By Rick Perry
There are better ways to help businesses flourish. For starters, cut the sky-high U.S. corporate tax rate.
During the 14 years I served as governor of Texas, I made job growth the highest priority of my administration. And the results are clear: Texas created 1.5 million jobs from December 2007 to December 2014. Without that employment surge in Texas, the nation as a whole would have been 400,000 jobs under water.
Not only is Texas the nation’s economic engine, it is also a major hub for exports. During my third year in office, Texas became the nation’s leading exporter, a title it has retained. Today, Texas products, in areas such as energy, technology and manufacturing, account for nearly one-fifth of all U.S. exports.
The U.S. Export-Import Bank has played a role in making this happen. Since 2007 more than 1,200 Texas companies have obtained help from Ex-Im in financing more than $24 billion in exports.
As governor, I feared that because global competitors use institutions similar to the Ex-Im Bank to help their companies export goods to us, shutting down the Ex-Im Bank would mean unilaterally disarming in a fight that Europe and China intend to win. That is why, in June 2014, I wrote a letter to Congress urging the reauthorization of the Export-Import Bank.
Next month, the bank comes up for reauthorization again—but this time I can’t get on board. I have been deeply disturbed by recent revelations of corruption and bribery at the institution. On April 13 the Justice Department announced that a former Ex-Im loan officer, Johnny Gutierrez, had pleaded guilty to accepting bribes on 19 separate occasions from people with interests before the bank. Michael McCarthy, Ex-Im’s acting inspector general, has told Congress that there are 31 corruption and fraud investigations into the bank still pending.
Those at Ex-Im who have abused the public trust must be pursued to the full extent of the law. But it may be that the best way to mend Ex-Im is to end it. Here’s why.
One of the biggest challenges America faces is sluggish economic growth. This is complicated by an absurdly complex tax code, which is riddled with lobbyist-driven loopholes and saddled with the highest corporate tax rate in the developed world. The ever-expanding federal debt—fueled by ever-rising federal spending—is another major challenge, particularly because we can’t grow our way out of this $18 trillion hole. A third challenge is an explosion of new regulations, thanks to ObamaCare, the Dodd-Frank law and President Obama’s out-of-control executive branch.
If we want U.S. companies to win in the global marketplace, we have to do three things. First, we need to clean up the tax code, ensuring that corporate taxes are fair, simple and competitive. Today, the top federal corporate tax rate is 35%, one of the highest in the developed world. And that is before you pile on state and local taxes.
Second, we have to begin to retire the federal debt by reducing spending instead of increasing taxes. There is considerable evidence that as the size of a nation’s public debt approaches its annual economic output, growth slows to a crawl. In 2014, according to the Congressional Budget Office, the debt-to-GDP ratio was 74%—and climbing.
Third, we have to make the regulatory system stable and predictable so that it’s easier for U.S. businesses to get off the ground. The Competitive Enterprise Institute estimates that, over the eight years President Obama has been in office, more than 600,000 pages have been added to the Federal Register, Washington’s compilation of regulatory notices. From 2008 to 2011, more American businesses closed their doors than opened them, ending a record of business dynamism that had been in progress for at least 30 years, according to a Brookings Institution study released last year.
The problem is this: We won’t have the moral credibility to reduce corporate taxes if we continue to subsidize corporate exports for corporations that already enjoy low effective tax rates, like General Electric and Boeing. We won’t have the moral credibility to reform government programs that benefit future retirees if we don’t first reform government programs that benefit big businesses like Caterpillar. We won’t be able to give businesses more regulatory latitude if we continue to operate a government bank with an emerging record of corporate corruption.
And that is why the time has come to end the Export-Import Bank. We can’t let Ex-Im get in the way of reforms that would expand opportunity for all Americans.
We could pair Ex-Im’s retirement with corporate tax reform—a more effective way to improve the competitiveness of U.S. companies. We should work with our partners in the World Trade Organization to roll back the use of export-import banks by other countries, so that American exporters don’t face an unfair playing field. The end result would be freer trade and higher growth.
In Texas we have long maintained a stable and predictable regulatory climate. We balanced our budget for 14 straight years. And we have worked hard to keep the tax burden on families and employers as low as possible. Those policies have resulted in a sustained economic boom for the state.
If we want to bring Texas’ prosperity to the nation as a whole, we’ll have to do a lot more than terminate Ex-Im. But that’s where we should begin.
Mr. Perry was governor of Texas from 2001 to 2014.