Beltway Confidential

Obamanomics in Washington State: Boeing's record subsidy

By |
Beltway Confidential,Timothy P. Carney,Washington,Boeing,Subsidies

Boeing this week won the largest subsidy a company has ever won from a state when Gov. Jay Inslee, D-Wash., signed into law an $8.7 billion package of tax breaks just for the jetmaker.

Boeing got the deal, in part, by threatening to leave the state, which is the same way they secured a $3.244 billion package of Washington State goodies ten years ago in the special 2003 “Boeing Session” of the state legislature.

Boeing argues it needs these latest subsidies to build the 777 in Washington State because its competitor Airbus is so subsidized - which it is. Notably, Airbus got $158 million in subsidies from Alabama.

So the latest Boeing subsidy reminds us of the destructive subsidy arms race between states.

Also, this subsidy package comes amidst a World Trade Organization process on whether the U.S. subsidies for Boeing are illegal.

But there's another theme here: This sort of corporate welfare is just the sort of economic policy Obama advocates under the name of “New Economic Patriotism.”

Obama has rained the subsidies down on Boeing for five years. Gary Locke, the first Washington State governor to hold a special “Boeing Session” was Obama's first Commerce secretary. Obama campaigned for Jay Inslee, the current Boeing-subsidizing governor, in 2012. Democrats control most of the government in Washington State.

The personal connections are deeper, as I wrote a year ago:

Boeing's lobbyists during Obama's first term have had close Obama ties, including Linda Daschle, wife of former Sen. and current Obama confidant Tom Daschle. Boeing retains one of the most Obama-friendly firms on K Street -- the Podesta Group, co-founded by Obama's transition director, John Podesta.

Obama adviser Bill Daley had been sitting on Boeing's Board of Directors for five years when Obama tapped him as White House chief of staff in 2011.

Obama's 2008 campaign manager, David Plouffe, spent Obama's first term making millions as a management consultant for Boeing and other companies.

… When [Gary] Locke became ambassador to China, Obama replaced him at Commerce with Boeing director John Bryson.

So, if you want to see Obamanomics undiluted by Republican Party influence, look to Washington State today.

UPDATE: Boeing has responded to my query with a detailed list of points. Below, I'm pasting the most persuasive and relevant:

Washington state prior to 2003 had a B&O tax on gross receipts for manufactured goods that made it uncompetitive with every other state....

· The lower rate does not make Washington state an inexpensive place to do business (from a tax standpoint), but it does put them in the ballpark of other states.

· The state conducted extensive cost-benefit analysis prior to extending either incentive package.... my understanding is that since 2003 the state has seen a 3-to-1 return on its incentive package investment, which explains why it acted quickly to extend things like the current B&O tax rate.

· Looking at this through Boeing’s eyes, it’s important to recognize that we are in an increasingly competitive global environment. Airbus, which is heavily subsidized by France, Germany, the UK and Spain, remains our primary competitor. However, China also is building its first large commercial jetliner and has aspirations to be a major player in aerospace. Bombardier of Canada also has become a competitor in the single aisle market, and aerospace companies in Japan, Brazil and Russia also are competitive threats.

· American industry already is at a disadvantage when it comes to national taxes. The US corporate tax rate is the highest of any developed nation. We also are burdened by many costly regulations. So we naturally look very hard at the business climate in various parts of the US when deciding where to do business and where to make sizable new long-term investments.

View article comments Leave a comment