What does the Ex-Im Bank really cost taxpayers?

A heated debate is raging in Congress over whether to reauthorize the Export-Import Bank. The Ex-Im Bank, as it is commonly known, is an independent federal agency charged with providing credit assistance for U.S. exporters. Beneficiaries include large corporations (in 2012, over 80% of the guarantees made went to Boeing) and many smaller companies.

The philosophical heart of the debate is about industrial policy. Supporters argue that other countries provide similar assistance, and that the Ex-Im Bank is necessary to level the international playing field. Opponents object to favoring special interests over those of the U.S. taxpayer.

Which raises the question, how much does the Ex-Im Bank really cost taxpayers? The short answer is: considerably more than what the federal budget reports. In fact the budget shows that Ex-Im bank makes money for taxpayers, despite providing credit guarantees at lower prices than what any private financial institution would offer. For more on how to think about the true cost of Ex-Im’s guarantees, I recommend reading this excellent blog post on the topic by Donald Marron, the director of the nonpartisan Urban-Brookings Tax Policy Center: http://blog.metrotrends.org/2014/09/export-import-bank-lose-money/

Another interesting perspective was shared with me by an expert on government subsidies at the OECD. Whereas most trade subsidies are prohibited by treaty, credit support is not classified as a subsidy in international agreements. Under-pricing export guarantees is a way for governments to circumvent the rules barring trade subsidies.