Why the Likely Resurrection of Eximbank is Worse than the Budget Deal

The friends of liberty appear to be in danger of suffering two defeats— first, a budget deal that rolls back the sequester without reforms to the core of entitlements and, second, the resurrection of Eximbank. The second defeat would be more devastating than the first, because the procedural advantages are all with liberty in the case of Eximbank.

Although the Republicans have a majority in both houses of Congress, they confront substantial obstacles to working their will on the budget.  The President can veto (without fear of override) any appropriation bill they send up. Even worse, the Democrats can filibuster any bill in the Senate. As a result, the Republicans cannot even send a continuing resolution funding the government to the President’s desk without substantial Democratic support.

Without that resolution, the government will shut down. In the past, government shutdowns have been blamed on Republicans when in control of Congress. People are rationally ignorant of politics and will not follow the various machinations to understand that Republicans are not to blame. Moreover, the Republicans are the party favoring smaller government and thus seem in some sense the logical party at fault. Because of the likely landscape of public opinion, Republicans have little leverage in spending battles when the government is divided as now.

Mike Rappaport and I have suggested that when Republicans gain control of the entire government, they could create a default appropriation rule that keeps the government running but with a lower level of spending. That rule would give the party of limited government more leverage because the failure to enact a continuing resolution would not have the boomerang effect that it has had in the past. But barring such reform, the Republican decision to compromise on the budget was not irrational, even in the cause of limited government.

In contrast, in the battle over Eximbank, the procedural posture gives the friends of liberty all the leverage. Eximbank’s charter has run out and requires reauthorization. Thus, the President’s veto power and the Senate filibuster rule are irrelevant. And in this case the Chairman of the House Committee on Financial Services was a strong opponent of the bank.  Reauthorization could not even get to the House floor under regular order.

Eximbank may be revived only because more than forty Republicans joined with all Democrats on a discharge petition that forced a vote in the House of Repressentatives to reauthorize it.This was an extraordinary act of party disloyalty, because it weakens the power of the majority party over the House of Representatives. In the past, even signing a discharge petition on any important issue would have risked retribution by the Speaker in the form of removal of choice committee assignments. It is Eximbank’s revival, not the budget deal, that calls into question the Republican Rarty’s bona fides as a party of limited government. It is not only that rank and file members signed a discharge position against their leadership, but that the leadership did not punish them, suggesting the possibility of collusion or at least indifference.

Eximbank gains its political power because it aids a powerful interest group (corporations that want government guaranteed loans) at the expense of the diffuse public (the taxpayers on the hook for possible losses on such loans). But the classic special interest nature of this legislation makes its passage all the more an indictment of many members of the majority party