The richest person in Australia, Gina Rinehart, is set to win the corporate welfare lottery, courtesy of United States taxpayers.
Videos By Rare
It was recently announced that Ms. Rinehart’s iron ore mine company, Roy Hill, will receive $650 million in financial guarantees from the United States Export-Import Bank. Forbes estimates that Gina Rinehart is worth a whopping $17 billion, which is enough money to self-finance the loan herself 25 times over.
If all of this didn’t seem egregious enough, then consider that this U.S. backed loan with unbelievably favorable terms will have profound economic consequences on American companies, especially those in the mining industry. American mining companies do not have the same access to the favorable loans offered to foreign competitors by the Export-Import Bank. Consequentially, Roy Hill is able to undermine the American mining industry by offering discounted prices in comparison to its American counterparts. The end result is that American companies have to cut costs in other areas to compensate for the advantage provided by the loan guarantees issued by their own government. More often than not, companies end up terminating worker contracts and killing American jobs.
For years, many Republicans have shouted into the wind, calling on Congress to terminate the Ex-Im Bank;s charter or at the very least rein in practices that directly impact American companies. Last year, some Members of Congress voted again legislation reauthorizing the Bank’s charter, but many chose a different path. Some of the senators who voted in favor of the Bank’s reauthorization are now reeling at their decision. They may also be reconsidering their vote in favor of Fred Hochberg’s nomination as the Bank’s president. Unsurprisingly, they are the same senators that represent iron ore mining districts.
Senators Amy Klobuchar, Al Franken, Carl Levin and Debbie Stabenow all voted for the Bank’s reauthorization, but they have become “concerned the proposed Ex-Im Bank financing and the large amount of iron capacity that it would subsidize will…substantially injure American iron ore and steel producers and their employees that are competing in the same global marketplace.” And they have great cause to be concerned.
According to these senators, the Export-Import Bank would “displace $600 million of U.S. iron ore exports,” resulting in a total loss of $1.8 billion to the U.S. iron ore industry. In an appeal to reverse Export-Import Bank’s decision, the senators accurately note that Ex-Im’s charter states that “the Bank may not extend any direct credit or financial guarantee for establishing or expanding production of any commodity for export by any country if the Bank determines that the resulting production capacity is expected to compete with U.S. production of the same, similar or competing commodity.”
Unfortunately, this has not stopped the Bank in the past. In fact, Ex-Im has consistently harmed the American airline industry by offering plum financial backing to foreign carriers. These loans have acted as subsidies that undercut U.S. airlines, allowing foreign carriers to trim fat from their operating costs and increase their profit. The direct impact on the American airline industry has been a loss of as many as 7,500 jobs and as much as $684 billion.
If the Export-Import Bank approves the Roy Hill loan, then more Americans will surely lose jobs. The Export-Import Bank has assured the senators that they will conduct an “extensive economic impact study,” but it would be more appropriate for the Bank to simply put an end to this nonsense and kill the deal. Now that Democrats and Republicans are united against the Bank’s lending practices, it is time that Congress pass legislation to bring an end to this government agency’s record of economic destruction. Maybe they can even convince President Obama to rescind his support for the Bank, after all he himself once said that the Export-Import Bank has “become little more than a fund for corporate welfare.”