Tuesday, June 16, 2015

Harvard Economics Department Chairman : Arguments For Ex-Im Bank Are Weak

Professor Greg Mankiw reports on the rather weak arguments for the Export-Import Bank:
1. It creates jobs. Of course it does! If the government were to put the names of all businesses into a hat, pull out a few randomly, and give those a per unit subsidy, those businesses would expand and hire more workers. That would not make it a good policy, however, because the wrong jobs would be created.

2. It returns money to the Treasury. Really? If the bank were truly a profitable venture, we could privatize it. I bet if the government tried to sell off the Ex-Im Bank, it wouldn't get much, if anything at all. If the Bank's activity were actually profitable, we wouldn't need a government-run bank to do it.

3. Other countries give similar subsidies to their firms. So what? If other nations engage in corporate welfare, that is no reason for the United States to follow suit in the name of a level playing field. We don't need to import other nations' bad policies.

Maybe there are better arguments for the Export-Import Bank. But if this is the best advocates of the Bank can do, it shouldn't be reauthorized.
Hard to argue with the economic analysis here.