There was a time when America could rightly call itself the “arsenal of democracy.” Its industrial output was so great that it dwarfed the production of potential enemies.
Those days are over. The smart phone or laptop computer on which you are reading this was made in Asia. The spoon with which you are stirring your coffee probably was too, because the last U.S. maker of metal flatware closed in 2011. The incandescent light bulb in your reading lamp was also manufactured overseas, because nobody in America still makes such bulbs (go to the lighting aisle at Home Depot and check it out — “Hecho en China”). If you are taking penicillin for an infection or prednisone for allergies or metformin for high blood sugar, the key ingredients in the drugs you depend on were made in China or India. And when you head out on the highway after reading this, the reinforced concrete you will see being poured at road construction sites has to contain foreign ingredients, because nobody in America makes steel reinforcing bars (rebar) anymore.
It seems that America’s leading export since the new millennium began has been its factories. Not surprisingly, the U.S. share of global economic output has declined from a third to a quarter in barely a dozen years, in a transfer of wealth from West to East that the intelligence community says is unprecedented. So what is Washington doing to cope with this unfolding economic catastrophe? It’s expanding the welfare state, borrowing more money, and shutting down the government’s sole export credit agency. In other words, it is accelerating America’s economic decline. The decay that afflicts so many former industrial centers in America, from Birmingham to Baltimore to South Bend to Saint Louis, is a bipartisan phenomenon, fashioned by ideologues of the left and right whose philosophies have failed their constituents.
The current debate about whether America needs an export-credit agency is emblematic of how ignorant many political players are. The critics rail against the big companies who use Ex-Im Bank services — Boeing, Caterpillar, GE — without noticing they are among the shrinking fraternity of companies that still dominate their industries while manufacturing in America. Take Boeing. Over 40% of Ex-Im’s loan portfolio consists of credit extended to foreign buyers of Boeing jetliners. Is that a bad thing? Boeing sells 80% of its products abroad, but generates 80% of its content domestically. Literally thousands of suppliers, big and small, benefit from its exports. But Ex-Im’s critics want to shut off Boeing’s access to the bank’s facilities, even though its main rival, Airbus, has access to several European export-credit agencies.
Ex-Im critics say they want to end “corporate welfare” but the record is very clear that anybody using Ex-Im credit has to pay the money back with interest. That’s why the bank doesn’t need an annual appropriation from Congress — it pays for itself. The opposite situation prevails in Europe, where governments continue to subsidize Airbus year after year even though the World Trade Organization has ruled that European “launch aid” is illegal. In fact, WTO found that every single aircraft Airbus has marketed was illegally subsidized, and that in the absence of such market distortions, the company probably wouldn’t exist at all.
So what are free traders on Capitol Hill doing to combat this assault against America’s biggest exporter? They’re shutting down the only agency that helps Boeing to level the playing field. They don’t care about the tens of thousands of jobs that already have been lost, or the fact that America is running the biggest non-petroleum trade deficit in history, or that private lenders say they can’t fill the gap in financing that will be created if Ex-Im dies. It’s a matter of principle they say.
The only principle at work here is that when people use ideology as a substitute for facts, they tend to make mistakes. In the case of Ex-Im, the critics are making a big mistake. And if they succeed in shutting the agency down, their reward will be a bigger welfare state as thousands of workers who once were gainfully employed by exporters hit the unemployment lines. Another nail in the coffin of industrial America.
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