Though he says he’s not terribly political, James McDevitt is a sort of walking Republican trifecta. He’s the COO of a small business called Applied Machinery; his company makes oil-drilling rigs for the extraction industry; and he’s from the deep red state of Texas. In all, it’s safe to say that whether he’s political or not, he isn’t used to receiving unpleasant news from the GOP.
So for McDevitt, the recent battle in Washington over the future of the Export-Import Bank of the United States has been a new experience. Conservative Republicans in Congress seem intent on shutting down the Ex-Im Bank, which offers loans and guarantees to U.S. companies and foreign purchasers as a means of encouraging the export of U.S-made goods. (It costs taxpayers nothing; the bank operates at a profit.)
“I was shocked to find out it was Republicans in Congress that aren’t supporting the Ex-Im Bank,” McDevitt said.
The two congressional districts in the Houston area where the several hundred employees of Applied Machinery work are represented by Ted Poe and Kevin Brady, two Republican lawmakers. Poe is an avowed opponent of Ex-Im, having voted against the renewal of its charter in 2012. Brady, who voted in favor of it in 2012, has not yet taken a public stance on renewing the charter when it expires at the end of the summer.
This puzzles McDevitt. “Texas is the number one exporting state in the country and Houston is the number one exporting city,” he said. “Not to have a congressman stand up for exports, stand up for U.S. jobs? I’m shocked.”
Neither Poe’s nor Brady’s office returned requests for comment on this story.
The White House wants the bank reauthorized, as do many Senate Democrats. But hard-right conservatives in Congress argue that the bank is an example of “crony capitalism” – the government providing sweetheart loan guarantees and other benefits to big corporations instead of forcing companies to get their financing on the open market.
And on its face, they have a case.
According to Ex-Im’s own records, more than three quarters of the financial support the bank provides to U.S. businesses goes to a handful of huge corporations, including Boeing, General Electric, and Bechtel.
There are counter arguments, of course. Boeing’s sole competitor is Airbus, the European airplane manufacturer that receives massive subsidies from multiple European governments. GE, Bechtel, and other U.S. multinationals compete with companies around the world whose governments aggressively subsidize exports.
As conservative economist Douglas Holtz-Eakin put it, it is essential that the U.S. not “disarm” in fights over trade.
“The reality is you would like to live in a world … that does not have a need for an export import bank, one where international transactions were done on a level playing field,” he said in an interview. “That’s just not the reality. Many other countries, notably China and the BRICs, other OECD countries, all have an export credit agency.”
McDevitt’s argument is more specific. His company, he says, faces significant challenges that would be difficult or impossible to overcome without its support.
“We rely on Ex-Im Bank because we can’t borrow money from the bank without Ex-Im backing it,” he said, recounting the time a bank executive laughed at him when he went looking for a loan to do business in oil-rich Nigeria.
“This sounds like an email scam,” the banker told him. But when McDevitt came back with a loan guarantee from Ex-Im, Applied Machinery was able to secure a $25 million line of credit for working capital, which allowed the company to bid on – and win – the contract.
The benefit is not just in the provision of working capital. In countries like Nigeria, McDevitt said, it can be hard for purchasers of the equipment he makes to get local financing. Ex-Im loans to purchasers allows some deals to happen that otherwise would not.
“When we do international business, it would be very hard for us to compete without the Ex-Im Bank,” he said.
As things stand right now, there appears to be a very good chance that the reauthorization of the bank will not get through the Republican-led House of Representatives. House Speaker John Boehner (R-OH) has been non-committal, and newly elected Majority Leader Kevin McCarthy (R-CA) has come out against renewal.
The prospect of the bank’s demise has McDevitt concerned. “It’s really going to affect our business, because we are bidding on big international projects,” he said. “I’m scared about what’s going to happen. Do I not commit to big international projects because the financing might not be there? Will I be laying people off because of this? I don’t think they understand the effect this will have.”
Top Reads from The Fiscal Times: