘Yet this action is causing companies to start looking outside the U.S. instead.’
“‘People complain that the bank only helps big companies,’ said Doug Oberhelman, the chairman and C.E.O. of Caterpillar. ‘A lot of our suppliers are small. They don’t export, but we do. And if we aren’t exporting, they aren’t selling to us.” He added, “I find it staggering that we would put highly paid export-oriented jobs at risk.’
“What Oberhelman finds ‘staggering,’ Immelt finds ‘hard to believe’ and McNerney finds ironic is the refusal of Republican extremists — led by the House Financial Services Committee’s chairman, Jeb Hensarling — to allow a vote on the reauthorization of the Export-Import Bank of the United States, a vote that would pass in a landslide.”
Okay, this argument has the form of the government should give me money because it is not really about helping me, I will spend the money on a car, on clothes, and on restaurant meals. If the government doesn’t give me money, then I won’t spend this money and all the people who would have been employed by this spending will be out of jobs. So it’s really about helping them, not me.
It’s not surprising that the CEOs of Boeing, General Electric, and Caterpillar would make this sort of argument. It is a bit surprising that an established columnist with the country’s leading newspaper would take it seriously.
But let’s get beyond the silliness and look more closely at the economics of the situation. Some folks may have heard of the Federal Reserve Board. They considered raising interest rates last week, but ultimately decided not to. Had the Fed actually raised rates the point would have been to slow the economy and reduce the rate of job creation. In other words, the Fed would be raising rates because it is worried that we will have too many jobs. (If you don’t understand this point then you need to do more homework. This is why the Fed raises rates.)
Now back to the Ex-Im Bank. Suppose that the Republicans in Congress read Nocera’s column, realize their stupidity, and rush out and reauthorize the Ex-Im Bank. Boeing, Caterpillar, and General Electric then use their subsidized loans to boost their exports. This lead to more people working at these companies and also at their smaller suppliers. Is everyone happy?
Not quite.
Our friends at the Fed see the uptick in employment. (Actually, it will probably be too small to have a noticeable impact in the data, but let’s play along.) They decide that employment growth is definitely getting out of hand and start jacking up interest rates. This means less car buying, less home construction, less private investment, and less infrastructure investment by state and local governments. Also, higher interest rates are likely to lead to a higher dollar, which means fewer exports and more imports. Since the Fed has an idea of what employment levels and job growth rates they are willing to accept, any boost to employment that results from subsidized loans from the Ex-Im Bank is likely to be offset by the job losses resulting from higher interest rates.
Are the jobs that are created by the subsidized loans to Boeing, Caterpillar, and General Electric better jobs than the ones lost in the auto sector, construction industry and other interest rate sectors of the economy? Offhand, I have no idea. But if Nocera or anyone wants to make a serious argument for the Ex-Im Bank, they have to be able to tell us why the jobs created by these subsidies are better than the jobs that they displace. Until they can make this case, they don’t have an argument for reauthorizing the Ex-Im Bank, just a lot of name-calling.
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