- Nov 26, 2011
- 123,587
- 55,674
- 2,290
I have often attacked liberals for their one size fits all approach to the widening income gap. Their answer to the problem is "tax the rich more", which punishes the innocent along with the guilty. Such a "solution" addresses the symptoms, but does not cure the disease, and so the disease would continue unabated. The income gap would continue to increase.
I have said the real problem is not that the rich aren't being taxed enough. The real problem is that some players are given a legislative field that has been radically tilted in their favor.
In this topic, I am going to provide an example of the advantages given to a sub-group of "the rich". We are going to talk about the Export-Import Bank, a federal body.
First, I will provide the on-paper reasoning given for the existence of the Export-Import Bank and how it is supposed to operate. Then I will point out the serious flaws which are exposed as a result of the realities of its operations.
Suppose you are an American company that has a chance to sell a lot of your products to a foreign entity or country. Suppose also the foreign entity/country has a reputation as being in, or being, a real shit hole. To buy your products, that foreign entity or country will need a loan. Since the entity or country is considered a big credit risk, it won't be able to get a loan on good terms.
But suppose the US government was willing to float a low interest rate loan to that entity or country so it could then buy your products? Hey, that means your products get sold, which means...JOBS! (applause)
The US government floats these low interest loans by way of the Export-Import Bank. From here on, for sake of brevity, I will call that bank Ex-Im.
Ex-Im is able to make low interest loans because of arbitrage. You see, as a federal body, the Ex-Im bank can borrow money at really, really low rates. Then it can turn around and loan that money at low rates and still make a "profit" for the US taxpayer.
It turns out the default rate on Ex-Im loans is incredibly low, so this is not a flaw in the plan.
All right. So up to this point, it sounds pretty good, right? Everybody wins. US companies get to sell their stuff, people get jobs to make that stuff, and the US government makes a profit for the taxpayers on the loans it floats. Win/win, right?
Nope.
First, Ex-Im isn't really making a profit. They are using accounting tricks. You can read about those tricks here. Ex-Im is actually operating at a loss.
Okay but...JOBS! (applause)
Well, it turns out that Ex-Im pretty much only benefits gigantic US corporations and not small businesses. Why do gigantic US corporations need this kind of government handout ("corporate welfare")?
They don't. In fact, their advantages are coming at a cost to other US businesses, and this is where the unlevel playing field becomes most evident.
For the most part, Ex-Im loans aren't really being made to shit hole entities or countries. They are being made to entities and countries which could very easily get reasonably low interest loans without the Ex-Im bank. So the Ex-Im bank is actually providing a below market loan to these countries and entities that don't really need a leg up, and that, ladies and gentlemen, is an unfair business practice, no?
By far the biggest beneficiary of Ex-Im is Boeing.
By being able to get a loan at below market rates, the favored airline carriers are provided a significant cost advantage relative to their competitors.
And there is your unlevel playing field, boys and girls. All in the service of Boeing. That is rank cronyism of the worst sort.
These are the sort of complicated and messy things which need to be extricated from our legislative morass. Raising taxes won’t solve this problem. That is a simpleton’s answer to everything. The real solutions will take hard work, and there are not enough people around right now who aren’t afraid of some hard work. There are too many bumper stick intellects looking for easy answers to hard problems.
I have said the real problem is not that the rich aren't being taxed enough. The real problem is that some players are given a legislative field that has been radically tilted in their favor.
In this topic, I am going to provide an example of the advantages given to a sub-group of "the rich". We are going to talk about the Export-Import Bank, a federal body.
First, I will provide the on-paper reasoning given for the existence of the Export-Import Bank and how it is supposed to operate. Then I will point out the serious flaws which are exposed as a result of the realities of its operations.
Suppose you are an American company that has a chance to sell a lot of your products to a foreign entity or country. Suppose also the foreign entity/country has a reputation as being in, or being, a real shit hole. To buy your products, that foreign entity or country will need a loan. Since the entity or country is considered a big credit risk, it won't be able to get a loan on good terms.
But suppose the US government was willing to float a low interest rate loan to that entity or country so it could then buy your products? Hey, that means your products get sold, which means...JOBS! (applause)
The US government floats these low interest loans by way of the Export-Import Bank. From here on, for sake of brevity, I will call that bank Ex-Im.
Ex-Im is able to make low interest loans because of arbitrage. You see, as a federal body, the Ex-Im bank can borrow money at really, really low rates. Then it can turn around and loan that money at low rates and still make a "profit" for the US taxpayer.
It turns out the default rate on Ex-Im loans is incredibly low, so this is not a flaw in the plan.
All right. So up to this point, it sounds pretty good, right? Everybody wins. US companies get to sell their stuff, people get jobs to make that stuff, and the US government makes a profit for the taxpayers on the loans it floats. Win/win, right?
Nope.
First, Ex-Im isn't really making a profit. They are using accounting tricks. You can read about those tricks here. Ex-Im is actually operating at a loss.
Okay but...JOBS! (applause)
Well, it turns out that Ex-Im pretty much only benefits gigantic US corporations and not small businesses. Why do gigantic US corporations need this kind of government handout ("corporate welfare")?
They don't. In fact, their advantages are coming at a cost to other US businesses, and this is where the unlevel playing field becomes most evident.
For the most part, Ex-Im loans aren't really being made to shit hole entities or countries. They are being made to entities and countries which could very easily get reasonably low interest loans without the Ex-Im bank. So the Ex-Im bank is actually providing a below market loan to these countries and entities that don't really need a leg up, and that, ladies and gentlemen, is an unfair business practice, no?
By far the biggest beneficiary of Ex-Im is Boeing.
By being able to get a loan at below market rates, the favored airline carriers are provided a significant cost advantage relative to their competitors.
And there is your unlevel playing field, boys and girls. All in the service of Boeing. That is rank cronyism of the worst sort.
These are the sort of complicated and messy things which need to be extricated from our legislative morass. Raising taxes won’t solve this problem. That is a simpleton’s answer to everything. The real solutions will take hard work, and there are not enough people around right now who aren’t afraid of some hard work. There are too many bumper stick intellects looking for easy answers to hard problems.
Last edited:
