Public subsidies: going, going, Boeing?

AuthorPeirce, Neal
PositionCommentary

Notwithstanding crippling budget crises, 19 states have risen to the bait set out by the Boeing Co. and proffered bids--some breathtakingly large--to land the assembly plant for Boeing's proposed new, fuel-conserving 7E7 jetliner. Appropriately, the new machine is dubbed the Dreamliner.

The biggest bidder of all is Washington state, which put together a subsidy package estimated to total $3.2 billion (yes, billions!) in value.

For 1,000 jobs--midpoint of the 800 to 1,200 Boeing is estimating--that works out to roughly $160,000 per worker per year over a plant life span of about 20 years.

Yet the jobs will average just $65,000 a year in pay.

"When I saw $3 billion, I thought "The number is a typo," economist Art Rolnick of the Federal Reserve Bank of Minneapolis told a Minnesota reporter.

In Washington state, still stung by Boeing's 2001 decision to move its corporate headquarters to Chicago, polling shows solid public support for the massive subsidy offer. State officials told Stateline.org, which made a careful nationwide survey of the bids, that they project the 7E7 plant could generate as many as 17,000 spin-off jobs and $60 million to $70 million in annual tax dollars. Boeing employs about 60,000 Washingtonians.

Hoping for the same kind of mega-gains, Michigan Gov. Jennifer Granholm last month offered Boeing $300 million in the form of tax abatements, infrastructure assistance, and worker training.

Even California, on the brink of fiscal insolvency, is working up a package reportedly worth $250 million over five years. Gov. Gray Davis asserts the state's "generous incentive package" will include "enterprise zone tax credits, a foreign trade zone, employee training grants, and local incentive programs."

The global economy is shifting the industrial competition game rapidly, notes William Stafford, president of the Trade Development Alliance of Greater Seattle.

First, manufacturing is getting dispersed. Stafford suggests that Dreamliner's major part assemblies--for wings, tail sections, or major fuselage features, for example--will likely be done "around the world in the location of Boeing's customers." The U.S. plant will simply put the subassemblies together.

That's why the job total is around 1,000, not the 5,000 to 7,000 local worker total for major airplane projects of past years.

Second, foreign competition is heating up, with rules of the game different from Americans' free market theories. Suggest a joint venture with a Taiwan...

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