Obama wants to renew the Export Import Bank

[Torie]

The Export-Import Bank turns a profit.  How is something welfare if it actually makes money?

Because it's a subsidy in the sense that the big corporations get lower interest rates, then they would from a private lender. It only makes money if one ignores the time value of money, to wit that the Feds could earn interest on the money other loaned. And in an omega, economic collapse situation, that hits every 10-20 years or so, the scheme could lose a lot of money. Shorter term profits are not a good indicator of the long term financial return of this sort of program.

[Torie]

The Export-Import Bank turns a profit.  How is something welfare if it actually makes money?

Because it's a subsidy in the sense that the big corporations get lower interest rates, then they would from a private lender. It only makes money if one ignores the time value of money, to wit that the Feds could earn interest on the money other loaned. And in an omega, economic collapse situation, that hits every 10-20 years or so, the scheme could lose a lot of money. Shorter term profits are not a good indicator of the long term financial return of this sort of program.

How investments do in an economic collapse is not a good indicator of their value either.  In the long-run, the ex-im bank is in the black, right?

The question is whether these programs are worth the investment and whether they have an positive impact on the US economy.   The consensus view seems to be that it's a large net-plus.  And, the proof is that almost every other country has a government entity with the same function.  The only argument against it is that it goes against libertarian principles and it helps private businesses.  In my book, both are worthy objectives for any government program.

I would be interested to see more on this "consensus" thing. Consensus of economists? Is that really true? Being in the black (even if it were in the black overall having taken some omega event economic hits), does not mean that it does not cost money, because it presumably still earns less profit than the the money saved by having less treasury bill interest to pay, adjusted for risk. And it's still a subsidy to big corporations no matter how you cut it. If it were not, then corporations would just get financing from the private sector. But I am open to data based arguments, that this is one of those rare instances where corporate "welfare" is justified. Color me skeptical though

[Torie]

The Export-Import Bank turns a profit.  How is something welfare if it actually makes money?

Because it's a subsidy in the sense that the big corporations get lower interest rates, then they would from a private lender. It only makes money if one ignores the time value of money, to wit that the Feds could earn interest on the money other loaned. And in an omega, economic collapse situation, that hits every 10-20 years or so, the scheme could lose a lot of money. Shorter term profits are not a good indicator of the long term financial return of this sort of program.

The corporations aren't getting the loans. Foreigners are getting loans to buy goods from the United States. Every other country does this.

Oh, so foreigners are getting below market loans, or loans they could not otherwise get, as a subsidy, to buy US goods. Great. I guess maybe it's just to keep up with the competition, and if so, it's really a trade agreement issue between nations, a form of unfair competition. So well - it's complicated. I find as I grow older, that things seem ever more complicated. Less and less is an easy call, particularly on esoteric issues, rather than profound moral issues, like SSM, or the suck education poor kids are getting in the US.

Thanks for the post. I learned something.

[Torie]

The Export-Import Bank turns a profit.  How is something welfare if it actually makes money?

Because it's a subsidy in the sense that the big corporations get lower interest rates, then they would from a private lender. It only makes money if one ignores the time value of money, to wit that the Feds could earn interest on the money other loaned. And in an omega, economic collapse situation, that hits every 10-20 years or so, the scheme could lose a lot of money. Shorter term profits are not a good indicator of the long term financial return of this sort of program.

The corporations aren't getting the loans. Foreigners are getting loans to buy goods from the United States. Every other country does this.

I like how this is supposed to be a valid point in defense. Well, if most countries do it, than it must be right!

The point is that if other nations do it, and the US is a lone wolf in not doing it, it puts US exporters at a competitive disadvantage due to foreign government subsidies of the exports of their nations. It is really a trade issue, like tariffs, currency manipulation and exchange rates, giving tax incentives by nations for export sales, and so forth. In a perfect world, I agree, nobody should subsidize exports by whatever means, nor have tariffs for that matter. But we don't live in a perfect world.