Republicans in Congress out to lunch on Ex-Im Bank funding
The politically-focused publication The Hill has an article that describes a Republican Party that is completely out of touch with reality on the Ex-Im Bank funding of exports.
Ex-Im supports a broad spectrum of industries, but is especially important to Boeing–so much so that Ex-Im is sometimes derisively called Boeing’s Bank due to the dominance of Boeing airplanes funded by Ex-Im.
Ex-Im reaches its $100bn cap this month, according to The Hill, much earlier than the previously anticipated May. Boeing and GE–which supplies engines for 92% of Boeing’s airplanes–are lobbying Congress to increase the cap to $140bn. This might sound like lunacy in the budget crisis, but according to Boeing, Ex-Im actually contributed more than $1bn through fees to the US Treasury in recent times. And fees are going up as a result of international changes last year to Ex-Im and Europe’s similar credit agencies.
According to The Hill, some Republicans characterized Ex-Im as providing subsidies to US corporations. As readers of this column know, we dislike corporate subsidies of any kind (see also below), but Ex-Im is not subsidies (and neither are the European Credit Agencies’ support for Airbus airplanes). This are funding mechanisms to support exports. In Boeing’s case, the company is the USA’s largest exporter that helps the balance of trade.
So let’s see: Ex-Im is a net contributor to the US Treasury. It helps exports. It helps the USA’s largest exporter, which helps the balance of trade. What’s not to like about this program?
About the only thing not to like with respect to Boeing is Ex-Im lends to airlines that compete with US international carriers. But this complaint largely revolves around cheaper financing, and last year’s agreement took care of this. The other complaint is that Ex-Im also supports financially troubled carriers like Air India. But the airline complaining the loudest on this is a product of two bankruptcies (Delta Air Lines and its merger partner Northwest Airlines), and there now isn’t a US legacy carrier that hasn’t been “supported” through the bankruptcy process. We could write a whole new post about how the legacies, including the “old” Delta, complained that bankruptcy unfairly supported weak carriers.
The Republicans opposing Ex-Im funding are out to lunch, and this time with the business community they profess to support. No wonder the Republican brand is in so much trouble.
Speaking of corporate subsidies that we dislike, we were especially pleased to see the prospect that EADS may forgo launch aid for the A350 from Germany because politicians there are once again whining about parity in Airbus management.
EADS doesn’t need launch aid; it has the financial strength to build airplanes without it. We understand EADS’ position that it doesn’t want to unilaterally give up launch aid as long as Boeing is getting government subsidies (see the WTO Findings), but our position has always been we don’t like corporate subsidies of any kind and Airbus is no longer a start-up company that needs this kind of support. (Nor does Boeing.)
We also believe that getting Germany (and France) out of EADS’ hair would free the company to make decisions based on commercial considerations, not political ones, such as how to manage the company for the best interests of the shareholders, where to place production and how best to deal with labor. If EADS does away with German launch aid, we say good riddance. Next up would be France.
Finally, John Leahy plans to stick around Airbus several more years. His contract expires in June and he fleetingly considered retiring. Our opinion was that Leahy loves his job and the business too much to retire until he is carried out feet first. We gave the prospect of retirement no chance. Looks like we called this one.