A government bank that’s financed millions of dollars of exports from Georgia is under fire in the U.S. House of Representatives, where some high-ranking leaders say the bank amounts to a taxpayer subsidy for crony capitalism.
The debate sometimes boils down to the smallest things, like nuts. Pecans coming from Middle Georgia are in high demand in places like China. But shipment and payment for Georgia pecans introduces delays measured in months, and the Export-Import Bank of the United States can provide financing that generates Georgia jobs, said R.G. Lamar, president of Hawkinsville’s Lamar Pecan Co.
Lamar, son and grandson of the family-owned company’s founders, looked into a loan from the bank, normally referred to as the Ex-Im Bank. Lamar didn’t make that deal but is looking into getting export insurance and purchase-order financing from the Ex-Im Bank. The plan could add five to 10 jobs in Hawkinsville, a not-small number for a smaller community, Lamar said. The small community also won’t help cover the costs of waiting 50 to 100 days for payment.
“A local bank won’t do purchase order financing,” he said.
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Montezuma-based Easterlin Pecan Co. has been borrowing about $4.5 million a year in each of several years from the Ex-Im Bank, bank records show. Hudson Pecan Co. of Ocilla has borrowed as much as $3.6 million from the bank.
But the region’s Ex-Im Bank deals aren’t simply related to nuts. Thrush Aircraft, of Albany, borrowed about $23.6 million in 2013 for a variety of deals.
The company, which makes crop-dusting airplanes, received approval for as much as $37.4 million in financing on a single deal, Ex-Im Bank records show.
By far the biggest beneficiary has been another airplane manufacturer, Boeing, which is often trying to sell jets to places that are also looking at European-subsidized Airbus planes.
Asked if export financing was an appropriate role for government, Lamar replied, “Yeah, absolutely. Every other government that’s trying to export to China is getting help, too.”
Greg George, director of Middle Georgia State College’s Center for Economic Analysis, said such government subsidies introduce inefficiencies.
If the Ex-Im Bank puts money into one Middle Georgia community, it’s using money from taxpayers in adjoining communities and the rest of the country to help out.
The Ex-Im Bank was launched in the middle of the Great Depression to stimulate an economy harmed by a collapse of trading because taxes skyrocketed, George said.
“As a corrective measure, it might have been a decent idea to get trade going again. Then if you leave these things in place, it just becomes a source of largesse for companies, a source of corporate welfare,” George said. “The idea is to get the markets going and (then) get out of the way. Eighty years later, we’re still doing it.”
He said he would rather see more organizations like The Georgia Center of Innovation for Aerospace, which offers expertise and partnerships to help expand markets and share academic and professional support.
A political fight rages
Some politicians, such as House Budget Committee Chairman Paul Ryan, R-Wisconsin, dismiss the Ex-Im Bank as “crony capitalism.” They’re fighting a 16th renewal of the charter of the Ex-Im Bank, which expires at the end of September.
Politicians in the debate can’t even agree on basics, such as whether the Ex-Im Bank actually costs taxpayers or turns a profit.
Middle Georgia’s congressmen are divided on the issue of the Ex-Im Bank.
U.S. Rep. Sanford Bishop, D-Ga., said that “The Ex-Im Bank levels the playing field for American companies in a very competitive global market, supporting industry and jobs here at home in Georgia and across the United States.”
Smaller companies have a harder time getting similar rates from banks and private investors, said Bishop, whose 2nd Congressional District comprises part of Bibb County as well as Peach and Crawford counties. Bishop said the bank doesn’t cost American taxpayers and has rigorous oversight.
“As a result, Ex-Im’s default rate has consistently been less than 2 percent over the past eight decades, a default rate lower than commercial banks,” Bishop wrote in response to Telegraph questions.
U.S. Rep. Austin Scott, R-Ga., would not answer specific Telegraph questions. He called for changes but not abolition in a statement.
“It is clear that the Export-Import Bank is in need of reform. However, we must carefully consider the merits and consequences of the Ex-Im Bank prior to reauthorization. Not only is it important to put taxpayer safeguards in place, but we must also ensure that special privileges or unfair advantages are not given to certain companies,” Scott’s statement reads. His 8th Congressional District comprises much of Middle Georgia, including part of Bibb County and all of Houston and Monroe counties.
The office of U.S. Rep. John Barrow, D-Ga., whose 12th Congressional District includes Laurens County, did not respond to The Telegraph’s e-mails and phone calls.
Where the future lies
However the political fight ends up, it’s clear Georgia farmers are betting they’ll be able to keep growing their exports.
Lenny Wells, an associate professor at the University of Georgia’s Tifton campus, said a survey indicates Georgians have planted about 15,000 new acres of pecan trees just in the past four years.
The land reported in the survey -- cleared of pine trees or converted from row crops -- may actually represent only about half of the new pecan trees that were planted. Some of those trees are only now starting to produce nuts; others won’t be producing significant numbers of nuts for another eight years.
It’s a longer-term investment, and growing demand for the nuts has also driven up prices Americans pay since 2009, Wells said.
America grows about 80 percent of the world’s pecans, and Georgia grows about 30 percent of the nation’s crop, Wells said.
“The international demand has been pretty good,” Wells said. “Of course, China has been the main player there, but, of course, there’s growing interest in Europe. And Turkey has been a target for the pecan industry to grow the exports. India also has been another area.”
George, the economist at Middle Georgia State College, said the Ex-Im Bank is creating more inefficient markets. Subsidized exports can cost American taxpayers while raising prices of pecans to Americans, who in effect are competing to eat those pecans for a low price. The land used for pecans could be used for other things as well.
George said a free market could replace the Ex-Im Bank if it weren’t there.
“If there’s a market opportunity, then banks will always be there with the financing. If it makes economic sense, then someone’s going to be there to take the money,” he said. “If there’s a market for it, then it will happen. If there’s not, then it shouldn’t.”
To contact writer Mike Stucka, call 744-4251.