We have been living through a very interesting economic time. A good example came last year with the Fiscal Cliff deal. I was for it. In fact, I was unhappy that Obama cut a worse deal than he could have—allowing rich people to keep more money than should have been. But as I also wrote at the time: in the long term, it was good policy; but in the short term, it was bad policy. We wanted the people to have as much money as possible. In this case, it didn’t matter that much because only the rich saw their income taxes go back up to the normal level, and they already have more money than they can spend. (A much bigger issue was an end to the payroll tax holiday, which was just peachy to the Republicans because, let’s fact it, they only care about the taxes of the rich.)
We have the same thing going on with re-authorization of the Export-Import Bank. The truth is that it’s a bad thing: welfare for the rich, masquerading as some great big jobs program. So we ought to get rid of it. But not now. It is a good example of why economic growth has been so anemic. It is economic death by a thousand cuts. If the Republican Party were any kind of reasonable, things would be much better by now. You can see this by looking at federal government spending after every other recession since World War II. Just check out this graph by Ezra Klein from last year. What it shows that is that when Reagan and Bush the Younger where in the White House, federal spending really helped the economy. But under Obama, federal spending has been cut so much that it has actually hurt the economy. That’s not really on Obama but rather the Republicans. And despite this, the Republicans continue to claim that federal spending is out of hand. (And they will only stop saying that when a Republican is in the White House.)
The point is that in general, we should be doing anything we can to help the economy, even stupid things like supporting the Export-Import Bank. But this morning, Dean Baker made an excellent point, More Fun and Games With Export-Import Bank. It’s in response to an article by William Brock who argued that this is all going to cost jobs. Well, that’s not especially true. It will cost profits among those favored, politically connected companies. But okay, lost profits is money that doesn’t cycle in our economy and thus jobs will be lost. But just how big would this hit be?
Baker noted that these cheap loans would not result in a decrease of exports equal to the loans, so we are looking at something like $4 to $11 billion per year, and not the $37 billion that Brock would have us believe. Compare this to the estimated $15 billion per year in exports that we lose each year because we refuse to do business with Iran. In that context, the loss of the Export-Import Bank doesn’t look that bad. We are willing to forego two to three times as much in exports because we still haven’t gotten over the hostage crisis from 35 years ago. And that’s just one example.
In another article this morning, Baker asked, Will Protection of Microsoft in China Cost the Jobs of Manufacturing Workers? The point is one that Bakes makes a lot. Our government only has so much leverage over China. And we seem to be using it to get stronger intellectual property protections, which help already rich software and movie companies. Instead, we should be pressing China to increase the value of its currency so that our exports to them would be more competitive and their exports to us, less competitive. That’s the sort of thing that would really create jobs, but instead the government (as usual) is looking out for the interests of the super rich rent seekers.
What we have in the United States is a media system that pays a whole lot of attention to things that will hurt the super rich (eg the Export-Import Bank, copyright in China) and very little attention to much bigger things that hurt the working class (eg trade with Iran, the strong dollar policy). So while it’s true that the elimination of the Export-Import Bank would be bad in the short term, it wouldn’t be that big a deal. But given that it is a welfare program for the super rich, chances are that the Export-Import Bank will be reauthorized. This is American, damn it: the rich can never be harmed!