This week, the Hill has a great piece illustrating the serious problem of corporate addiction to government privileges. Protected companies jealously protect their handouts, and sometimes they can get furious with the rare principled politician that threatens to cut them off.
This time, the company is Boeing, the furious defender of government privilege is senior vice president Timothy Keating, and the hopefully short-lived privilege is the Export-Import Bank. The Hill reports on what Keating had to say recently (emphasis added):
“Mostly far-right political consultants, think tanks and congressmen banded together in a fit of ideological road rage to kill the bank,” Boeing Senior Vice President Timothy Keating said in prepared remarks at an aerospace conference in Everett, Wash.
“The temporary extension recently enacted, in many respects, leaves us worse off than before,” Keating continued. “The extension is to next summer, when in all likelihood, the Congress will be more polarized than even now. And a short-term extension does not provide business certainty, both for U.S. exporters and their potential foreign customers.” . . .
“The Export-Import Bank gives American manufacturing a fighting chance in the global arena. Ex-Im has long enjoyed broad bipartisan support in the Congress, and presidents ranging from Ronald Reagan to Barack Obama have favored its continued operation,” said Keating, a former special assistant to President Bill Clinton.
“Spending too long in Washington, D.C., can make you a bit jaded and hard to surprise,” he said, “but it is still amazing to me that the people going after Ex-Im are basically willing to dismantle the U.S. aerospace industry and ship the jobs to France or China all in order to raise some extra money and show their most rabid supporters that it is possible to kill a government program, irrespective of the real-world consequences.”
I suppose it is heartening that Keating seems truly worried that, for once, Congress might do the right thing and kick our country’s nasty Ex-Im habit for good in June, no matter how wrong his last-ditch defense is.
And it’s predictable that a Boeing executive would be livid about this possibility. After all, the Ex-Im Bank is fondly referred to as “Boeing’s Bank” by D.C. insiders for a reason. Check out this chart:
That shows the top ten corporations that received the highest amounts of Ex-Im assistance in 2007 and 2013, using public Ex-Im data. As you can see, the vast majority of the money benefits large corporations that have ample access to private financing. The massively successful manufacturer, America’s No. 1 exporter, and the massively successful manufacturer leads the pack, pulling in 36 percent of all funds in 2007 and 30 percent of all funds in 2013.
Meanwhile, an S&P report released over the summer made it very clear that Boeing is the only company whose business model would be affected in a world without Ex-Im. Without Ex-Im, it will have to face more of the risk of doing business because it may have to organize more self-financing for the planes it sells than it does now. That risk is currently born by taxpayers. In a world without Ex-Im, S&P notes, Boeing will have to be more competitive to succeed like it does today — but Boeing is a big-boy company, and I’m confident it can learn to compete without Ex-Im. Consumers benefit when companies compete — they get better goods and services at a lower price. Competitors benefit when they operate on a level playing field — each company grows stronger through market innovation to the good of the whole economy. And, of course, Boeing itself will benefit by becoming corporate welfare-free, freeing itself from political uncertainty, and competing on its own merits — it’ll even save money on lobbying expenses!
The case for Ex-Im is nowhere near as solid as the corporate welfare-addled Mr. Keating’s rant proclaims. First, he argues that the bank promotes U.S. exports — if anything, its impact is negligible. If promoting U.S. exports is truly Mr. Keating’s goal, then he should propose policies that would actually work. Liberal economist Dean Baker has a good summary of the Ex-Im Bank and economics 101:
The basic story is a simple one. The Ex-Im bank subsidizes politically connected firms by providing them with below market loans. This can boost exports, but the bank also subsidizes imports, leaving its direct impact on the trade balance uncertain. As any graduate of Econ 101 knows, the subsidies provided by the bank effectively raise the cost of capital to other firms. When the higher interest rates paid by less well connected firms are factored in the bank would likely be a net loser of jobs and detriment to growth.
Mr. Keating is also misleading his audience by touting President Obama and President Reagan’s alleged support for the cheap high of Ex-Im Bank subsidies. When he was a senator, Obama said the Ex-Im Bank was ”little more than a fund for corporate welfare,” while President Reagan dramatically cut its budget during his time in office.
Finally, it is intentionally misleading to portray the case against Ex-Im as an ideological fixation when the policy merits are on the side of letting it expire. If anyone has a fixation on Ex-Im, it’s the beneficiaries of the Ex-Im handouts down at Boeing.