Boeing’s recent stumbles with its new 787 Dreamliner have again brought into question what role U.S. taxpayers should play in subsidizing the giant airplane manufacturer. As of two weeks ago, the Federal Aviation Administration (FAA) was forced to ground the entire fleet of Boeing’s new planes after they exhibited a tendency to catch fire mid-flight. The media coverage has rightly focused on the numerous flaws in design and construction that went into these planes, often noting the multiple years of setbacks that forced the company to officially delay the plane’s release date seven times.
What this coverage generally omits, however, is that regardless of the failures of Boeing and its 787, the U.S. government continues to subsidize the company to the tune of tens of billions of dollars each year. This corporate welfare is dispensed through the United States Export Import Bank (Ex-Im), an institution that draws on the backing of American taxpayers in order to offer financial support to companies of their choosing.
The Ex-Im Bank has a storied history with Boeing. Since the advent of this government institution, no company has received more financial support than the aircraft maker. Last year’s numbers are a testament to this fact: of the Ex-Im Bank’s $14.7 billion fiscal year 2012 budget, 83 percent went toward financially supporting Boeing either through direct loans or loan guarantees. And although such statistics may seem drastic, the close relationship between these two entities has existed for decades.
The Ex-Im Bank acts much like any other bank in that they loan money or offer loan guarantees to be paid back over time with interest. What separates the Ex-Im Bank is that its loans are backed by the full faith and goodwill of American taxpayers, giving the organization a far greater ability to invest in riskier ventures, while offering lower rates than privately-held banks. Consequently, some of the bank’s investments haven’t panned out so well; for example, Solyndra.
The Ex-Im Bank is known as “Boeing’s Bank” due to its role in facilitating the export of the company’s planes to countries around the world. And instead of allowing private lending institutions to make the loans or guarantee them, Ex-Im has aggressively implanted itself into the financing process, subsequently stymying competition and establishing a system of government-sponsored corporate welfare.