No More Benefit of the Doubt

Up until now, I’ve always tried to give the Obama administration the benefit of the doubt when it comes to economic policy. I have always tried to see their side of the argument and assumed they were operating in good faith. Economics is not an exact science and all of us who opine on the subject surely need to exercise an abundance of humility. After reading this editorial in the WSJ about the rejection of loan guarantees to Reliance Power by the Export Import Bank, I have decided that I will no longer provide such benefit. From now on, I will assume that any policy put forth by this administration has an ulterior motive and that it is designed to benefit their supporters, regardless of who else it might harm, and to advance nothing more than their own grasp on power.

I know that all politicians operate in this manner and that is why I am a non committed voter in Florida (that’s the equivalent of indepedent here). I don’t like politicians of any stripe. I assume they are all dishonest narcissists until proven different. I haven’t been disappointed often. What disgusts me about this administration is they don’t seem to care what anyone thinks about their tactics or methods. They are intent only on rewarding their friends and harming their perceived enemies. Joe Biden was always a political hack but he has just gotten worse while working in this administration. His comment the other day to the owner of a yogurt shop who dared to ask him to lower his taxes – “don’t be a smartass” – reveals a contempt for those of us who have to pay the bills so Biden and his ilk can maintain the lifestyle to which they’ve become accustomed that is just stunning.

So what is it that has me so riled up?

Last Thursday, the U.S. Export-Import Bank denied loan guarantees to Reliance Power Ltd., an Indian utility building a coal-fired power plant near Sasan, India. Bucyrus International Inc., a South Milwaukee-based manufacturer, was ready to export some $310 million in mining equipment—and about $600 million over three years—but Reliance’s order was contingent on the favorable financing rates provided by the Ex-Im guarantee. Reliance cancelled the order Monday morning and will reboot with Bucyrus’s competitors in China or Belarus if the bank doesn’t reverse in the coming days.

The Reliance-Bucyrus deal met all of the Export-Import Bank’s qualifying criteria, including the tougher environmental and CO2 standards that the White House has imposed over the last several months. But the bank nonetheless rejected the project in a 2-to-1 vote under pressure from the Treasury and State Departments. “We were absolutely flabbergasted and shocked,” Bucyrus CEO Tim Sullivan told us in an interview.

As a free market type I don’t have much problem with this. I don’t think we need an Export Import bank; if projects make economic sense, they’ll get done and if they don’t they won’t. If Reliance can get the equipment more cheaply somewhere else, that’s what they should do. If Bucyrus wants the business they need to earn it. Here’s where I have a problem:

Then again, the bank is the prototype for Mr. Obama’s agenda of politically directed credit, which makes the Bucyrus decision especially revealing about White House priorities.

In February, for instance, the Administration approved a $528 million low-cost loan to Fisker Automotive, which plans to build a luxury hybrid car that will sell for $48,000 before Uncle Sam’s $7,500 tax credit. Fisker’s plant is in Mr. Biden’s hometown of Wilmington, Delaware.

Dress this up however you want and it is still nothing more than raw corruption. Knowing Biden was the important factor here, not the carbon footprint. The moral implications are even worse. The administration prefers manufacturing expensive trendy cars for rich Americans to providing electricity for poor Indians. This was a political decision and nothing more and is why I oppose government interventions such as the Ex-Im Bank. These institutions are always –  always – subverted for the benefit of the few at the expense of the many. It is disgusting.

Update: If you needed any further evidence that this decision was political, the Ex-Im Bank has now decided that Reliance can resubmit their application. The putative reason is that Reliance will build a couple of solar plants as well, but that was known prior to the rejection so it isn’t new information. The reason for reconsidering the bid is more likely the widespread bad publicity and potential political fallout. And I wonder as well what the administration extracted from Bucyrus in exchange. The mafioso known as the Obama administration doesn’t do anything for free.

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