Budgeting for Eximbank: A Case Study of Credit Reform

Congressional Budget Office
A special study by the Congressional Budget Office, Budgeting for Eximbank: A Case Study of Credit Reform, finds that the federal budget does not accur- ately measure the cost of new loans, loan guarantees, and insurance provided by Eximbank. The study examines how credit reform would improve budget- ing for Eximbank by separating the subsidy cost of the bank's credit assistance from its nonsubsidized cash flows.
Eximbank's loans, guarantees, and insurance cost the government money because the fees it charges do not cover all of its expenses and because the interest rates it charges borrowers are lower than the rates it pays to bor- row from the Treasury. The budget's failure to measure accurately the cost of Eximbank's credit programs prevents the Congress and the Administration from comparing their cost with the cost of other programs, and from making and enforcing decisions to limit the cost of the bank's new credit assistance. The present system focuses exclusively on the cash flows resulting from bud- getary decisions, rather than on the economicresources used by Eximbank's credit programs. Credit reform would make subsidy cost the measure of the cost of credit programs in the unified budget. The Congress would be required to appropri- ate the subsidy cost of new loans and loan guarantees and insurance. The budget would account separately for subsidy cost and for the nonsubsidized cash flows associated with credit assistance. The study shows how these changes would affect the treatment of Eximbank in the unified budget under two versions of credit reform that would have no effect on total budget outlays or the deficit, and under a modification that would change them. Credit re- form's potential effects on Congressional consideration of the bank's activity are also discussed. ' The study was prepared as a companion volume to the CBO report, Credit Reform: Comparable Budget Costs for Cash and Credit. Much of the analysis is applicable to other federal credit programs. To show how analysts can use publicly available data and a model developed by the Office ofManage- ment and Budget to estimate credit subsidy cost, the study details howCBO estimated the subsidy cost of Eximbank credit assistance in fiscal year 1990. Questions about the study should be directed to Robin Seiler of CBO's Budget Process Unit at (202) 226-2835. The Office of Intergovernmental Rela- tions is CBO's Congressional liaison office and can be reached at 226-2600. For additional copies of the paper, please call the Publications Office at 226-2809.
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