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Cronyism, and the Ex-Im Bank

12:00 AM, Aug 30, 2014 • By IRWIN M. STELZER
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·     Liberal Democrats, who despise Boeing for moving production of the 787-10 Dreamliner  from the pro-union state of Washington to the anti-union state of South Carolina, are supporting the “Boeing Bank” because it creates jobs; 

·     Enter Delta Airlines. That highly regarded carrier competes on international routes with some of Boeing’s customers who receive financing subsidies from the Ex-Im bank, lowering the price these competitors pay for aircraft and the fares they must charge.

Delta contends that Ex-Im subsidies allowed Air India to flood the New York-Mumbai route with extra capacity and crowd out competitors. Delta says it was forced to stop flying that route in October of 2008 due to the Bank’s loan guarantees to Air India, enabling its competitors to pour capacity onto that route. And other loan guarantees to American manufacturers -- there were 3,000 last year -- enable them to keep down the cost of steel mills they build in China and refrigerator plants in Mexico, points out Timothy Carney in the Washington Examiner. One result is that American steel producers have persuaded our trade overseers to levy tariffs on China’s low-priced steel, perhaps produced from the very Chinese plants the construction of which was subsidized by Ex-Im financing.  

So life has become more complicated for congressmen opposed to crony capitalism. They can oppose crony Boeing’s efforts to have Ex-Im re-authorized, or oppose crony Delta’s efforts to eliminate or pare down the “Boeing Bank.” Both cronies have large teams of lobbyists and supporters in the White House. In a perfect world, the edge goes to Delta. But this is not a perfect world, as the export credits to Airbus and others demonstrate.

The resulting policy muddle might best be solved by looking to last week’s durable goods report, and to an old standby. In July, Boeing booked orders for a record 324 planes, orders that will provide thousands of jobs a few years from now when production begins. America needs jobs growth, and the jobs-in-hand provided by Boeing have to be given greater weight than the jobs-in-the-bush that might emerge if critics are right and subsidies to Boeing divert resources from other, smaller businesses. And that old standby Adam Smith points out that “The French have been particularly forward to favor their own manufactures….Revenge in this case naturally dictates retaliation…”

So it might be wise for Congress temporarily to renew the Bank until after the November elections, and then reach a more considered decision when electoral passions cool for the brief period before the start of the 2016 presidential and congressional election campaigns.

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