While the media's talking heads rent their garments in phony outrage, Republicans crowed with delight, and so-called Democrats wrung their hands and pointed fingers about the troubled launch of the Affordable Care Act, a starker example of our country's frightening economic trajectory manifested itself in Seattle this week.
Corporations like Boeing are used to getting their way. They're used to having local municipalities kowtow to them, used to demanding and receiving enormous tax breaks, training programs and other favors bestowed by cities desperate to sacrifice to the last dime for the privilege of hosting one of their manufacturing facilities and the precious jobs that come with them. In "What's the Matter with Kansas," Thomas Frank described how Boeing engineered a bidding war between multiple states for the "privilege" of manufacturing its 7E7 airliner. At the time, Boeing was Wichita, Kansas' largest employer, with an equally large manufacturing facility in Washington State:
Anyone who wonders how, exactly, the corporate vision gets translated into the nuts and bolts of state law would do well to study the bidding war that followed.
The winning community, Boeing announced, would furnish the company with quality schools, low absentee rates among its labor force, good services, low taxes, cheap land, and “local community and governmental support for manufacturing businesses.” Got it? The competing states certainly did; they responded by generating statements of high romantic love for Boeing and obsequious promises of eternal meekness. People in the Puget Sound area remembered how Boeing had once criticized the state for having high taxes and workers’ comp costs; now they declared themselves ready to change all that, with attractive tax incentives and a promise to make the state’s troublesome environmental bureau into a “more business-friendly” outfit.
Thomas Frank, "What's the Matter with Kansas?"
They're also accustomed to dangling those precious jobs tantalizingly to public officials while negotiating the harshest possible terms for the workers who actually end up filling them. It's the unvarnished corporate fist of the free market, wielded with all its raw and pitiless force, and it doesn't care if it takes an entire city down, least of all the people who live in it.
In 2003 the loser was Kansas, which despite struggling with its own budget shortfall felt compelled to cough up 500 million in bonds, ultimately negotiated by Boeing into an interest-free loan by placing the onus back on the state for paying back the bond interest. The "interest" payments were taken out of the state taxes paid by existing Boeing employees, rather than going into the state's general revenue fund. In the end, Boeing didn't add any new jobs to Kansas and kept its business operations--and the manufacture and assembly of the 7E7-- exactly where they had been before the "loan."
Now it's Washington State's turn--and the manufacture of a brand new aircraft, the "777X" at Boeing's Everett, Washington plant. But having already squeezed extortionate concessions from the state ("the largest tax subsidy in U.S. History," according to one source), Boeing has now set its sights on the workers slated to actually build their planes. The corporation's final ultimatum to its machinists union would have resulted in terminating their pensions, hiking the cost of their health care, and provided for a paltry 1% pay increase every other year. Meanwhile Boeing has reaped stunning profits over the past year, and its stock price has climbed 80%.
This week, to everyone's surprise, the machinist's union overwhelmingly rejected Boeing's ultimatum, its President describing it as a "piece of crap." In response, Boeing has now announced it will likely relocate its manufacturing operations for the 777x to another state, populated with more "reasonable" workers--possibly Texas, where Rick Perry actually Tweeted his willingness to "help out "--resulting in a loss of 56,000 jobs in Washington state. Nikki Haley, Republican governor of South Carolina, has eagerly invited Boeing to take advantage of her state's work force as well. Boeing has also hinted that the failure to accept its labor proposals might prompt it to send the work to Japan.
Timothy Egan of the New York Times puts the problem here into focus:
The events of the last few days show the utter bankruptcy of economic policy prescriptions offered by both political parties. You want tax breaks and deregulation -- the Republican mantra? The $8.7 billion granted Boeing this week is the largest single state-tax giveaway in the nation’s history. It wasn’t enough. You want government training for schools and highly skilled workers -- the Democratic alternative? There was plenty of that, to Boeing’s liking, in the package.
Egan is referring to the 8.7 Billion in tax breaks
Washington state is offering Boeing for the privilege of keeping its operations in the state, as well as ongoing funding for workforce training
. But that wasn't enough
What Boeing wants is very simple: to pay the people who make its airplanes as little money as it can get away with. It needs to do this, we’re told, to stay competitive. It has all the leverage, because enough states -- and countries -- are willing to give it everything it asks for. Who wouldn’t want a gleaming factory stuffed with jet assemblers, a payroll guaranteed for a generation?
All went according to script as the Boeing Company showed what to expect in a grim future for a diminished class -- the vanishing American factory worker. The threats were issued, the tax giveaways approved, the political leaders warned of the need to buckle to Boeing.
This is how the middle class dies, not with a bang, but a forced squeeze. After a global corporation posts record profits, it asks the state that has long nurtured its growth for the nation’s biggest single tax break, and then tells the people who make its products that their pension plan will be frozen, their benefits slashed, their pay raises meager. Take it or we leave.
What Boeing is doing has been replicated ad nauseum throughout the country (Boeing workers called the company's proposal the "Walmartization of Aerospace"), as manufacturers migrate their operations to the cheapest common denominator. And slowly but surely, the Middle Class that once thrived in this country begins to vanish:
So, off to Texas, where one in four people have no health care, or South Carolina, where a compliant work force would never think of putting up a fight? And who can blame Boeing? After all, pensions are a thing of the past, aren’t they? Wages and household income, across the country, have not risen in nearly 15 years.
This is supposed to be the age of the gig economy -- every worker an entrepreneur. But it hasn’t translated to a fix of the greatest economic crisis of our times: how to preserve a declining middle class.
As Danny Westneat of the Seattle Times
Take one aspect of the Boeing showdown, the pensions. For decades Boeing has given its line workers a decent retirement benefit. It pays out about $90 a month for every year worked at the company, so that someone with 30 years of service would get $2,700 a month when they’re done at age 65.
Add Social Security to that and you’ve cobbled together a comfortable but hardly posh old age for sheet-metal workers, riveters and others who build the nation’s planes.
Boeing wants to cancel those pensions and put in much weaker 401(k) plans. There’s little doubt this will happen, sooner or later. Because if it doesn’t, Boeing can use pension-free laborers in South Carolina to do the same work.
It’s a race to the bottom. Or rather, a slog to an era when workers will be more reliant on Social Security than ever.
In what has to be the most appalling irony in all of this, Boeing's CEO, Jim McNerney, headed the Business Roundtable, a corporate lobbying group which this past year argued for raising
the Social Security Eligibility Age:
Earlier this year that group called for raising the eligibility age for Social Security to 70 years old, as well as crimping back on the benefits (by reducing the index of inflation used to calculate payouts.)
“We are going to need our employees to work longer just to fill the needs that we have in the work force,” said a Roundtable suit, helpfully explaining why all Americans should willingly retire later, for less.
So here we have the spectacle of the CEO of a corporation currently cutting its workers' pensions while at the same time arguing that Social Security should be drastically curtailed.
Westneat ran McNerney's personal numbers as well:
According to the company’s recent annual reports, McNerney’s pension holdings soared by $6.3 million just in the past year.
If McNerney retires now he will get $265,575 a month. That’s not a misprint: The man presiding over a drive to slash retirement for his own workers, and for stiffs in the rest of America, stands to glide out on a company pension that pays a quarter-million dollars per month.
The average Boeing machinist at the Washington facility makes $85,000 per year, enough to make a decent living for a family, but not much more. In the eyes of many Americans that makes him or her a "Lucky Ducky." Never mind the fact that the only reason he earns that amount is because he had the power of a union negotiating on his behalf. Most Americans are no longer in unions, and if corporations like Boeing have their way, the very idea of unions will be forgotten. When that happens Americans will look around at their neighborhoods, at their homes, at their families, and at their elected officials, and some will ask what happened to the Middle Class in this country.
This is what happened.