General Electric recently announced a plan to move almost 1,000 jobs abroad. The company blamed its loss of access to loans from the Export–Import Bank for the move.
It’s not surprising that GE would use its elimination of jobs as an excuse to push its political agenda; that is what big corporations do. But we should look at this more seriously.
The Ex-Im Bank, which supporters in Congress seek to reauthorize before Speaker John Boehner steps down on Oct. 30, is not a magical job creation machine, it is a source of subsidized loans from the government. When a company like GE loses this subsidy it could lose some business, hence the shifting of 1,000 jobs. However, GE could look to offset the lost subsidies in other ways.
For example cutting CEO Jeffrey Immelt’s $37.2 million salary by a third would be enough to offset a 2 percentage point subsidy on $600 million worth of loans. But it is understandable that Immelt would rather GE’s public relations department complain about the lost subsidies than cut his own pay.
Obviously the bottom line for GE looks better with the Ex-IM subsidies than without them, but as every economist knows, these subsidized loans are not a free lunch. If a politically connected firm is getting loans because of a government subsidy that means less connected borrowers will have to pay more for their loans. This is especially clear in a context where the Fed is raising interest rates to slow the economy. The Fed will raise interest rates faster and higher because of the Ex-Im loans to GE.
We will never hear about the jobs lost in the companies that have to pay more for their loans due to the subsidies given to GE. These companies don’t have PR departments with the same access to the media as GE. But that doesn’t make the lost jobs any less real to the workers affected.
So the question of the Ex-Im Bank is not one about jobs. It is a question about subsidizing GE and Jeffrey Immelt’s paycheck.
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