Two Wrongs Don’t Make A Right

by Veronique de Rugy

I could have called this post “Why So Many Businesses Aren’t Taxpayer-Friendly.” In the last few weeks, I have documented many of the reasons why the Export-Import Bank should be abolished (here and here). As you know, the Bank gives out unfair subsidies to big manufacturers like Boeing at the expenses of other companies and U.S. taxpayers. It’s corporate welfare, period.

However, in a very Washington move, I find out today that Delta Airlines, one of biggest critics of the Ex-Im Bank’s unfair subsidies, has become one of the few winners that get to benefit from the government’s largess:

The Export-Import Bank of the United States (Ex-Im Bank) today announced that the board of directors has approved a Final Commitment for an $84.8 million loan guarantee to VRG Linhas Aereas S.A. (GOL), a Brazilian airline. This financing will support the export of engine maintenance services by Delta TechOps, a subsidiary of Delta Air Lines, headquartered in Atlanta, Ga.

This could be an attempt by the Bank to placate Delta at a time where the agency’s funding is in jeopardy, or it may just be that Delta lobbied to get what others are getting rather than continue the fight to end the unfair subsidies.

Either way, it does not make it right. In fact, this is outrageous. First, while some companies benefit from this unhealthy marriage between private companies and government, many other companies don’t, and many others will suffer from this union (I assume that Delta competitors aren’t too excited right now).

Special-interest-group politics is also overall harmful to consumers, taxpayers, and the entire economy. It isn’t corruption, but it is terrible, because it creates bad incentives, moral hazards, and often inefficient outcomes (think about “too big to fail” or the Solyndra scandal).

Special-interest politics leads to privatized benefits and socialized loses. Boeing and Delta will benefit from the subsidies, but if they fail, taxpayers will pick up the tab.

But more importantly, the existence of programs such as the Bank leads to a destruction of the private profit-and-loss system that should be guiding companies’ decisions about how to run their business. Competition is good for consumers because it keeps prices low while increasing the quality and choices of products and services. Yet competition is hard work for businesses. They have to fight for customers by innovating and evolving in line with demand. To avoid the gritty work of fighting it out in a free market, organized private interests — such as Boeing and Delta — lobby the government for handouts that will keep out competition or give them an advantage over competitors.

This practice has been around for as long as there have been businesses and governments. It’s time to put an end to it.

Finally, I wonder how taxpayers feel about seeing their dollars use to help companies that do not need help: Boeing is America’s biggest exporter and Delta is the second-largest U.S. airline. For all the talk about hating the 1 percent of taxpayers, I don’t see much anger directed at the biggest companies in America that are benefiting from government handouts.

Wake up people, and occupy government!

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