President Barack Obama talks with Boeing 787 factory with Boeing Factory chairman of the board, president and CEO James McNerney, right, and Boeing Commercial Airplanes CEO Jim Albaugh, left, during a tour of the Boeing 787 factory on Friday in Everett, Wash. (AP Photo/The Seattle Times, Mike Siegel, Pool)
President Obama went to a Boeing factory last week and promised to help the $56 billion corporation by giving it more taxpayer subsidies.
Obama called on Congress to reauthorize and expand the government agency that most embodies corporate welfare -- the Export-Import Bank of the United States. The Boeing factory in Washington state was a fitting location, given that most of Ex-Im's finance dollars -- 66 percent of its guarantees last year -- subsidize Boeing sales.
Because foreign governments give "unfair subsidies" to their manufacturers, Obama argued, Uncle Sam needs to raise its subsidies in order to create a "level playing field."
Even if increasing the power of bureaucrats and politicians to dole out taxpayer-backed subsidies to selected U.S. manufacturers somehow levels the playing field globally, it definitely rigs the game domestically, favoring politically connected companies and industries while hurting others.
The latest Ex-Im victim is taking the agency to court. U.S.-based airlines, through their lobby, the Air Transport Association of America, have sued Ex-Im over its $3 billion in loan guarantees to Air India.
Air India used these U.S. taxpayer subsidies to buy Boeing jets for less than it would have paid in a free market. This, the U.S. airlines lobby argues, gave Air India a competitive advantage over Delta, which was flying U.S.-to-Mumbai flights just like Air India. Last month, Delta canceled its service to Mumbai, surrendering to its foreign competitor.
The airline lobby argues that Ex-Im skipped its legally required study of the economic effect of its Air India subsidies.
This is a constant problem, according to the Government Accountability Office, which found that "Ex-Im is processing more than 90 percent of its loan and guarantee applications without conducting a congressionally required review of any serious adverse effects of the loan or guarantee."
Congress required adverse-effect review after a string of deals that helped foreign competitors or caused U.S. jobs to move overseas.
A decade ago, for instance, Ex-Im guaranteed $3 million of financing for General Electric to build a factory in Mexico because some of the new factory's equipment was made in the United States. That factory was part of GE's plan to move refrigerator jobs from Bloomington, Ind., to Celaya, Mexico.
The Bloomington plant fully shut down in 2010. Joe Adams, who was laid off from GM's Bloomington plant in 2005, put it succinctly when I told him about the Ex-Im subsidy: "My taxes are paying to ship my job to Mexico."
Every time Ex-Im comes up for reauthorization, Congress calls out the agency's various sins and proposes some new rule. Ex-Im subsidies killing U.S. jobs? Congress reauthorizes Ex-Im, requiring an adverse-impact study. Too much money goes to Boeing, GE, and Halliburton? Congress reauthorizes Ex-Im, requiring a higher percentage of money go to small exporters.
These requirements are toothless, as demonstrated by the Air India subsidies and last year's Boeing numbers. But the rules also miss a key point: A government agency using the full faith and credit of the United States to subsidize select companies is inherently destructive.
First, there's the risk to the taxpayer. Obama bragged last week that Ex-Im's subsidies come "at no cost to the taxpayer." But that's only true as long as Ex-Im's profits on the successful deals it finances exceeds its losses on the loans that go bust. Fannie Mae and Freddie Mac were profitable for decades, but now they've cost the U.S. taxpayers more than $300 billion. And as part of his export-initiative, Obama wants to authorize Ex-Im to take on riskier financing.
Second, there are the businesses that lose out because Ex-Im chose to subsidize someone else. Banks do not have bottomless financing. When Ex-Im guarantees a Wells Fargo loan benefiting Boeing, there's a good chance some other company didn't get a Wells Fargo loan. In other words, taxpayer loan guarantees don't just create new financing out of thin air -- they displace some financing that would have gone to less politically favored companies.
And finally, this "venture socialism," as Sen. Jim DeMint calls it, breeds corporate dependency on government, undermining national prosperity and encouraging corruption.
Obama's speech on Friday was in a unionized plant that benefited from the National Labor Relations Board's effort to stop Boeing from moving to South Carolina. When Uncle Sam is financing your deals in the billions of dollars every year, you're not in a strong position to fight back against White House diktat.
The Obama-Boeing relationship is a fitting symbol of Obamanomics: Subsidies and regulations packaged with talk of "fairness" and "capitalism."
Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on washingtonexaminer.com.
http://campaign2012.washingtonexaminer.com/article/obamas-corporate-welfare-no-level-playing-field/384151
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