Recent news concerning Boeing, and its 787 Dreamliner being grounded by the Federal Aviation Administration (FAA), leads one to question the role of the federal government in subsidizing Boeing’s sales across the globe. Last week, it was announced that all of Boeing’s brand-new flagship 787 Dreamliner jets would not be permitted to fly due to an electrical malfunction that causes the aircraft’s battery to catch fire mid-flight.
The airplane maker has experienced myriad issues with its new plane, including numerous manufacturing and supply chain setbacks, including seven official delivery delays. But no matter the circumstances, Boeing can continue to expect the full support of Uncle Sam – with the full faith and credit of the American people – in the form of billions of dollars in financial support from the United States Export-Import Bank (Ex-Im).
Boeing has long enjoyed a close relationship with the Ex-Im Bank. Research performed by the nonprofit Pew Charitable Trusts in 2009 shows that, between 2007 and 2008, 65 percent of the $15.3 billion worth of loan guarantees that the Ex-Im Bank issued went to help foreign countries buy Boeing aircrafts. More recently, the bank earmarked 82.7 percent of the total $14.7 billion it authorized during 2012 for the same beneficiary. Such preferential treatment is a testament to the influence that Boeing has with bureaucrats within the federal government, something the company has worked hard and spent millions to earn.
Specifically, Boeing spent $11.8 million last year on lobbying, the most of any major aerospace firm. Yet purchasing political power wasn’t enough. As it pertains to the Ex-Im Bank, Boeing’s clout extends far beyond most any other entity, corporate or otherwise.
The Ex-Im Bank’s Advisory Committee – the appointed group that decides where the bank will direct its money – offers a startling example of just how far Boeing’s influence reaches. Members of the committee include Christine Gregoire, Governor of Washington, where Boeing is based, and Owen Hernstadt, the director of trade and globalization for the International Association of Machinists and Aerospace Workers (IAMAW), the powerful union that represents the vast majority of Boeing’s workers. In addition, Boeing’s Chief Executive Officer Jim McNerney was appointed by President Obama as the chair of the President’s Export Council in 2010. With all of these players implanted at the highest levels of government, it isn’t too hard to imagine a scenario in which their voices helped guide funds towards deals benefitting the massive airline manufacturer.
This should come as anathema to anyone who believes in a free market and/or open competition. The relationship and special treatment Boeing receives from the Ex-Im Bank is the true epitome of crony capitalism. At its core, the government agency exists almost exclusively to continue loaning money to countries that want to purchase Boeing products; first and foremost, planes such as the 787 Dreamliner. But what happens when Boeing’s jets have major mechanical issues? What happens if the countries that have purchased these jets begin to renege on their commitments because of these problems? What happens if the planes sit on tarmacs across the globe and lose value? The answer is that the American taxpayer could be on the hook for an investment they did not authorize.
Let’s not forget the likes of Fannie Mae and Freddie Mac – two government backed agencies that swallowed billions of taxpayer dollars before most anyone noticed how destructive the practice was much less did anything about it. We cannot allow the Ex-Im Bank to become another Freddie and Fannie.
If these deals are good enough for the American people to back, they should be good enough for private lending institutions to finance or guarantee. That way, stockholders, not John and Jane Taxpayer are left holding the bag when yet another government bet goes south.
Written into the Ex-Im Bank’s most recent re-authorization bill are instructions for the U.S. Treasury to begin winding down the organization. The recent news concerning Boeing is more evidence that it would be a prudent course of action for the incoming Treasury Secretary to read and follow the law. If we delay any longer, we continue to artificially manipulate the marketplace, costing us thousands of American jobs in the airline industry, while risking the loss of billions of dollars. With a stagnant economy and a 16 trillion dollar debt, our country simply cannot afford that risk any longer.