The Corner

Joe Nocera Keeps Flailing on Ex-Im

The New York Times’ Joe Nocera is at it again: With Monday’s latest apology for corporatism, the scribe has now dedicated not one . . . not two . . . but three precious columns to saving the Bank of Boeing.

To be fair, Nocera’s most recent column, titled “Helping Big Companies Compete,” now at least ceases the silly delusion that the Export-Import Bank primarily benefits small businesses (as he basically did the last time around). Nocera is now essentially admitting that Ex-Im is in the business of serving big business. That’s a good start.

But things go downhill quickly. Nocera proceeds to careen off the tracks. He argues that we can’t cut taxpayer-backed subsidies that benefit Boeing because . . . the subsidies benefit Boeing. I’m not kidding. Nocera truly believes that it is somehow the job of the federal government to manipulate credit markets to ensure that specific, politically connected U.S. firms attain their desired level of profits. It is “mind-boggling” to Nocera that anyone would oppose such a thing.

His newest argument boils down to this: These giant companies have customers and those customers need help.

Nocera does not specify exactly what kind of “customers” to which he refers, but he is clearly most concerned with the customers of Boeing, General Electric, Caterpillar, and the like.

I am unsure if Nocera has actually looked at the Ex-Im data. If he did, he would know that the Bank extends loan to some very profitable customers — carriers like Copa Airlines, and fast-growing ones like Lion Air and Emirates Air.

And please don’t come and tell me that all of these companies wouldn’t be able to pay for their aircraft or that no private lenders would be willing to finance the deals without Ex-Im. Again, the data show that many companies buy planes both using Ex-Im guarantees and without them. In June 2012, for instance, Emirates bought two Boeing 777s using Ex-Im financing and four Airbus A380s using market financing. This is good evidence of two things: (1) the airline can afford to buy some aircrafts at normal market rates, and (2) that private lenders are willing to lend the money even absent of the help of Ex-Im.

Over at the Daily Signal, Heritage fellow Diane Katz writes about evidence from a new GAO report that Boeing’s customers really don’t need Ex-Im’s help:

As it is, some 85 percent of Boeing and Airbus large aircraft deliveries were not subsidized by export credit agencies, according to the GAO. Competition between Boeing and Airbus, the other primary supplier of commercial aircraft, is based largely on factors other than financing, including passenger capacity, range, fuel economy and life-cycle costs.

All of which belies claims that reauthorization of Ex-Im is necessary to plug gaps in private financing or to keep pace with subsidies provided by foreign governments. Even without Ex-Im, there’s plenty of business to keep Boeing and its suppliers busy.

I am going to repeat that: “some 85 percent of Boeing and Airbus large aircraft deliveries were not subsidized by export credit agencies, according to the GAO.” Did Nocera read that before he wrote his editorial?

For the third time now, Nocera’s column fails to even consider the extreme unfairness of a system that grants cheap, taxpayer-backed financing to some companies at the expense of all the non-subsidized companies. He either doesn’t know or doesn’t care about the many real victims of Ex-Im corporatism.

Take that Emirates purchase, for instance. That very wealthy firm benefited from interest rates that were nearly half the rates that its unsubsidized competition could procure without Ex-Im privileges. The result? Emirates will save $20.3 million per plane — a perk that Delta Airlines and other U.S. airlines don’t have access to.

When Delta and other airlines can’t compete on costs, they have to cut jobs. And that’s what they do. During the hearing on Ex-Im before the House Finance Committee, the CEO of Delta, Richard Anderson, testified that some 7,500 U.S. airlines jobs had to be cut because they faced unfair competition from the Ex-Im subsidized “customers” that Nocera is so eager to protect.

A recent S&P report provides good news to those of you who toss and turn awake at night agonizing over Boeing’s bottom line. The report finds that the consequences of ending Ex-Im will be much more benign than doomsayers like Nocera claim. There’s plenty of financing for aircraft sales, the report finds. “We don’t believe that the expiration of Ex-Im’s authorization in September would hurt Boeing’s credit quality or ability to make planned delivery in 2014 and 2015,” S&P writes.

Also, as I explained last week, eliminating Ex-Im’s borrowing privileges with the Treasury will transfer risks away from taxpayers and toward the businesses that should rightly shoulder them. In a world without Ex-Im, S&P notes, Boeing will have to be more competitive to succeed at the same level.

That’s good news for everyone, including Boeing. Boeing will ultimately benefit from competing on merit and not on government privilege. Nocera seems utterly horrified that a company that makes billions of dollars year should have to compete for its customers. Speaking as a “customer” myself, I know full well that when companies compete, we get better goods and services at lower prices. I’m not seeing the downside here.

Liberal economist Dean Baker is also having a fun time with Nocera’s piece. He writes:

The story here is not very complicated for believers in economics. If there were no subsidies from the Bank, Boeing would have to accept somewhat lower profits on its deals. It would likely make up some, but not all, of the value of the Bank’s subsidy. This means that the customers would be looking at slightly higher prices. Life’s tough. (Let’s get a list of the customers and see if they rank higher than veterans or inner city kids as beneficiaries of the taxpayers largesse.)

In some cases, the higher price will mean that Boeing will lose the deal to a competitor. That’s known as capitalism, it happens all the time.

I have a friendly suggestion for Mr. Nocera: Next time he decides to write a pro-Ex-Im piece, he should actually look at the data and read some of the economic literature on the topic before merely brainlessly rehashing talking points and propaganda hand-written by lobbyists with the Chamber of Commerce and National Association of Manufacturers. It would make for better reading for all of us — and it would save Mr. Nocera from needless public embarrassment.


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