It's time to end corporate welfare. Boeing is exhibit A for why.
- Paul Constant is a writer at Civic Ventures, a cofounder of the Seattle Review of Books, and a frequent cohost of the "Pitchfork Economics" podcast with Nick Hanauer.
- In this opinion piece, he writes that the recent Boeing failures showcase the "parasitic relationship" between corporations and local government, as Boeing received large tax breaks.
- Americans are starting to realize that these tax breaks don't actually benefit the local economy - and, in the case of Boeing, fund "villainy."
- For more on this topic, listen to the latest episode of "Pitchfork Economics."
- Visit Business Insider's homepage for more stories.
Until the next catastrophic oil spill or widespread outbreak of food-borne illnesses, Boeing is the reigning champion of American corporate malfeasance. Since the airplane manufacturer's new 737 Max models started crashing in 2018, killing nearly 350 people in two separate crashes, Boeing has done nearly everything wrong. Reporters at the Wall Street Journal discovered, for instance, that Boeing knew about the model's deficiencies about a year before planes started falling from the sky.
The story of the 737 Max is a tragedy of cost-cutting in design and an indictment of a system of austerity in which the policing of government regulations have been largely outsourced to the very corporations which are supposed to be regulated. At nearly every turn, Boeing has revealed its willingness to hide the truth, mislead authorities, and ignore the consequences of its own actions.
And Dennis Muilenburg, Boeing's outgoing CEO who ran the company during this whole saga, is walking away with an astonishing $62 million severance package. (For the sake of comparison, Boeing will compensate the families of the hundreds of people who died in the two 737 Max crashes with cash and benefits equaling $100 million dollars, which eventually works out to less than $150,000 per family.)
Perhaps worst of all, if you're a taxpayer in Washington state, you have helped to fund Boeing's bad actors behind the story of golden parachutes, irresponsibility, and avoidable deaths. Washington state leaders in 2013 gave Boeing a jaw-dropping $8.7 billion in tax breaks that are still rolling out to this day.
During his presidential run last year, Governor Jay Inslee, who shepherded Boeing's tax breaks through Washington's legislature, says he is "not happy with the Boeing situation" in retrospect. "If you've ever been mugged, you understand what it feels like," Inslee told Trevor Noah on The Daily Show in March 2019.
"These corporations put a gun to your ribs and say you're going to lose 20,000 jobs" unless you hand over the tax breaks, Inslee explained. And even though Boeing got the huge payout that they wanted out of Washington state, they killed those jobs anyway. In 2017 alone, a year in which Boeing enjoyed a $227 million share of that Washington state tax cut, the company laid off 6,000 Washington workers. Michael Hiltzik at the Los Angeles Times estimates that Boeing cut nearly 13,000 Washington jobs between the announcement of the tax break and the end of 2017.
Boeing is a particularly egregious example of the parasitic relationship between corporations and local governments, and they're exhibit A for the case against corporate welfare. As Governor Inslee learned, generous tax breaks provide no guarantee that a corporation will be a good neighbor. Boeing received the largest corporate tax break payout in Washington state history by far, and it repaid that taxpayer generosity by slashing and moving jobs, building substandard products that killed users, and delivering outsize paydays to the masterminds who oversaw one of the most embarrassing two-year periods in American corporate history.
Of course, it's easy to paint Boeing as a villain, but the mechanism that Boeing used to fund its villainy is anything but unusual. In the latest episode of "Pitchfork Economics," Nick Hanauer and Zach Silk discuss the many ways in which corporations suck wealth from the taxpayers in order to pay out investors and leadership. David Dayen, the executive editor at the American Prospect, and Rana Foroohar, associate editor at the Financial Times, discuss the relatively short, trickle-down history of governments using taxpayer dollars to subsidize rapacious corporate behavior. This is the real story of welfare abuse, and it's absolutely maddening.
Thankfully, the American people, like Governor Inslee, have seen more than enough evidence to understand that these tax breaks are handouts that do nothing to benefit the local economy. People in New York City, for instance, revolted against proposed state and city tax incentives to bring Amazon's proposed "HQ2" to town. At the time that Amazon announced it would be backing off from the HQ2 plans, anti-Amazon leaders including Alexandria Ocacio-Cortez were painted as "villains" for killing jobs. But even without the tax breaks, Amazon is quietly going ahead with the jobs and investments in New York City that it proposed anyway.
And all that anecdotal evidence is backed up with fresh academic research. A new study by Cailin Slattery and Owen Zidar finds that most states and local governments offer $30 billion a year in welfare - as a "low-end estimate" - to corporations, and in some states the outgoing incentives exceed corporate tax revenues. In their paper, Slattery and Zidar conclude that they "do not find strong evidence that firm-specific tax incentives increase broader economic growth at the state and local level."
Over the last 40 years of trickle-down doctrine in the United States, the prevailing philosophy has been to attract businesses to your area with low taxes, low wages, and few regulations. It has been an unsustainable model that has harmed workers, encouraged lazy and malicious business practices, and destroyed our reputation as global economic leaders.
At the very least, our leaders need to understand that this rampant system of corporate subsidization must end. It's not just that public investments into our health, our infrastructure, and our future are hurting - it's that our corporations have grown lazy and entitled, and they're taking advantage of the system with no plan to ever pay us back. It's time to kick corporations off welfare for good.
Get the latest Boeing stock price here.