Jobs or corporate welfare? GOP dispute fuels economic worry in South Carolina

Sen. Tim Scott, R-S.C.
Sen. Tim Scott, R-S.C. Associated Press

A political stand-off over a relatively obscure government agency has embroiled some of South Carolina’s most prominent Republicans, and a top economic development official in the state worries the stalemate could chill job growth.

One of the key players in the deadlock is South Carolina’s junior senator, Republican Tim Scott, who voted in December to tank Scott Garrett’s nomination to lead the Export-Import Bank. The stakes were high enough to prompt Scott to go against the wishes of his party’s leadership and the Trump administration for the first time.

It also has put South Carolina’s GOP governor, Henry McMaster, in an awkward spot as he seeks re-election this year: He wants to be seen as both an advocate for jobs and an ally of President Donald Trump.

Ted Pitts, president and chief operating officer of the S.C. Chamber of Commerce, warns the impasse has economic implications.

“If Ex-Im were to go away, there is no doubt in my mind South Carolinians would lose their jobs,” he said.

But the current impasse over the Ex-Im Bank in Washington is just the latest chapter in a two-and-a-half-year philosophical battle over the future of the office that finances overseas exports of U.S.-made goods.

Ex-Im supporters — most Democrats and establishment-aligned Republicans from states with strong manufacturing economies — argue the bank facilitates opportunities for small businesses to sell their products abroad. They also say it allows major companies to hire domestic workers to complete big products for large international orders.

Conservative opponents of the bank call it “corporate welfare.” They criticize the practice of financing exports as wasting taxpayer dollars, saying it puts certain companies at an unfair advantage over others in the private sector.

For Scott, who supports the Ex-Im Bank, opposing Garrett was the logical choice. A New Jersey House Republican who lost reelection in 2016, Garrett was one of the leaders in blocking reauthorization of the bank’s charter during the second half of 2015. During his confirmation hearing before the Senate Banking Committee in November, Garrett refused to disavow his past actions or explain why he now wants to run an agency he once so staunchly opposed.

Fearing Garrett would use his post to undermine the bank, Scott and one other Republican, Sen. Mike Rounds of South Dakota, joined every Banking Committee Democrat to vote against advancing his nomination.

In retaliation, Republican Sens. Richard Shelby of Alabama and Pat Toomey of Pennsylvania — Ex-Im Bank opponents who see a kindred spirit in Garrett — say they will block consideration of four noncontroversial nominees to serve on the bank’s board until their former House colleague is confirmed. These board members are necessary for the agency to regain the quorum it needs to facilitate major deals, an ability it has lacked for the last two years due to political disagreements.

Shelby and Toomey had made their plans known before the Banking Committee showdown, so Scott knew the risks of voting “no.”

“I have thought about that several times,” Scott told McClatchy. “That has been a part of the equation as well, just realizing that I think the White House seems to be dug in on, ‘It’s Garrett or bust.’”

The White House has yet to say publicly how it plans to proceed, so far staying silent on whether it will nominate a new contender for board president, push Republican leaders to resurrect Garrett’s nomination or support Toomey’s and Shelby’s hardball gambit.

Hours after the Banking Committee vote, White House press secretary Sarah Huckabee Sanders would only say the administration was “very disappointed the Senate Banking Committee missed an opportunity to get the Export-Import Bank fully functioning again.”

Even South Carolina Gov. McMaster, who is counting on Trump’s endorsement as he stares down a competitive gubernatorial primary, is being swept up in the dispute. McMaster has made it clear he supports the Ex-Im Bank but has not expressed reservations about Garrett. He also said he didn’t believe Trump would nominate someone to run an agency he wants to dismantle.

Following the vote to block Garrett, McMaster would not venture to suggest the president should name a replacement. According to his spokesman, Brian Symmes, “the governor is confident that Congress and the administration will come to an understanding that doesn’t put the Bank’s future in jeopardy.”

In the meantime, South Carolina is caught in the Beltway crossfire.

Generally, international clients agree to purchase certain U.S. products before they are ready for delivery, the expectation being that the Ex-Im Bank will cover the costs of shipment when the time comes. But because of uncertainty over whether the bank will be able to approve financing — lack of a quorum currently prevents it from greenlighting exports over $10 million — economic development officials in South Carolina worry about a chilling effect in a state that is home to operations of major manufacturing giants.

Anxieties are especially acute given two major manufacturers in the state have shed jobs in the last 12 months. General Electric Power, which has a plant in Greenville, S.C., announced a round of layoffs on Dec. 1, which an official statement attributed in part to “a significant decline in orders.” A GE spokesperson told McClatchy the layoffs were not a result of one specific deal falling through, but said the bank’s uncertain future was “a factor.”

Boeing, which has a facility in North Charleston, has faced similar dilemmas. An official with the company did not directly link layoffs at the state’s plant over the past year with Ex-Im Bank dysfunction, but said that “no one can say we haven’t lost anything for South Carolina.”

According to agency data, 23 S.C.-based companies used the Ex-Im Bank to finance exports in 2017. That number is comparable to, if not slightly higher than, states of a similar size. Industries in South Carolina taking advantage of the bank ranged from textiles and motor vehicles to food and chemicals, with exports valued as high as $67 million and as low as $6,228.

“We got about 17,000 workers in the state who could be impacted if Ex-Im were not to be fully operational in the near future,” said Pitts of the state chamber. “We think there is a strong case to be made.”

Pitts and others can point to a recent example where uncertainty at the bank may have cost the state jobs. During the months-long closure of the Ex-Im Bank in 2015, GE had to turn to a French credit agency to finance the export of a major order. The terms of receiving that financing depended on production being done in France, which meant 400 jobs that would have been created in Greenville never came to pass.

"We couldn’t afford to walk away from $11 billion worth of products. We couldn’t not compete,” said the GE spokesperson. “So we had to find financing.”

Despite strong feelings on all sides of the issue, senators left for the holiday recess with little urgency to determine next steps. Lawmakers are returning to work with no indication of if, how or when the standoff will be resolved.

At some point, Scott will be forced to confront the issue again. He was under significant pressure to oppose Garrett’s nomination leading up to the Banking Committee vote, with the National Association of Manufacturers running an aggressive ad campaign his state. On the other side, conservative activists opposing the Ex-Im Bank have made support for Garrett an ideological litmus test.

Scott said he could only control his own vote.

“My responsibility is to make the best decision that I can based on the facts that I have and not play out every scenario or hypothetical situation that may occur.”

Anita Kumar of the McClatchy Washington bureau contributed to this report.

Emma Dumain: 202-383-6126, @Emma_Dumain