US aerospace industrial base is running out of time

The Hill ^ | October 08, 2015 | David F. Melcher 474

[Soul of the South]

You stated correctly, “Ex-Im financing guarantees are intended to facilitate exports by bridging gaps in jurisdictional authority so that banks can lend money with a relative degree of security in circumstances where that might not otherwise be possible.”

In other words through the Import/Export Bank the US government assumes financial risk actors in the private market are unwilling to take. It is surprising someone who professes to be a principled disciple of Friedman and Hayek can justify this government intervention in markets. However, throughout life I’ve learned most people will bend principle when it conflicts with their own economic interests.

With respect to the Import/Export bank not providing subsidized interest, I suggest you read a 2015 publication of the Mercatus Center at George Mason University. Mercatus is a research center dedicated to free market ideas you profess to admire. Coincidently, in addition to its research, the center sponsor a speaker series named after Mr. Hayek.

The title of the study is: ‘The Export-Import Bank’s Top Foreign Buyers” and it is authored by Veronique de Rugy and Diane Katz. Rugy is from the Mercatus Center and Katz is from the Heritage Foundation. One might characterize them as principled free market advocates in the tradition of Hayek and Friedman. A link to the article follows: http://mercatus.org/sites/default/files/Rugy-Ex-Im-Top-Foreign.pdf

Contrary to your assertion the Import/Export bank’s activities do not result in interest subsidies, I recommend you read pages 10 and 11 of the paper relating to the real example of the financing of planes sold by Boeing to Air Emirates. Emirates bought 4 Airbus 380’s and 2 Boeing 777’s in June of 2012. The Airbus planes were financed in the private market, the Boeing planes received Import/Export bank financing. As the article points out, it is obvious an airline controlled by the government of the Emirates could afford private financing.

Speaking to the Emirates transaction with respect to the Import Export Bank financing effectively creating interest subsidies the article states: “The subsidies enjoyed by Emirates impose a very real cost on US airlines. With Ex-Im Bank assistance, Emirates financed its purchase of planes at interest rates that were almost half the cost paid by their unsubsidized competitors. That saved Emirates about $20.3 million per plane—savings that translated into far lower operating costs.” In effect, the US taxpayers by assuming the financial risk of the transaction through the Import/Export bank, allowed the bank to extend Emirates a below market interest rate. American carriers Delta, American, United, etc. paid higher rates in the private markets for their planes because the risk associated with loans to US domestic carriers are not backed by the full faith and credit of the taxpayer.

You closed your last post by stating you are “outa here.” I suggest with respect to the free market principles you claim profess allegiance to you are indeed “outa here”.