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09.09.2014 0

Pearlstein is right, time to end corporate welfare

Anti Ecport-Import BankBy Robert Romano

“If the government has no place insuring export loans, then surely it also has no place providing subsidized crop insurance to farmers…”

That was Washington Post columnist Steven Pearlstein, commenting on the imminent demise of the Export Import Bank of the United States, a $27.3 billion a year loan program to supposedly “facilitate exports of goods and services,” according to the bank’s charter. That charter is set to expire later this month pending congressional reauthorization.

But, Pearlstein complains, what about the hundreds of billions of other corporate welfare subsidies and handouts that will continue unabated after Ex-Im is gone?

“[F]or many of the Republican critics, the campaign against the Ex-Im Bank is meant to give the appearance of opposing corporate welfare queens who keep them in office,” Pearlstein wrote.

He’s got a point. Why not also get rid of farm subsidies, crop insurance, and drought relief?

What about flood insurance?

Small business loans?

Or Mississippi River barge subsidies?

Or the U.S. tourism and hotel slush fund?

Or a host of energy subsidies, including the ethanol in gasoline mandate?

Or import quotas on sugar?

And then there’s all of the tax incentives various industries have managed to carve out for themselves in the nation’s gargantuan tax code.

Why not get rid all of those as well? Indeed, why not?

Pearlstein wonders why Democrats do not up the ante against the Republican proposal to shut down the Ex-Im Bank. “What’s really surprising… is that Democrats did not take this opportunity to up the ante on the Republicans by proposing to phase out corporate welfare in all of its forms, including Ex-Im.”

Propose to shut everything down, Pearlstein suggests. Of course, he knows why Democrats won’t do it, acknowledging in his piece, “Naturally, anything House Republicans are against these days, Democrats are for. So we have a Democratic Party — including such crusaders against corporate welfare as Sens. Sherrod Brown (Ohio) and Elizabeth Warren (Mass.) — coming together to defend [the Ex-Im Bank].”

But beyond partisan dementia, perhaps the real danger to corporatism is how little economic impact ending the hundreds of billions of subsidies really would have on the economy. Nobody except the subsidized would even really notice.

“In truth,” Pearlstein acknowledges, “the Union will survive, and the economy will be largely unaffected, whether or not the Ex-Im Bank is reauthorized.”

The same can be said for all of the other aforementioned subsidies. Many of those are kind of small potatoes. Almost nobody would care if, for example, the Mississippi River barges didn’t get their cut of the pie.

So let’s think big. Insurance companies are bound to receive hundreds of billions of Obamacare subsidies over the next ten years. But they don’t need those. They were doing just fine without them. So let’s get rid of them.

Financial institutions have received trillions of dollars of free subsidies from the Federal Reserve via quantitative easing to purchase back risky mortgage backed securities but also many more U.S. treasuries. The program was unprecedented prior to 2008. Therefore, they don’t need it. No more printing free money for banks.

Government-backed student loans and federal grants are also a major source of funding for higher education institutions both public and private, and have contributed to the skyrocketing cost of tuition in the rush to go to college with many pursuing majors and careers that do not even require a college education in reality. In the process, it is becoming cost-ineffective to take on majors that really do require a degree. So, let’s cut it back. Only do loans for professions for which there is an economic demand, or else, just let private financial institutions provide the financing.

The same could be said for government backing of the housing industry that created that God-awful credit bubble, inflated home values to unaffordable heights, and nearly wrecked the global economy. Let’s stop doing that, too.

Let’s see what would happen. We bet that once all of these subsidized industries were off on their own, and could no longer depend on Congress and faceless bureaucrats for their largesse, a funny thing would happen. It’s called competition.

Instead of perversely competing for government favors and competitive advantage via lobbyists in Washington, D.C., businesses and other institutions would have compete for your business and survive on their own merits. Prices would drop. Consumers would benefit. Of course, then politicians would have to do without their cash cow and means of maintaining power.

Which is probably why it won’t happen and, why, in the end, the Export Import Bank will probably survive, too. But, oh well. One can dream.

Robert Romano is the senior editor of Americans for Limited Government.

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