The act of not reauthorizing the Export-Import Bank of the U.S. is just the latest example of how the extreme dysfunction found in Congress is slowing down what could be a more robust economic recovery.
It’s easy to think of metal fabricating as strictly a domestic activity, but that’s not reality. Metal components made in Paris, Mo., easily can wind up in a product used in Paris, France. It’s the law of unintended globalism, made possible by modern trade agreements and technology that have made the world a slightly smaller place. When Boeing delivers a plane to a customer in China, it is delivering the handiwork of multiple U.S. companies.
Some fabricators have taken the more direct step of actually engaging with foreign customers. In a 2013 survey of The FABRICATOR’s readership, which was sent out to more than 6,000 subscribers, about a quarter of the 81 respondents indicated that they currently compete for business in foreign countries. Sixty-six percent said they compete in Asia, 56 percent in Europe, and 54 percent in Latin America.
Stephen Smith, founder of It Straps On (ISO) Inc., a Covington, La.-based company that makes stainless steel bandings, buckles, and brackets, told me several years ago that seeking out customers outside U.S. borders just made sense. “… We realized that the U.S. is just one small part of this world. We wanted to export,” he said at the time. Earlier this year the U.S. Department of Commerce awarded ISO the E-Star Award in recognition of four years of increased export growth. (Only companies that have previously won the agency’s E Award for exporting sales are eligible for the E-Star Award.) Obviously, exports remain an important part of ISO’s overall business success.
So it does for a spate of manufacturers, from the stainless steel banding fabricator to the billion-dollar aerospace conglomerate. The world is their market.
Believe it or not, the government wants to help with this. Its export credit financing agency, the Export-Import (Ex-Im) Bank of the U.S., helps to provide loan guarantees, working capital, and insurance for commercial bank loans used to support the export deals of domestic companies, many of which happen to be in the metal manufacturing industry. The agency is also self-funded and returned $1 billion to the U.S. Department of the Treasury last year.
But some Congressional lawmakers don’t want to reauthorize the Ex-Im Bank’s existence. These politicians claim the free market can handle the export financing better, even though many foreign countries have aggressive export credit financing bodies that help their own win new contracts. They claim the Ex-Im Bank is an example of corporate welfare, supporting huge multinational companies based in the U.S. at the expense of smaller companies, but the agency isn’t turning away small companies. (Congress dictates that 20 percent of the dollar amount of Ex-Im Bank loans go to small business, and evidence suggests that the Ex-Im Bank can do a better job serving that constituency.) They call the Ex-Im Bank corrupt because some employees were found to have accepted inappropriate gifts in exchange for services, but an investigation later led to the firing of three of those employees.
These lawmakers want change, or they aren’t going to provide key votes to reauthorize the Ex-Im Bank’s existence. After Sept. 30, the agency isn’t going to be able to make any new loans without reauthorization.
Truthfully, this probably will get resolved when Congress returns from its summer recess in early September. The Congressional critics probably will get some assurances that the bank’s loan practices will be investigated. A reauthorization will occur, but with too much angst.
This knockdown and drag-it-out approach to basic governmental operation—over the most basic of legislative issues—is taking its toll on the U.S. economy. Economic indicators keep improving from month to month, and hiring activity is trending consistently upward. Yet most U.S. citizens a lack confidence in their financial position in this improved economic environment. In an early August survey sponsored by The Wall Street Journal and NBC News, 64 percent of respondents reported that they are still feeling some sort of impact from the Great Recession, which officially ended five years ago. As part of the same survey, 76 percent of adults believe their children’s lives will not be as prosperous as theirs.
If this country’s leaders expect U.S. consumers to open up their wallets as they did before the last economic downturn and for Wall Street companies to invest the millions of cash sitting away in bank accounts, they need to get back to basic governing. If the elected officials—who all have historically low approval ratings—choose not to do that, this “reccession hangover,” as one analyst put it, will continue to prevent rapid economic expansion.
Meanwhile, U.S. manufacturers, especially those whose exports play an important role in their revenue stream, will push forward and make the most of a pretty crummy situation.