Responsible to Taxpayers, Not Corporations, Congress Shouldn't Renew Export-Import Bank's Charter
There is something unseemly about a $90 billion corporation - i.e., Boeing - demanding ever more taxpayer subsidies to export its products. And it is downright ludicrous for the company to warn of "Armageddon" should Congress eliminate the source of said subsidies, the Export-Import Bank.
All of which makes for a brazen corporate welfare campaign - one wholly contradicted by the facts.
The Ex-Im Bank's charter was set to expire on Sept. 30.
President Barack Obama, Boeing and bank officials sought a multiyear reauthorization and a hefty increase to the bank's current lending cap of $140 billion (all backed by taxpayers). But faced with significant opposition - and abundant evidence of bank mismanagement - lawmakers instead extended the charter for nine months.
Boeing is by far the most vocal proponent of bank reauthorization because it is by far the biggest beneficiary of the export subsidies. A whopping 65 percent of all Ex-Im Bank loan guarantees and 42 percent of all loans doled out last year financed Boeing exports, according to calculations by economist Veronique de Rugy of the Mercatus Center at George Mason University. (Runners up: General Electric, with a market cap of $253 billion, and Bechtel, with 2013 revenues of $39.4 billion). As such a vocal proponent, Boeing's claims thus deserve scrutiny.
Company shareholders understandably expect their executives to maximize corporate value, including taking advantage of available subsidies. But Congress is responsible to taxpayers, not Boeing shareholders, and the Ex-Im subsidies are not free. They come with significant costs that are borne by the public, including the millions of business owners and workers who don't profit from cronyism.
The Ex-Im subsidies are particularly unwarranted because the primary beneficiaries are multinational corporations that can easily finance their own exports and which do not lack access to private financing.
Boeing is well-positioned to do without Ex-Im given industry trends as well as the thousands of contracts it holds with the Departments of Defense, Energy, Transportation, Justice, Agriculture, NASA and Homeland Security, among others. These account for multiyear projects totaling some $67 billion (e.g., 215 Chinooks and 99 V-22s with the U.S. Army, Marine Corps and Air Force; 36 Apache helicopters for the Republic of Korea; a U.S. Navy contract for 13 P-8A Poseidon aircraft; and seven satellite orders).
As noted in its 2013 annual report, the company also anticipates strong demand for its commercial aviation products. Airlines the world over must replace older, less efficient planes (a projected 15,500), while new demand will prompt fleet expansion (by an estimated 21,270 planes). Indeed, Boeing added new orders totaling $135 billion last year alone, bringing its order "backlog" to a record $441 billion - more than five times current annual revenues.
As the report states: "Overall, commercial aviation remains a very attractive growth market worth more than $4.8 trillion over the next 20 years. Our product strategy advantage positions us for significant and sustained growth within this market."
Nor is there a shortage of financing options. The company runs its own financing arm - with a portfolio worth $3.5 billion - while interest rates remain low, aircraft-backed bonds are increasingly popular, and commercial banks are looking to diversify mortgage-heavy loan portfolios. And the government-run airlines that constitute many of Boeing's customers, including China and India, do not actually need subsidies from American taxpayers.
Consequently, there's not a hint of truth to the recent warning from Boeing executive Kostya Zolotusky that failure to reauthorize Ex-Im would be tantamount to "Armageddon." (This is the same executive who told the Wall Street Journal last year he was confident the company could find alternative funding sources for customers in the event Ex-Im is not reauthorized.)
Boeing's Senior Vice President Timothy Keating is likewise (ahem) mistaken in characterizing efforts to close down Ex-Im as "a far-right fit of ideological road rage." Even Obama, during his 2008 campaign, called for ending Ex-Im, which is beset by mismanagement, dysfunction and risk (as documented for years by the bank's own inspector general and the Government Accountability Office).
The fate of the bank will continue to be debated in the weeks and months ahead, and a powerful coalition of corporate interests will continue to warn of calamitous consequences if Congress does not approve a long-term reauthorization. But even the most bombastic rhetoric cannot change the fact that 98 percent of U.S. exports occur without any help from the bank, and the multinational corporations that do benefit could easily tap alternate sources of export financing.
If lawmakers really want to nurture employment and economic growth, they will eliminate corporate welfare - and focus instead on reducing the tax and regulatory barriers that choke investment, innovation and job creation for businesses of every size.
- Diane Katz is a research fellow in regulatory policy in the Roe Institute for Economic Policy Studies at The Heritage Foundation.
Originally distributed by the Tribune Content Agency