The Corner

Economy & Business

Will John Boehner Stick by His Promises about Ex-Im?

Over at the Hill, Kevin Cirilli has a very good piece on the politics of reauthorizing the Ex-Im Bank: House speaker John Boehner is a supporter of the bank, but numerous members of his caucus and most leading presidential candidates from his own party want to see it lapse. It’s still unclear whether Boehner will stick to his commitment to Financial Services committee chairman Jeb Hensarling that he won’t force a reauthorization, but he’s going to have to make up his mind.

The piece also highlights some of the arguments on both sides of the debate. An example from the Ex-Im fans:

Export-Import Bank chairman Fred Hochberg told The Hill that he has not met with Boehner or his office about the expiring charter.

But Hochberg said that his message to Boehner would be that “exporters and their workers need certainty to keep exporting and to keep people working. So this uncertainty alone is causing difficulties.”

Should the bank’s charter expire June 30, “it will certainly make it harder for exporters and their workers,” Hochberg said.

We’ve been hearing the uncertainty argument a lot lately, but it’s worth keeping in mind that Boeing, the bank’s largest beneficiary, is doing fine these days. Take this Reuters story: “Boeing predicts both strong air traffic and plane sales.” More:

Boeing Co said it expects airline passenger traffic to rise more than 6 percent in 2015, possibly close to 6.5 percent, above its long-range forecast of about 5 percent.

The world’s largest plane maker said it still expects to book firm orders for at least 750 new airplanes this year, though it has booked only 136 net orders so far in 2015.

“We’ve got work to do,” to hit the order target, Randy Tinseth, Boeing vice president of marketing, said in a series of briefings ahead of the Paris Airshow that starts June 15.

“We have a lot of things in the pipeline,” he added, referring to potential orders. “We’re on plan.”

Boeing’s forecast is in line with actual growth in air travel. Figures released by the International Air Traffic Association (IATA) on Thursday show worldwide passenger traffic rose 6.3 percent in the first four months of 2015 compared with the same period last year. Boeing said 2014 growth was 6 percent.

In fact, Boeing also announced last week that, if the Ex-Im Bank lapses or closes down, it would use its financing arm to help out its customers:

The plane maker’s customers are the biggest users of Ex-Im Bank, whose guarantees secure billions of dollars in commercial funding. And Boeing, as one of the most vocal proponents of reauthorizing the government-backed corporation, would have no option because rival Airbus Group SE is able to rely on European export credit agencies to support some of its jet sales.

Still, Boeing says that if it needs to, its finance arm could temporarily fill in the gap if Ex-Im Bank funding is halted.

“We do provide some customer financing, and if there’s a short-term shutdown of Ex-Im, we will work with customers who are scheduled for deliveries to ensure they get the financing they need, even if we have to provide it ourselves,” said Tim Neale, a Boeing spokesman.

Boeing’s willingness to use its own balance sheet to help airlines could provide ammunition to critics of Ex-Im Bank, who say the bank is unnecessary.

This confirms what S&P noted last summer: In a world without Ex-Im, Boeing, as the biggest beneficiary of Ex-Im, is the only big company whose business model would be seriously affected. Without Ex-Im, the company would face more uncertainty and likely have to self-finance some plane sales. But that’s the way it should be: Boeing, not taxpayers, should bear the cost of its business model’s uncertainty. In a world without Ex-Im, S&P noted, Boeing will have to be more competitive to succeed at the same level, but again, this is a good thing. Consumers benefit when companies compete — they get better goods and services at a lower price — and taxpayers would be relieved of having to shoulder the cost of Boeing’s financing.

And that argument — also repeated by Ex-Im president Fred Hochberg – that Airbus is lobbying for the death of Ex-Im? Tim Carney has shredded it.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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