Boeing and the 777Xtortion

Encircled by smiling legislators and a gaggle of business leaders at his June 2003 bill-signing ceremony in Olympia, Gov. Gary Locke moved his pen over paper, turning legislation into law and public money into corporate welfare. It was the right thing to do, the governor said. Either give the Boeing Company a $3 billion tax break or watch the aerospace industry fly away.

He didn’t mention that the fix was in—that the “independent” consulting company he’d hired for $715,000 to study the giveaway was also Boeing’s paid corporate consultant, and would itself benefit from the tax break. And he professed to trust the word of a company with a scarred history of criminal bribery and contractual fraud, confident Boeing would live up to its promise of making Puget Sound the center of its new 787 Dreamliner assembly operation.

By 2005, it was Locke who’d flown away, leaving office after his second term as Boeing began outsourcing jobs, including building wings in Japan. By 2009, when Locke landed in D.C. to become Barack Obama’s Commerce Secretary, catering to Boeing’s needs around the world, the Lazy B was opening a second 787 production line—in South Carolina, where it garnered another $1 billion in tax incentives.

Last week it was governor-in-training Jay Inslee offering three times as much to once again keep Boeing from flying away. Despite its annual $85 billion in revenue and $4 billion profit, the needy aerospace giant insisted that Locke’s $3 billion, 20-year tax break had to be replaced by Inslee’s $9 billion, 27-year tax break, or it would be forced to make another Carolina-style move.

Over the weekend, the legislature snapped to attention and doled out the huge exemption. Inslee and lawmakers then dissolved into an orgy of backslapping and self-congratulation. To the governor, it wasn’t largesse he was giving away to a Fortune 500 behemoth, it was process. Lawmakers, “in very short order,” he said, “did a great job producing a great product.” The legislature had itself become a production line, assembling CARE packages for America’s #1 plane maker.

And Boeing was delighted to take delivery. Taxes—not paying them—is part of the company’s capital strategy. It regularly doesn’t pay any corporate income tax, and in addition to the $9 billion it now won’t be paying Washington state, it gets an estimated $1 billion in other state tax incentives, thanks to years of heavy lobbying, campaign donations, and sustained threats to pack up and move. Thus, you can’t blame the conspiring corporate minds at Boeing for taking another plane hostage—this time the 777X, as in Xtortion. Their demand that taxpayers pay a ransom or their plane disappears worked before. And look who they’re dealing with: The state went for the newest demand knowing full well that Boeing deceived the government after the first giveaway. Legislators even added language to nullify exemptions should Boeing pull another Carolina. What part of “You can’t legislate morality” don’t they understand?

Boeing’s South Carolina strategy provides another weapon to use on Washington: its non-union operations in North Charleston. The threat of outsourcing local jobs to that far-away plant and other non-union locales has emboldened Boeing’s bargaining position here (even if Inslee’s office doesn’t see the harm: “They are just diversifying,” says the governor’s aerospace guy, Alex Pietsch). Workers this week are set to vote on a “piece of crap” offer, as the Machinists Union local leader calls Boeing’s proposal, which seeks to shift health-care costs to employees and replace their longtime pension with a savings plan. One tortured Boeing worker, faced with this career Sophie’s Choice, told the Times’ Dominic Gates: “It’s like I’m smiling while I’m being kicked in the balls. But it’s better than being decapitated.”

It’s a groinal sensation taxpayers might be experiencing as well. Just as nobody wanted to talk about the 2003 fix, no one seemingly wanted to discuss the possibility that this tax break was a fraud. Boeing had demanded that both the legislature and the machinists concede to their demands, and that’s how Inslee saw it. But did the company mislead the governor, or did the cheerleading Inslee, trailed by his legislative pep squad, choose not to interpret the fine print, since union ratification of the contract alone seemed to assure the new plane would be built here? As Boeing’s letter of understanding to the union states, “the Company,” in return for ratification, “agrees to locate the 777X wing fabrication and assembly, and the final assembly of the 777X in Puget Sound.”

Nine billion dollars and a kick in the balls later, “This is a great day for everyone in Washington,” Inslee said. “Winning the 777X will secure tens of thousands of jobs and yield huge economic benefits for generations to come.” It was, almost word for word, pure Gary Locke—wherever he might be.

Journalist and author Rick Anderson writes about crime, money, and politics, which tend to be the same thing.

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