End Corporate Welfare: Reform the Export-Import Bank

In the 1930’s, the Export-Import Bank was established by the U.S. government to protect American companies by financing foreign purchases of U.S. goods, so that the domestic exporters could compete with foreign companies that are often subsidized by their respective governments.  Sadly, Ex-Im Bank has taken a radical departure from its founding days.

Rather than providing loan guarantees to a medley of U.S. companies, Ex-Im Bank predominantly finances a single company that generates billions of dollars of revenue and is one of the largest corporations in the world.  Raking in almost half of all Ex-Im’s loan guarantees is the Boeing Company.  The airplane maker has become the principle breadwinner of what could kindly be described as lavish corporate subsidies.  And Boeing’s gain certainly appears to be America’s loss.

This government-run system of corporate welfare compromises America’s free market principals by picking winners and losers, and is even more deleterious to America’s airline industry.

When Ex-Im Bank subsidizes foreign airlines purchases of Boeing’s aircraft, the American airline industry gets the raw end of the deal.  American carriers are not given access to these favorable subsidies and are thereby placed at a competitive disadvantage, ironically by a federal agency whose supposed mission is to protect American employees and employers.

Using the Ex-Im Bank as its vehicle, the government is manipulating the free market, deeming winners and losers by awarding financing to companies of its own choosing.  Such government intervention should be used rarely, if ever, and always with the utmost caution.  This was perhaps best evidenced by the recent collapse of the housing market, which had been artificially propped up by the government’s unnecessary financing of mortgages.  Yet, the government is taking market distortions to a whole new level by subsidizing a company that has a net profit of more than a billion dollars a year at the expense of the struggling airline industry.

The government’s market distorting behavior is exemplified by Ex-Im’s financing of foreign airlines, which allows overseas rivals to pay roughly $5 million less than American carriers per wide body aircraft.  As a result, domestic carries lose out on hundreds of millions of dollars that instead goes to companies that undercut American employment.

In the process, American workers also become a victim of Ex-Im Bank’s subsidies.  When Ex-Im chooses to favor foreign airlines companies over its American counterparts, jobs are lost.  Ex-Im has already cost the U.S. airline industry up to 7,500 jobs and in an industry that employs 400,000, the number is certain to grow unless the current policy is reformed.

In short, changes need to be quickly made.  The Ex-Im Bank should be allowed to finance the purchase of American manufactured goods, as it was intended, but it should also protect American jobs as was also originally intended.

Reforms should seek to ensure that Ex-Im follows its Congressional mandate of considering the negative impact of its financing on American workers through thorough impact analyses before it acts.  Further, Ex-Im Bank should move toward a culture of transparency by opening its meetings to the public, disclosing its activities and soliciting public comment before it renders a decision; this is especially true when taking into account that the Bank is backed by American taxpayer dollars.  Finally, America needs to work diplomatic channels to minimize foreign credit agencies impact on the market and begin to ratchet back the subsidies as even the bank’s own vice president for transportation has characterized the dependence on subsidies as “not healthy”.

America faces stiff competition from its global competitors.  The country is plagued by a ballooning deficit, partisan gridlock and out-of-control spending. Our country is already facing enough obstacles as it is, if we want to continue to prevail in the global economy, we need reforms that will protect U.S. jobs over foreign subsidies.  We can start by sending a clear message to Congress: reforming the Export-Import Bank will stop job losses and end corporate welfare.