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BOEING AND WASHINGTON STATE: CODEPENDENCY AND MORAL HAZARD
Brendan Williams*
TABLE OF CONTENTS
INTRODUCTION ...... 66
I. CHARTING A DANGEROUS FLIGHT: WASHINGTON’S 1987 “POISON PILL” BILL ...... 69
II. THREATENING TAKEOFF: WASHINGTON’S 2003 BOEING CONCESSIONS ...... 71
III. EXPERIENCING TURBULENCE: WASHINGTON’S 2009 WORKER’S RIGHTS BILL ...... 75
IV. ONGOING TURBULENCE: WASHINGTON’S 2013 BOEING CONCESSIONS ...... 77
V. STUCK IN A HOLDING PATTERN: BOEING AS A BAD CORPORATE CITIZEN ...... 84
VI. CORRECTING COURSE: A BETTER MODEL OF CORPORATE INDUCEMENT ...... 90
* Attorney Brendan Williams is a nationally-published writer on health care and civil rights issues. Thanks to the great editors of the Gonzaga Law Review for their advice and assistance. This article is dedicated to the members of the IAM and SPEEA.
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INTRODUCTION
Aerospace giant Boeing has been a linchpin of Washington’s economy since 1916.1 By 1971, Seattle was such a “Boeing town” that amidst thousands of Boeing layoffs, a billboard was famously displayed that read “Will the last person leaving Seattle — turn out the lights.”2 Beginning in 2018, Boeing, the nation’s largest manufacturing exporter,3 was beset by bad news. Two crashes involving its 737 MAX aircraft killed 346 people, forcing the aircraft to be grounded by the Federal Aviation Administration (FAA) amidst allegations of a faulty flight-control system.4 In December 2019, the head of the FAA admitted his agency made mistakes in responding to the crashes.5 Congressional hearings revealed “instances when F.A.A. managers sided with Boeing instead of their own safety experts.”6 Documents released to Congress showed that “during certification of the 737 MAX, company employees spoke of deceiving international air safety regulators and Boeing’s airline customers, and successfully fought off moves over several years to require anything but minimal pilot training for the new airplane.”7 These revelations drew bipartisan condemnation: “Sen. Ted Cruz (R-Texas), who
1. See, e.g., Greg Schneider & Don Phillips, Boeing HQ to Leave Seattle, WASH. POST (Mar. 22, 2001), https://www.washingtonpost.com/archive/business/2001/03/22/boeing -hq-to-leave-seattle/36353247-c341-43f4-964e-65c559e6700d/ (“The company has been in the Seattle area since William Boeing founded it there in 1916 as the Pacific Aero Products Co., renaming it the next year.”). 2. Erik Lacitis, ‘Turn Out the Lights’: Message from 1971 Seattle Billboard Echoed in Head-Tax Debate, SEATTLE TIMES (May 21, 2018, 3:37 PM), https://www.seattletimes .com/seattle-news/turn-out-the-lights-message-from-1971-seattle-billboard-echoed-in-head -tax-debate/. 3. David Gelles, ‘I Honestly Don’t Trust Many People at Boeing’: A Broken Culture Exposed, N.Y. TIMES (Jan. 10, 2020), https://www.nytimes.com/2020/01/10 /business/boeing-737-employees-messages.html (“Boeing is the largest manufacturing exporter in the United States, and its fate can sway the national economy. It employs more than 130,000 people, in all 50 states, and supports a network of thousands of suppliers.”). 4. See Timeline: Boeing 737 Max Jetliner Crashes and Aftermath, CHI. TRIB. (Oct. 14, 2019, 7:52 AM), https://www.chicagotribune.com/business/ct-biz-viz-boeing-737-max -crash-timeline-04022019-story.html. 5. David Gelles & Natalie Kitroeff, Boeing Hearing Puts Heat on F.A.A. Chief Over Max Crisis, N.Y. TIMES (Dec. 11, 2019), https://www.nytimes.com/2019/12/11/business /boeing-faa-737-max.html. 6. Id. 7. Dominic Gates & Lewis Kamb, Boeing Apologizes as Internal Memos Reveal How Workers Spoke of Deceiving Regulators, Airlines, SEATTLE TIMES (Jan. 9, 2010, 9:11 PM), https://www.seattletimes.com/business/boeing-aerospace/boeing-internal-documents -reveal-culture-of-deceit-to-keep-down-costs-of-737-max/. WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 67 chairs the aviation subcommittee of the Senate Commerce Committee, called the documents ‘deeply disturbing.’”8 In 2019, Boeing’s archrival Airbus delivered over twice as many jet aircraft as did Boeing,9 while Boeing suffered its first annual loss in net revenue since 1997.10 Adding insult to injury, Boeing’s Starliner spacecraft failed to dock with the International Space Station during a December 2019 mission because “its onboard clock was 11 hours off.”11
8. Brianna Gurciullo & Tanya Snyder, Congress Seethes Over Boeing Emails, POLITICO (Jan. 10, 2020, 5:41 PM), https://www.politico.com/news/2020/01/10/congress -seethes-over-boeing-emails-097374. Yet the 737 MAX crashes, and Boeing’s responses, were not without precedent—a New York Times investigation of the 2009 crash near Amsterdam of a 737 found “striking parallels with the recent crashes—and resistance by the team of Americans to a full airing of findings that later proved relevant to the Max.” Chris Hamby, How Boeing’s Responsibility in a Deadly Crash ‘Got Buried’, N.Y. TIMES (Jan. 20, 2020), https://nyti.ms/3792Gms. Following the New York Times story, Boeing and the National Transportation Safety Board refused to cooperate with an inquiry into the 2009 crash by Dutch lawmakers. See Chris Hamby & Claire Moses, Boeing Refuses to Cooperate with New Inquiry into Deadly Crash, N.Y. TIMES (Feb. 6, 2020), https://nyti.ms/2uh4ATU. 9. See Dominic Gates, Boeing’s Horrible Year: It Lost Orders, While Airbus Delivered Twice as Many Jets, SEATTLE TIMES (Jan. 14, 2020, 8:44 AM), https://www.seattletimes.com/business/boeing-aerospace/after-boeings-horrible-year-annual -race-against-airbus-is-no-contest/ (“Airbus’ total jet deliveries were worth about $60 billion compared to Boeing’s $42 billion, based on market pricing estimates from aircraft valuation firm Avitas.”). Seizing the moment, Airbus even built up its own presence in Washington when it “acquired Mukilteo-based MTM Robotics, a small aerospace supplier with 40 employees that has made portable robotic systems and tools for three different Boeing aircraft programs.” Andrew McIntosh, Airbus Buys Seattle-Area Robotics Supplier That Built Systems for Boeing Jets, PUGET SOUND BUS. J. (Dec. 12, 2019, 11:29 AM), https://www.seattletimes.com/business/boeing-aerospace/after-boeings-horrible-year -annual-race-against-airbus-is-no-contest/. 10. Aaron Gregg, Losses from Max Grounding Continue as Boeing Reports Another Dismal Quarter, WASH. POST (Jan. 29, 2020, 11:57 AM), https://www.washingtonpost .com/business/2020/01/29/losses-max-grounding-continue-boeing-reports-another -dismal-quarter (“The company’s 2019 net losses of $636 million mark its first annual loss since 1997.”). Boeing bottomed out in January 2020, when it went the month without selling a single plane. See Dominic Gates, In an All-Time Low, Boeing Wins Zero Orders and Delivers Just 13 Jets in January, SEATTLE TIMES (Feb. 11, 2020, 5:13 PM), https://www.seattletimes.com/business/boeing-aerospace/in-an-all-time-low-boeing-wins- zero-orders-and-delivers-just-13-jets-in-january. 11. See Christian Davenport, After Mishap with Boeing Spacecraft, NASA Faces a Dilemma, WASH. POST (Jan. 9, 2020, 12:25 PM), https://www.washingtonpost.com /technology/2020/01/09/after-mishap-with-boeing-spacecraft-nasa-faces-dilemma/. Even this incident appeared not enough to prompt NASA to look closely at “one of its longest and most trusted contractors” until it was discovered that a second software problem occurred during the December test fight, “forc[ing] NASA to rethink its decision to give it a pass on the full safety review.” Christian Davenport, Boeing’s Starliner Space Capsule Suffered a Second WILLIAMS 12/3/2020 1:29 PM
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Also in December 2019, Boeing fired its chief executive, Dennis Muilenburg.12 However, he was still to receive over $62.2 million in compensation after his firing,13 news that reportedly “sickened” family members of those killed in the 737 MAX crashes.14 Even after the first plane crashed, “Muilenburg pressured the government to allow them to fly, going so far as to personally call President Trump about the issue.”15 This raises the question of “moral hazard.” The concept was born in insurance: “For nineteenth-century insurers, moral hazard was a label applied both to people and situations. The people were those whose character suggested that they were unusually susceptible to the temptation that insurance can create, and the situations were those that heightened that temptation.”16 Or, as economist Paul Krugman put it, “one person makes the decision about how much risk to take, while someone else bears the costs if things go badly.”17 What if Boeing’s excessive risk-taking was the result not of private insurance, but of government enabling? This article examines the control Boeing has exercised over Washington state politics, dating back to 1987 when the state protected the corporation against a hostile takeover,18 then jumping ahead to
Software Glitch During December Test Flight, WASH. POST (Feb. 6, 2020, 4:18 PM), https://www.washingtonpost.com/technology/2020/02/06/boeings-starliner-space-capsule -suffered-second-software-glitch-during-december-test-flight/. 12. David Gelles, Fired Boeing C.E.O. Muilenburg Will Get More Than $60 Million, N.Y. TIMES (Jan. 10, 2020), https://www.nytimes.com/2020/01/10/business/boeing-dennis -muilenburg-severance.html. 13. Id. 14. Aaron Gregg, Plane Crash Victims’ Families ‘Sickened’ by Fired Boeing CEO’s $62 Million Payout, WASH. POST (Jan. 13, 2020, 11:05 AM), https://www.washingtonpost .com/business/2020/01/13/plane-crash-victims-families-sickened-by-fired-boeing-ceos-62 -million-payout/. 15. Id. Boeing was a major beneficiary of President Trump’s 2017 tax cuts:
The Trump tax cuts, which trimmed US corporate taxes across the board by 40%, gave Boeing a $1.1 billion windfall in its 2017 year-end results. Boeing said it would spend $300 million on employee retraining and other worker-related upgrades, but plowed much more back into its own shares, instigating a $20 billion share buyback that helped lift its stock prices above $400 a share in early February 2019 for the first time ever.
Heather Timmons & Natasha Frost, How Money and Influence Flows Between the US Government and Boeing, QUARTZ (Mar. 14, 2019), https://qz.com/1572381/the-relationship -between-boeing-trump-and-the-federal-government/. 16. Tom Baker, On the Genealogy of Moral Hazard, 75 TEX. L. REV. 237, 250 (1996). 17. PAUL KRUGMAN, THE RETURN OF DEPRESSION ECONOMICS AND THE CRISIS OF 2008 63 (2009). 18. See infra Part I. WILLIAMS 12/3/2020 1:29 PM
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2003 when major tax and policy concessions were made to Boeing.19 Following those concessions, in 2009, Washington Democrats killed a workers’ rights bill Boeing opposed.20 In 2013, Boeing was given the biggest state tax break in United States history.21 Throughout these successes, a growing hostility to workers was abetted by policymakers,22 and this pattern of influencing legislation shows Boeing’s evolution as a corporate bad actor.23 Finally, in 2020, Boeing asked for its Washington tax preferences to be suspended given trade tariff implications, a request that legislators obliged.24 It is not unreasonable to suppose that such absolute power over policymaking has facilitated Boeing’s lack of accountability as a corporate citizen. The article concludes by noting that better approaches to corporate inducement exist, if Washington policymakers were receptive.
I. CHARTING A DANGEROUS FLIGHT: WASHINGTON’S 1987 “POISON PILL” BILL
In July 1987, “corporate raider” T. Boone Pickens began buying up Boeing stock, raising the possibility of a hostile takeover.25 The company looked to the Washington Legislature for protection, and reportedly encountered some early trepidation: “Washington state officials are balking at the prospect of toughening the state’s anti-takeover laws to protect The Boeing Company, since the move may be financially dangerous to the state and unconstitutional.”26 Senator Phil Talmadge, a Seattle Democrat and the chair of the Senate Judiciary Committee, “said he’s concerned that adopting Boeing’s proposal — which he referred to as
19. See infra Part II. 20. See infra Part III. 21. See infra Part IV. 22. See infra Part I–VI. 23. See infra Part V. 24. See infra Part VI. 25. See Andrew Pollack, Boeing Shares Soar; Pickens Role Cited, N.Y. TIMES (July 29, 1987), https://www.nytimes.com/1987/07/29/business/boeing-shares-soar-pickens-role -cited.html; Mark Clayton, Aircraft Giant Boeing Wonders What Boone Pickens Wants, CHRISTIAN SCI. MONITOR (July 30, 1987), https://www.csmonitor.com/1987/0730/fboe.html (“T. Boone Pickens, the Texas oilman and crafty corporate raider, has caused a collective shiver to run through the top management of Boeing, the giant aircraft manufacturer.”). Pickens’ intentions were not clear. See id. (“[M]ost analysts are saying they just don’t see him making a grab for Boeing.”). 26. Gloria Joseph, Bid to Protect Boeing Faces Uphill Battle, JOC.COM (Aug. 6, 1987, 8:00 PM), https://www.joc.com/air-cargo/bid-protect-boeing-faces-uphill-battle_ 19870806.html. WILLIAMS 12/3/2020 1:29 PM
70 GONZAGA LAW REVIEW Vol. 56:1 a prohibition on the transferability of corporate assets — would expose the state to billions of dollars in civil liabilities.”27 In the end, all caution was swept aside as the bill easily passed during a nine- hour emergency legislative session.28 As the Los Angeles Times reported, “[t]he measure was adopted by a vote of 67 to 12 in the state House of Representatives, and by a 44-to-2 vote in the state Senate. It was immediately signed into law by Gov. Booth Gardner.”29 According to one legislator: “‘The Legislature should be involved in this because we are concerned with companies and we are concerned about workers,’ said Rep. Art Wang, D-Tacoma. ‘The assets of this company include people.’”30 A provision of the new law’s halcyon intent section could be read today, ironically, as a prediction for the future “short-term gain” motivation of Boeing:
Hostile or unfriendly attempts to gain control of or influence otherwise publicly held corporations can cause corporate management to dissipate a corporation’s assets in an effort to resist the takeover by selling or distributing cash or assets, redeeming stock, or taking other steps to increase the short-term gain to shareholders and to dissipate energies required for strategic planning, market development, capital investment decisions, assessment of technologies, and evaluation of competitive challenges that can damage the long-term interests of shareholders and the economic health of the state by reducing or eliminating the ability to finance investments in research and development, new products, facilities and equipment . . . .31
The law artfully circumvented the charge that it was designed to benefit only one corporation by not naming it and instead protecting “every domestic
27. Id. 28. See Andrew Garber & Brian M. Rosenthal, Olympia Wants Ironclad Promise on 777X Production, SEATTLE TIMES (Nov. 8, 2013, 8:42 AM), https://www.seattletimes.com /seattle-news/olympia-wants-ironclad-promise-on-777x-production/. 29. Paul Richter, Washington State Arms Boeing with Shield Against Hostile Bids, L.A. TIMES (Aug. 11, 1987, 12:00 AM), https://www.latimes.com/archives/la-xpm-1987-08 -11-fi-661-story.html. 30. Bill Mertena, Washington Governor Signs Bill to Ward Off Boeing Raiders, ASSOCIATED PRESS (Aug. 11, 1987), https://apnews.com/2b802c40c5a5e1983aa60b5eb 3191883. 31. Act of Aug. 11, 1987, ch. 4, sec. 1, § 4, 1987 Wash. Sess. Laws 2935, 2935. WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 71 corporation” that employed “more than twenty thousand residents of the state.”32 Only Boeing fit this otherwise neutral description.33
II. THREATENING TAKEOFF: WASHINGTON’S 2003 BOEING CONCESSIONS
To understand the 2003 concessions that Washington policymakers made to Boeing, it is important to understand the preceding events. In 1996, Boeing announced it was buying its competitor McDonnell Douglas for $13.3 billion.34 It was reported that “[w]hile Boeing has been enjoying record orders, McDonnell has faced a series of cruel and humbling setbacks.”35 Some attribute Boeing’s subsequent problems to this acquisition. As one account noted, “it was McDonnell executives who perversely ended up in charge of the combined entity, and it was McDonnell’s culture that became ascendant. ‘McDonnell Douglas bought Boeing with Boeing’s money,’ went the joke around Seattle.”36 In 2001, no longer viewing itself as just a Seattle-area company, Boeing announced it would move its corporate headquarters from Seattle to Chicago.37 This prompted the Washington House Republican speaker, Clyde Ballard, to assail Democratic Gov. Gary Locke: “Within minutes after The Boeing Co. announced that it was moving its headquarters out of state, Ballard was on the phone to reporters to lay the blame at Locke’s doorstep.”38 In 2003, Boeing made it clear Washington would have to compete with other states for the building of a new airplane, the 7E7,39 and the New York Times
32. See id. sec. 2, § 12(e). 33. Mertena, supra note 30. But see WASH. CONST. art. II, § 28(6) (Under the Washington Constitution, no “private or special laws” may be enacted “granting corporate powers or privileges.”). 34. Brian Knowlton, Boeing to Buy McDonnell Douglas, N.Y. TIMES (Dec. 16, 1996), https://www.nytimes.com/1996/12/16/news/boeing-to-buy-mcdonnell-douglas.html. 35. Id. 36. Jerry Useem, The Long-Forgotten Flight That Sent Boeing Off Course, ATLANTIC (Nov. 20, 2019), https://www.theatlantic.com/ideas/archive/2019/11/how-boeing -lost-its-bearings/602188/. 37. James Wallace, Chicago Rolls Out Red Carpet for New Boeing Headquarters, S.F. GATE (May 11, 2001, 4:00 AM), https://www.sfgate.com/business/article/Chicago-rolls -out-red-carpet-for-new-Boeing-2922571.php. 38. See David Ammons, Locke/Ballard Clash Goes Public, KITSAP SUN (Apr. 8, 2001), https://products.kitsapsun.com/archive/2001/04-08/0064_david_ammons__locke _ballard_clash.html. 39. The plane was later rebranded the 787. See James Wallace, Boeing 7E7 to Die, but 787 to be Born, SEATTLE POST-INTELLIGENCER (Dec. 14, 2004), https://www.seattlepi.com/business/article/Boeing-7E7-to-die-but-787-to-be-born-1161965 WILLIAMS 12/3/2020 1:29 PM
72 GONZAGA LAW REVIEW Vol. 56:1 reported that “[c]ritics say Boeing’s threat is a form of corporate blackmail, a blatant attempt to spur pork-barrel legislation.”40 It worked. Governor Locke gave the company all it asked for: “Locke’s offer was nothing short of stunning: $3.2 billion in tax breaks over 20 years. He also sided with Boeing and big business on legislation to sharply reduce unemployment-insurance costs.”41 As one reporter noted, “Boeing has always enjoyed favorable tax treatment and deference in Olympia, but never had the state chased jobs so aggressively or so expensively.”42 In the intent section of the 2003 tax break law, the Legislature laid it on thick:
The legislature finds that the people of the state have benefited from the presence of the aerospace industry in Washington state . . . The legislature declares that it is in the public interest to encourage the continued presence of this industry through the provision of tax incentives. The comprehensive tax incentives in this act address the cost of doing business in Washington state compared to locations in other states.43
Among other things, the state’s business and occupation tax upon airplane manufacturers and sellers (i.e., Boeing) was limited to: “0.4235 percent from October 1, 2005, through the later of June 30, 2007, or the day preceding the date final assembly of a superefficient airplane begins in Washington state” and “0.2904 percent beginning on the later of July 1, 2007, or the date final assembly of a superefficient airplane begins in Washington state . . . .”44 In comparison, a hospital in Washington would pay a business and occupation tax of 1.5 percent of gross receipts.45
.php (discussing why Boeing’s rebranding to the 787 was reportedly a play to the Chinese market as “[t]he number ‘8’ is considered good luck in China.”). 40. Edward Wong, The Boeing State Fights to Build the Next Jet, N.Y. TIMES (June 10, 2003), https://www.nytimes.com/2003/06/10/business/the-boeing-state-fights-to-build -the-next-jet.html. There was some question among skeptics as to whether it was a bluff. See id. “Boeing will find it tough to set up the kind of infrastructure and skilled work force that it already has in Washington.” Id. 41. Ralph Thomas, Locke Remains Political Puzzle to Friends, Foes, SEATTLE TIMES (Jan. 11, 2005, 12:00 AM), https://www.seattletimes.com/seattle-news/locke-remains -political-puzzle-to-friends-foes/. 42. David Ammons, 7E7 Cruised in on Billions in Tax Relief, KITSAP SUN (Dec. 17, 2003), https://products.kitsapsun.com/archive/2003/12-17/352398_7e7_cruised_in_on_ billions_in_t.html. 43. Act of June 18, 2003, ch. 1, sec. 1, 2003 Wash. Sess. Laws 2d Spec. Sess. 2767, 2767. 44. Id. sec. 4, § (13)(a)(i)–(ii). 45. Id. § 4(12). WILLIAMS 12/3/2020 1:29 PM
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In addition, Boeing could offset the payment of the newly-minimal tax based on a credit granted for “qualified preproduction development expenditures . . . .”46 Boeing could also obtain a credit for existing facilities, because the credit granted applied to
[p]roperty taxes paid on new buildings, and land upon which this property is located, . . . used in manufacturing commercial airplanes or components of such airplanes; or [p]roperty taxes attributable to an increase in assessed value due to the renovation or expansion . . . of a building used in manufacturing commercial airplanes or components of such airplanes.47
The state passed these tax incentives without holding a committee hearing about the underlying legislation.48 The state’s unemployment insurance act was also amended.49 Tellingly, in the intent section, the very purpose of unemployment insurance was changed by striking words dating to 1945 requiring that “this title shall be liberally construed for the purpose of reducing involuntary unemployment and the suffering caused thereby to the minimum.”50 The amended act provided that for claims occurring after “January 4, 2004, the maximum amount payable weekly shall be either four hundred ninety-six dollars or sixty-three percent of the ‘average weekly wage’ for the [prior] calendar year . . . whichever is greater.”51 This was a reduction from existing law requiring that the “the maximum amount payable weekly shall be seventy percent of the ‘average weekly wage’ for the [prior] calendar year.”52 This significant change also passed without the legislation ever receiving a public hearing by a policy committee.53 As the Seattle Times reported:
When the vote came, business lobbyists whooped and clapped in the Boeing House — the company’s bungalow across the street from the
46. Id. sec. 7, § 7(2). 47. Id. sec. 15, § 2(a)(i)–(ii). 48. See H.R. 58-2294, 1st Spec. Sess. at 1 (Wash. 2003) (History of House Bill 2294 does not indicate a committee hearing was held). 49. See Act of June 20, 2003, ch. 4, 2003 Wash. Sess. Laws 2d Spec. Sess. 2782. 50. Id. sec. 1. 51. Id. sec. 11, § 3(a)(ii). 52. Id. § 3(a)(i). 53. Bill History of SB 6097 – 2003-04, https://app.leg.wa.gov/billsummary ?BillNumber=6097&Year=2003&Initiative=False (Bill history does not indicate public hearing by policy committee). WILLIAMS 12/3/2020 1:29 PM
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state House. The lobbyists spilled into the sun on the front lawn, hugging and patting each other on the back.
Across the street, about 20 labor-union lobbyists and activists gathered in a tent adjacent to the House chambers to watch the proceedings on television. Some sobbed or fought back tears, and others jeered at lawmakers who spoke in favor of the bill. Most just sat silently.54
The 2003 concessions made to Boeing were hardly the result of arms-length negotiations —it was later revealed that the state paid Boeing’s own consultant $715,000 to come up with the state’s offer.55 In the face of a conservative organization’s effort to unravel the conflict-of-interest, the state “released hundreds of contract pages it once claimed contained trade secrets—which, it turns out, didn’t. But a judge has allowed Locke and Boeing still to withhold nine key contract pages from public view.”56 As one account noted, “[t]hough Locke’s tax break was meant to keep more aerospace jobs in Washington, Boeing nonetheless moved portions of its labor force to South Carolina and overseas after it was passed.”57 Indeed, in 2009, the company threatened to leave Washington altogether: “Fred Kiga, Boeing’s vice president of governmental relations, delivered an address to an industry conference in Everett, warning that the constant fights with the unions were causing harm.”58 Democratic members of Washington’s congressional delegation took the company’s side, with then-U.S. Rep. Norm Dicks—characterized as “an aggressive lobbyist for Boeing”—emphasizing the seriousness of the threat.59 After retiring from Congress, Dicks became a paid lobbyist for Boeing.60
54. David Postman, Boeing Gets Double Win as Legislature Finishes Work, SEATTLE TIMES (June 12, 2003), https://archive.seattletimes.com/archive/?date=20030612&slug =legiboeing12m. 55. See Rick Anderson, The State’s Two-Timing Consultant, SEATTLE WEEKLY (Oct. 9, 2006, 12:00 AM), https://www.seattleweekly.com/news/the-states-two-timing-consultant/. 56. Id.; see also Evergreen Freedom Found. v. Locke, 110 P.3d 858, 862 (Wash. Ct. App. 2005) (affirming the trial court’s decision to redact contract and discussing how “[p]ublic release of these details could arguably lead to private gain and public loss.”). 57. Drew Atkins, The Scandals of Former Gov. Gary Locke, CROSSCUT (Aug. 11, 2016), https://crosscut.com/2016/08/the-scandals-of-former-gov-gary-locke. 58. Bryan Corliss, Boeing Boeing . . . Gone, SEATTLE BUS. (May 2009), https://www.seattlebusinessmag.com/article/boeing-boeing-gone. 59. See Dominic Gates, Key Lawmakers Warn of Boeing No-Strike Ultimatum, SEATTLE TIMES (July 8, 2009, 12:00 AM), https://www.seattletimes.com/business/boeing -aerospace/key-lawmakers-warn-of-boeing-no-strike-ultimatum/. 60. See Paul Fontana, Norm Dicks, Retired? You Must Be Joking., U. WASH. MAG., https://magazine.washington.edu/feature/norm-dicks-retired-you-must-be-joking/ (last visited WILLIAMS 12/3/2020 1:29 PM
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Instead of leaving Washington, in 2009, Boeing announced it would be opening an assembly plant in Charleston, South Carolina.61 As an aerospace reporter noted, that meant that the Machinists union “must accept that if Boeing doesn’t like their demands, it can direct future work to its nonunion Charleston plants.”62
III. EXPERIENCING TURBULENCE: WASHINGTON’S 2009 WORKER’S RIGHTS BILL
In 2009, legislation was introduced to enact a “Worker Privacy Act”—the House bill had 47 sponsors.63 As amended by a House committee, it stated that “employers may conduct employee meetings, disseminate literature, or send e- mails to employees regarding their political and religious views but shall not be able to require employees to attend these meetings, or listen to, or respond to, or participate in this communication.”64 Walmart was among those companies that held so-called captive audience meetings, including requiring its employees to attend meetings where they were warned that Democratic success in the 2008 elections could lead to unionization and job losses.65 It was reported “Boeing’s opposition was being wielded by Republicans and business leaders like a battering ram to try to disassemble the wall of Democratic support in both legislative chambers.”66 Legislative Democrats and Democratic Governor Christine Gregoire killed the bill based upon the pretext that a union email lobbying for the bill had violated the law—a claim that the Washington
Sept. 17, 2020) (noting that Dicks’ “roster of clients . . . includes Boeing, General Dynamics and the Puyallup Tribe. . .”). 61. See Dominic Gates, S.C. Decision Transforms Boeing’s Relationship with Washington, Labor Unions, SEATTLE TIMES (Nov. 1, 2009, 12:01 AM), https://www.seattletimes.com/business/boeing-aerospace/sc-decision-transforms-boeings -relationship-with-washington-labor-unions. 62. Id. 63. H.R. 1528, 61st Leg., Reg. Sess. (Wash. 2009); Jennifer Sullivan & Andrew Garber, State Worker-Rights Bill Shelved Because of “Legal and Ethical Questions,” SEATTLE TIMES (Mar. 11, 2009, 1:00 PM), https://www.seattletimes.com/seattle-news/state -worker-rights-bill-shelved-because-of-legal-and-ethical-questions/. 64. H.R. Substitute 1528, 61st Leg., Reg. Sess. § 1(2) (Wash. 2009). 65. See Editorial, Mixing Politics and Wal-Mart, N.Y. TIMES (Aug. 16, 2008) (“Providing workers with a list of members of Congress who, in Wal-Mart’s view, support bad legislation that would worsen workers lives seems indistinguishable from telling them who to vote against.”). 66. Jerry Cornfield, Democrats Shelve Worker Privacy Bill, DAILY HERALD (Mar. 11, 2009, 3:56 PM), https://www.heraldnet.com/news/democrats-shelve-worker-privacy-bill. WILLIAMS 12/3/2020 1:29 PM
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State Patrol found to be unsubstantiated.67 It was revealed that “[t]he weekend before the labor e-mail was sent, Gregoire administration officials were circulating an e-mail from Boeing lobbyists that pressured Gregoire to help halt the bill.”68 According to reporting:
[i]n that e-mail, Boeing lobbyist Trent House told Gregoire aviation adviser Bill McSherry that he had been counting votes among House Democrats, and that lawmakers ‘overwhelmingly want this bill just to go away and not have a vote. However, if a vote is required, most would reluctantly vote with the Labor community despite the known legal and symbolic flaws.’69
Following his success in killing a bill Boeing opposed, McSherry left Gregoire’s employ to lobby for Boeing.70 Labor remained embittered going into the 2010 election cycle: “Instead of contributing to the caucus campaign committees, the Labor Council created its own PAC called Don’t Invest In More Excuses, or DIME—a play on the e-mail that killed the worker-rights bill.”71
67. See Curt Woodward, State Patrol Says Labor E-Mail Tying Bill to Campaign Money Wasn’t Illegal, SEATTLE TIMES (Mar. 18, 2009, 12:00 AM), https://www.seattletimes .com/seattle-news/state-patrol-says-labor-e-mail-tying-bill-to-campaign-money-wasnt-illegal (noting that the email stated that unions would not support Democrats if the bill was not enacted). 68. Id. 69. Id. As one account in a labor publication read, despite having made campaign pledges to support the bill, “Democratic leaders stuck to the Boeing lobbyist’s script. Except that—instead of candidly saying they would renege on their pledge to organized labor in order to please the politically powerful aerospace giant—the three Democratic leaders hid behind a found e-mail. None of them contacted the labor council for an explanation of the e-mail before referring the matter to the Washington State Patrol.” Don McIntosh, Schism Widens Between Labor, Washington Dems, N.W. LABOR PRESS (Apr. 3, 2009), https://nwlaborpress.org/2009/0403/4-3-09WSLC.html. 70. See Dominic Gates, Boeing Hires Gov. Gregoire Adviser as New Director for State Lobbying Effort, SEATTLE TIMES (May 27, 2010, 7:19 PM), https://www.seattletimes.com/business/boeing-aerospace/boeing-hires-gov-gregoire-adviser- as-new-director-for-state-lobbying-effort/. Gregoire herself, upon leaving office, went to work for a reported “$20,000 a month” for a business consortium that included Boeing. Jim Brunner, Former Washington State Gov. Christine Gregoire Still a Force in Politics – This Time, Behind the Scenes, SEATTLE TIMES (Oct. 29, 2017, 6:00 AM), https://www.seattletimes.com/seattle-news/politics/gregoire-still-a-force-in-politics-this -time-behind-the-scenes/. 71. Andrew Garber, State Democrats Facing Revolt by Labor, SEATTLE TIMES (Nov. 11, 2009, 12:01 AM), https://www.seattletimes.com/seattle-news/politics/state-democrats- facing-revolt-by-labor/. This incident exacerbated internal divisions among Democrats: “Rep. Hans Dunshee, D-Snohomish, said the death of the Worker Privacy Act was the breaking point WILLIAMS 12/3/2020 1:29 PM
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IV. ONGOING TURBULENCE: WASHINGTON’S 2013 BOEING CONCESSIONS
In 2013, Governor Jay Inslee, a Democrat, called a special session to pass legislation granting Boeing a further tax break to secure 777X production.72 As one account noted, “[t]his is just the latest chapter of a long-running story that last climaxed in 2003 but dates at least to 1949, when the state freed airplanes used in interstate commerce from its sales tax.”73 It reported that “[a]mong other moves by the Legislature that have helped Boeing since then was a bill, passed during a nine-hour special session in 1987, that helped block a hostile takeover of the company by Texas oilman T. Boone Pickens.”74 The 2013 law stated:
[i]t is the legislature’s specific public policy objective to maintain and grow Washington’s aerospace industry workforce. To help achieve this public policy objective, it is the legislature’s intent to conditionally extend aerospace industry tax preferences until July 1, 2040, in recognition of intent by the state’s aerospace industry sector to maintain and grow its workforce within the state.75
The law, originating in the Senate, was never subjected to a public hearing in the House.76 And there was nothing very conditional about the 2013 extension of tax preferences, other than, without reference to the retention, or expansion of jobs, the new law’s requirement that “an airplane program . . . will commence manufacture at a new or existing location within Washington state on or after the effective date of this section: (i) The new model, or any version or variant of an existing model, of a commercial airplane; and (ii) Fuselages and wings of a new
for several caucus members.” Jennifer Sullivan, Tension and Divisions Growing Among House Democrats, SEATTLE TIMES (Mar. 27, 2009, 12:00 AM), https://www.seattletimes.com/seattle-news/politics/tension-and-divisions-growing-among -house-democrats/. Rep. Brendan Williams, D-Olympia, also noted that the “pro-business faction among House Democrats is ‘tilting’ party politics to the right,” deepening an imbalance among Democrats. Id. 72. See Garber & Rosenthal, supra note 28. 73. Id. 74. Id. 75. Act of Nov. 11, 2013, ch. 2, sec. 1, § 3, 2013 Wash. Sess. Laws 3d Spec. Sess. 2, 3. 76. See Bill History of SB 5952 – 2013-14, https://app.leg.wa.gov/billsummary ?BillNumber=5952&Year=2013&Initiative=False (noting a public hearing in the Senate Committee on Ways and Means but no public hearing in the House). WILLIAMS 12/3/2020 1:29 PM
78 GONZAGA LAW REVIEW Vol. 56:1 model, or any version or variant of an existing model, of a commercial airplane.”77 After the Machinists union “overwhelmingly rejected a proposed contract that contained benefit cuts in exchange for securing future 777X work in the state,” Governor Inslee and U.S. Rep. Rick Larsen (D-WA) both released statements urging the Machinists union to vote again, angering organized labor.78 It was reported that “[t]he disgruntlement led to labor groups canceling plans to attend a holiday reception at the governor’s mansion.”79 The Seattle Times also sought to officiously intermeddle in union decision- making, asking Machinists rhetorically: “Is Boeing bluffing?”80 The Seattle Times noted that “[Boeing] wasn’t in 2009, when it demanded a 10-year no-strike deal to keep the second 787 line at Everett. The company took its billion dollars of investment to a right-to-work state. Boeing is making 787s with nonunion workers in South Carolina.”81 The editorial ignored the fact that, in relocating that work in 2009, Boeing was violating the rationale for the tax breaks and unemployment insurance changes made in 2003.82 The fatal flaw of those concessions was that they “did not guarantee the state exclusive rights to build the 787.”83 Under political pressure, and with the union’s national office forcing a new vote in January 2014, Boeing’s hardball terms were narrowly agreed to by 51% of those Machinists voting.84 “The deal passed despite a strident Vote No campaign led by the union’s local leadership. When the result was announced inside the Seattle union hall filled with militant Machinists who opposed the
77. Act of Nov. 11, 2013, ch. 2, sec. 2, § 2(c)(i)–(ii), 2013 Wash. Sess. Laws 3d Spec. Sess. 2, 3. 78. Andrew Garber, Labor Upset with Inslee’s Call for New Machinists Vote, SEATTLE TIMES (Dec. 16, 2013, 9:55 PM), https://www.seattletimes.com/seattle-news/labor -upset-with-insleersquos-call-for-new-machinists-vote/. 79. Id. 80. Editorial, Machinists Voted Down the Boeing Contract. What’s Next?, SEATTLE TIMES (Nov. 14, 2013, 7:31 PM), https://www.seattletimes.com/opionion/editorial -machinists-voted-down-the-boeing-contract-whatrsquos-next/. 81. Id. 82. See Act of June 18, 2003, ch. 1, sec. 1, 2003 Wash. Sess. Laws 2d Spec. Sess. 2767, 2767; Act of June 20, 2003, ch. 4, sec. 1, 2003 Wash. Sess. Laws 2d Spec. Sess. 2782, 2782. 83. See Dominic Gates, Boeing Will Build Largest 787 Model Only in S. Carolina, SEATTLE TIMES (July 31, 2014, 1:46 PM), https://seattletimes.com/business/boeing-will -build-largest-787-model-only-in-s-carolina/. 84. See Dominic Gates, Machinists Say Yes, Secure 777X for Everett, SEATTLE TIMES (Jan. 4, 2018, 9:58 AM), https://www.seattletimes.com/business/machinists-say-yes -secure-777x-for-everett/. WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 79 contract, some men and women wiped away tears and a few cried openly.”85 Under the deal, it was reported that “[t]he 32,000 members of Boeing’s blue- collar union . . . will give up some hard-won benefits, including the traditional pension.”86 Triumphant politicians heralded the result:
Washington state political leaders, including Gov. Jay Inslee, expressed delight and relief at the result.
“Tonight, Washington state secured its future as the aerospace capital of the world,” said Inslee. “We will make sure the company keeps its commitment and that these jobs remain in Washington state for the life of the airplane.”87
Yet, as columnist Danny Westneat wrote in the Seattle Times, the whole episode was an ill harbinger for retirement security in general:
Now that our state’s pensioned politicians have so deftly assisted Boeing in wrenching pensions away from its line workers, the big question is: Who’s next?
A wrap-up story in this paper last weekend suggested that the stable retirements of Boeing’s 21,000 engineers will now be on the chopping block.
“SPEEA will be in the fat bull’s-eye next time,” one Boeing analyst was quoted, referring to the Society of Professional Engineering Employees in Aerospace, which still retains traditional pensions for all but new hires, at least until its contract is up in 2016.88
Already today, as defined benefit pensions disappear from workplaces, a plurality of older U.S. citizens, 40.2%, depend entirely upon Social Security for a sparse retirement income.89 It is remarkable that Democrats in Washington supported the elimination of retirement security.
85. Id. 86. Id. 87. Id. 88. Danny Westneat, Boeing Puts All Pensions at Risk, SEATTLE TIMES (Jan. 7, 2014, 8:00 PM), https://www.seattletimes.com/seattle-news/boeing-puts-all-pensions-at-risk/. 89. See Press Release, New Report: 40% of Older Americans Rely Solely on Social Security for Retirement Income, Nat’l Inst. on Ret. Sec. (Jan. 13, 2020), https://www.nirsonline.org/2020/01/new-report-40-of-older-americans-rely-solely-on-social -security-for-retirement-income/. WILLIAMS 12/3/2020 1:29 PM
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At a February 2014 ceremony announcing “that the company’s 777X wing- fabrication plant will be built in Everett,” it was conspicuous that “[t]he governor and both U.S. senators were there, but no local officials of the Machinists union . . . .”90 Yet “Inslee defended the concessions made to keep Boeing here — the Legislature’s passing of $8.7 billion in future tax breaks for the company and the Machinists’ agreement to freezing their traditional pensions — as essential to preserve the state’s economic future.”91 Westneat was not the only critic at the time. As this author wrote in the Seattle Times:
We have become a fearful state where our aspirations are subordinate to our fears. We cannot even ask questions, but must do as we’re told. Corporatism, and its ceaseless rewards for the 1 percent, is a fealty demanded of both parties, even as the 99 percent — working families held hostage — reject their captor’s demands.
Concern for Boeing subsumes all other considerations. No similar state policy accommodation is made elsewhere.92
Boeing went on to eliminate jobs in Washington anyway.93 It even engaged in a failed attempt to cut Machinists out of the fuselage production for the 777X by relying on robots.94 As Los Angeles Times business columnist Michael Hiltzik
90. Dominic Gates, Boeing, Politicians Vow to Heal Rift with Machinists Over 777X, SEATTLE TIMES (Feb. 18, 2014 8:55 AM), https://www.seattletimes.com/business/boeing -politicians-vow-to-heal-rift-with-machinists-over-777x/. 91. Id. While encouraging Machinists to give up their defined benefit pensions, it is perhaps worth noting that Inslee himself, while governor, still benefits from such a pension derived from his federal congressional service. See id.; Kyung M. Song, Inslee Leaving U.S. House but Still Eligible for Pension, SEATTLE TIMES (Mar. 20, 2012, 3:18 PM), https://www.seattletimes.com/seattle-news/inslee-leaving-us-house-but-still-eligible-for -pension/ (reporting “Inslee will qualify for his full $44,000 annual congressional pension when he turns 62 in February . . . . “). 92. Brendan Williams, Opinion, Guest: Stop Doubling Down on Boeing with the Tax Breaks, SEATTLE TIMES (Nov. 20, 2013, 4:58 PM), https://www.seattletimes.com/opinion /guest-stop-doubling-down-on-boeing-with-the-tax-breaks/. 93. Michael Hiltzik, Boeing Got a Record Tax Break from Washington State and Cut Jobs Anyway. Now the State Wants to Strike Back, L.A. TIMES (May 4, 2017, 2:20 PM), https://www.latimes.com/business/hiltzik/la-fi-hiltzik-boeing-washington-20170503-story .html. 94. See Dominic Gates, Boeing Abandons Its Failed Fuselage Robots on the 777X, Handing the Job Back to Machinists, SEATTLE TIMES (Nov. 13, 2019, 7:10 PM), https://www.seattletimes.com/business/boeing-aerospace/boeing-abandons-its-failed -fuselage-robots-on-the-777x-handing-the-job-back-to-machinists/ (“After enduring a manufacturing mess that spanned six years and cost millions of dollars as it implemented a WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 81 wrote in May 2017, “state legislators and Democratic Gov. Jay Inslee didn’t make [the securing of jobs] a hard and fast requirement of the handout. So they’ve had to stand by powerlessly as the company has cut 12,655 jobs, or more than 15% of its Washington workforce, since that heady signing ceremony in November 2013.”95 Hiltzik quoted Boeing lobbyist Bill McSherry, Gov. Gregoire’s former aviation adviser: “‘Boeing has kept its word to Washington,’ McSherry said, but that may be true only because its commitment was so vague.”96 Indeed, Hiltzik noted, “[e]ven beyond the scale of the subsidy, Washington was especially indulgent toward Boeing. ‘We gave aerospace and Boeing the largest tax break in U.S. history,’ says Bill Dugovich, a spokesman for the engineering union, ‘and we’re the only state that didn’t tie the break directly to jobs.’”97 Indeed, Missouri also passed legislation in 2013 to incentivize Boeing to build a new manufacturing plant in St. Louis County, but the legislation based the incentives on job creation.98 Subsequent legislation to tie the 2013 Boeing tax breaks to jobs failed to command legislative support99 and drew editorial opposition from the Seattle Times, which argued that “a deal was struck and lawmakers have no business trying to legislate how many workers Boeing should employ.”100 The objective of the failed legislation was to “maintain and grow Washington’s aerospace industry workforce” by requiring “one hundred thousand five hundred employment positions by 2040” to obtain the aerospace tax preference.101 In addition to assessing whether this metric was on target, the state would have been
large-scale robotic system for automated assembly of the 777 fuselage, Boeing has abandoned the robots and will go back to relying more on its human machinists.”). 95. Hiltzik, supra note 93. 96. Id. 97. Id. 98. See Virginia Young, Missouri Lawmakers Approve Bill to Bring Boeing Plant to St. Louis County, ST. LOUIS POST-DISPATCH (Dec. 6, 2013), https://www.stltoday.com /news/local/govt-and-politics/missouri-lawmakers-approve-bill-to-bring-boeing-/ (“The bill expands a package of tax credits . . . up to $1.7 billion over 23 years, with the exact amount hinging on how many jobs the aerospace giant creates here.”). 99. See Alwyn Scott, Washington Lawmakers Nix Bill Linking Tax Breaks to Boeing Jobs, REUTERS (Feb. 5, 2016, 1:55 PM), https://www.reuters.com/article/us-boeing -taxbreaks-idUSKCN0VE2LS (“Washington state Representative June Robinson, a Democrat and bill sponsor whose district holds Boeing’s largest factory, said her constituents wanted Boeing to be accountable in exchange for tax breaks.”). 100. Editorial, Don’t Rework Boeing $8.7 Billion Tax-Break Deal, SEATTLE TIMES (May 8, 2015, 1:27 PM), https://www.seattletimes.com/opinion/editorials/dont-rework -boeing-87-billion-tax-break-deal/. 101. H.R. 2147, 64th Leg., Reg. Sess. sec. 1, § 3 (Wash. 2015). WILLIAMS 12/3/2020 1:29 PM
82 GONZAGA LAW REVIEW Vol. 56:1 required to “assess growth in high-wage employment, as defined by an annual or hourly wage equal or greater than the state median wage.”102 When Inslee prepared to run for the 2020 Democratic presidential nomination, the Boeing deal loomed as a major liability among Democratic voters, as Westneat predicted: “Inslee was the chief cheerleader of the largest corporate tax break in U.S. history, $8.7 billion to woo Boeing’s 777 plant here. Five years later, it still ranks No. 1 — twice as big, amazingly, as the controversial breaks Amazon just got from two states combined to bring 25,000 jobs to each.”103 As Westneat pointed out, “the deal fatally didn’t include job guarantees, and Boeing later drained away nearly 20,000 jobs.”104 Westneat was right: the Boeing deal forced Inslee into incoherence as a candidate. In a CNN town hall, moderator Wolf Blitzer pressed Inslee:
Noting the years of job reductions by the company that followed, Blitzer asked whether Inslee had made a bad deal.
“I made an unfortunately necessary deal,” Inslee responded. But he said Boeing should not have been able to “threaten” the state with moving jobs elsewhere. “I liken that to a kind of extortion,” he said. “I think we should be protected from that type of behavior.”105
Inslee made similar remarks in another television appearance.
102. Id. § 4. 103. Danny Westneat, If Jay Inslee Runs for President, His Biggest Accomplishment May Be His Undoing, SEATTLE TIMES (Nov. 28, 2019, 6:00 PM), https://www.seattletimes .com/seattle-news/politics/if-jay-inslee-runs-for-president-his-biggest-accomplishment-may -be-his-undoing/. In 2017 alone, Boeing cut 6,052 Washington jobs while saving $227 million from tax incentives. Dominic Gates, Boeing Saved $227M from State Tax Incentives Last Year While It Cut 6,000 Jobs, SEATTLE TIMES (Sept. 26, 2019, 1:13 PM), https://www .seattletimes.com/business/boeing-aerospace/last-year-boeing-saved-227m-from-state-tax -incentives-while-it-cut-6000-jobs/. 104. Westneat, supra note 103. 105. Jim Brunner, At CNN Town Hall, Gov. Inslee Says He’d Have Grounded Boeing Planes Sooner, Calls Company Tax Breaks Extortion, SEATTLE TIMES (Apr. 11, 2019, 4:02 PM), https://www.seattletimes.com/seattle-news/politics/at-cnn-town-hall-gov-inslee-says -hed-have-grounded-boeing-planes-sooner-calls-company-tax-breaks-extortion/. Judge Richard Posner once wrote that “blackmail is a form of extortion, which is the eliciting of bribes by threats.” Richard A. Posner, Response, Reply to Critics of the Problematics of Moral and Legal Theory, 111 HARV. L. REV. 1796, 1814 (1998). However, he stated, “[a] bribe is not a natural kind; it is merely a name for forms of compensation that are disapproved. The criteria for disapproval vary from society to society and even within societies, according to distinctions that are often fine.” Id. WILLIAMS 12/3/2020 1:29 PM
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Inslee told The Daily Show host Trevor Noah that he “was not happy with the Boeing situation,” and compared it to being robbed at gunpoint.
“If you’ve ever been mugged, you understand what it feels like,” Inslee said. “. . . These corporations put a gun to your ribs and say you’re going to lose 20,000 jobs unless you get [them] a tax break.”106
Yet, after Inslee withdrew from the 2020 presidential race and immediately announced a bid for a third term as governor,107 a columnist noted, “Jay Inslee had a chance recently to face his muggers. He didn’t show up.”108 A meeting of the Washington Citizens Commission for Performance Measurement of Tax Preferences in September 2019 gave the governor the proper venue to share his voiced concerns on the shortcomings of the 2003 and 2013 tax package.109 Robin Toth, Inslee’s aerospace advisor, attended the meeting but simply
delivered a promotional message of the industry’s strength and importance, and of the state’s efforts to attract more aerospace outfits to Washington. She veered wide of the issue of whether a jobs-related metric should be appended to the tax break law.
“I don’t really have a position on that,” she said afterwards. “I haven’t gotten anything from the governor on that.”110
Therefore, no concerns about “corporate extortion” relating to the tax package were shared from his office.111
106. Melissa Santos, Jay Inslee’s About-Face on Boeing’s Big Tax Break, CROSSCUT (Mar. 25, 2019), https://crosscut.com/2019/03/jay-inslees-about-face-boeings-big-tax-break. Inslee could not have been too upset, as, during his presidential campaign, it was reported that he purchased $15,000 (and up to $50,000) in Boeing stock in 2018. See Jim Brunner, Inslee Bought Stock in Boeing, Microsoft, Amazon and Other Washington Companies in Late 2018, SEATTLE TIMES (May 17, 2019, 6:00 AM), https://www.seattletimes.com/seattle-news /politics/inslee-bought-stock-in-boeing-microsoft-amazon-and-other-washington-companies -in-late-2018/. 107. Joseph O’Sullivan & David Gutman, Washington Gov. Jay Inslee to Seek Reelection, Hours After Dropping Presidential Bid, SEATTLE TIMES (Aug. 22, 2019, 9:18 AM), https://www.seattletimes.com/seattle-news/politics/inslee-announces-hell-run-again -for-governor-hours-after-dropping-presidential-bid/. 108. Jerry Cornfield, Inslee Passes Up a Chance to Confront Corporate ‘Blackmail’, SEATTLE WKLY. (Sept. 12, 2019, 1:30 AM), https://www.seattleweekly.com/news/inslee -passes-up-a-chance-to-confront-corporate-blackmail/. 109. Id. 110. Id. 111. See id. WILLIAMS 12/3/2020 1:29 PM
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V. STUCK IN A HOLDING PATTERN: BOEING AS A BAD CORPORATE CITIZEN
Boeing’s 737 MAX problems were attributed by some to Boeing’s “highly effective campaign to get the federal government to delegate more and more of the Federal Aviation Administration’s safety responsibilities to the company.”112 It was reported in March 2019 that “[f]our weeks before a Lion Air jet plunged into the Java Sea in October, Congress passed little-noticed provisions that gave the plane’s maker, Boeing, even more power to oversee itself, demonstrating the company’s sway in Washington.”113 In part, Boeing’s new authority was credited to U.S. Senator Maria Cantwell (D-WA) who “wrote a key amendment that gave Boeing and other companies authority for approving anything deemed a ‘low and medium risk’ during airplane certification.”114 As Senator John Thune (R-SD) stated during floor consideration of the FAA Reauthorization Act of 2018:
the aviation industry makes a big contribution to our economy, and the legislation before the Senate today will help this industry continue to compete and innovate. The FAA sets standards for aircraft designs and other aircraft components, and it certifies these designs to ensure they meet specific requirements. This legislation will take excess bureaucracy out of the certification process so that U.S. air companies can get their products to market on time and successfully compete in the global marketplace. It will also enable U.S. manufacturers to fully use certification authorities that have been delegated to them.115
112. Michael Laris, With Its Ties in Washington, Boeing Has Taken Over More and More of the FAA’s Job, WASH. POST (Mar. 24, 2019, 6:28 AM), https://www.washingtonpost .com/local/trafficandcommuting/with-its-ties-in-washington-boeing-has-taken-over-more -and-more-of-the-faas-job/2019/03/24/6e5ef2c6-4be8-11e9-9663-00ac73f49662_story.html. 113. Id. 114. Lewis Kamb, Longtime Boeing Advocate Maria Cantwell Formally Criticizes Report on FAA’s Certification Process for 737 MAX, SEATTLE TIMES (Jan. 17, 2020, 4:03 PM), https://www.seattletimes.com/business/boeing-aerospace/longtime-boeing-advocate -maria-cantwell-formally-criticizes-report-on-faas-certification-process-for-737-max/. See generally FAA Reauthorization Act of 2018, Pub. L. No. 115-254, 132 Stat. 3186, 3247–49 (codified at 49 U.S.C. § 44736) (At the request of those entities to which authority had been delegated, the federal government is required to “eliminate all limitations specified in a procedures manual in place on the day before the date of enactment of the FAA Reauthorization Act of 2018 that are low and medium risk as determined by a risk analysis using criteria established by the ODA Office and disclosed to the ODA holder[.] . . . The term ‘Organization Designation Authorization’ or ‘ODA’ means an authorization by the FAA under section 44702(d) for an organization composed of 1 or more ODA units to perform approved functions on behalf of the FAA.”). 115. 164 CONG. REC. S6427 (daily ed. Oct. 2, 2018) (statement of Sen. Thune). WILLIAMS 12/3/2020 1:29 PM
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Having been so deregulated by Congress, a lax attitude prevailed—one Boeing employee, according to a document uncovered later, “ridicule[d] colleagues involved in the development of the troubled plane, saying, ‘This airplane is designed by clowns who in turn are supervised by monkeys.’”116 Another message was no less brazen: “‘I still haven’t been forgiven by God for the covering up I did last year,’ one employee says in 2018, referring to an exchange of information with the FAA.”117 In addition to the aerospace giant spending $15 million on federal lobbying in 2018, it was reported that “President Ronald Reagan’s chief of staff, Kenneth M. Duberstein, sits on Boeing’s board of directors. So does Caroline B. Kennedy, President John F. Kennedy’s daughter and the former ambassador to Japan.”118 Boeing has used this bipartisan support as a cover to squeeze workers. In South Carolina, Boeing faced a unionization vote in 2017 and left nothing to chance: “The jet maker ran 485 local TV spots between Jan. 31 and Feb. 6 urging workers to vote against the IAM, according to data from advertising tracker Kantar Media/CMAG.”119 Nor was Boeing alone in this anti-union push: “Additional anti-union ads from the South Carolina Manufacturers Institute had aired 350 times by Feb. 6, including one that ran locally during the Super Bowl.”120 The anti-union campaign was relentless, according to reporting:
The IAM says Boeing has been pressing its case aggressively in the workplace as well, including through mandatory meetings, casual conversations on the shop floor, TV screens placed in break rooms, free anti-union T-shirts, and a giant stack of food, diapers and clothing
116. David Schaper & Vanessa Romo, Boeing Employees Mocked FAA in Internal Messages Before 737 Max Disasters, NPR (Jan. 9, 2020, 9:44 PM), https://www.npr.org /2020/01/09/795123158/boeing-employees-mocked-faa-in-internal-messages-before-737 -max-disasters. 117. Id. 118. Laris, supra note 112. Boeing has also benefitted from preferential loans from the Export-Import Bank, nicknamed the “Bank of Boeing” by critics on the left and right. Charles Lane, Can a Bitter Policy Argument Be Settled by the Real World? For Once, Yes., WASH. POST (Feb. 4, 2019, 3:58 PM), https://www.washingtonpost.com/opinions/can-a -bitter-policy-argument-be-settled-by-the-real-world-for-once-yes/2019/02/04. President Obama, in running for office in 2008, had derided the Bank as “corporate welfare” before reversing course as president by supporting it. Matthew Yglesias, Watch Barack Obama Make the Case Against the Export-Import Bank, VOX (May 22, 2015, 10:15 AM), https://www.vox.com/2014/6/27/5846430/obama-was-against-the-export-import-bank -before-he-was-for-it. 119. Josh Eidelson, Boeing Floods Airwaves in Aggressive South Carolina Anti-Union Campaign, SEATTLE TIMES (Feb. 14, 2017, 11:47 AM), https://www.seattletimes.com /business/boeing-floods-airwaves-in-aggressive-south-carolina-anti-union-campaign/. 120. Id. WILLIAMS 12/3/2020 1:29 PM
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labeled as all the things employees could buy for the same cost as annual union dues. A postcard titled “The Truth About IAM Wage Claims,” one of several the IAM says have been distributed by management at morning meetings, urges employees to “Just say NO to the IAM” and features an image of Pinocchio.121
Meanwhile South Carolina’s governor, Republican Nikki Haley, was reported as continuously working against the unionization effort from its beginning.122 “Haley said she’s telling union officials: ‘Get out. We got here without you. We don’t need you in the process.’”123 Haley’s efforts were not unrecognized—she was appointed to Boeing’s board in 2019.124 After a two-year process, in February 2017, almost three-quarters of voting South Carolina Boeing workers rejected the union organizing effort.125 Apparently not content with victory, Boeing fired some workers who successfully organized in 2018 into a smaller unit of “about 176 inspectors and technicians”—allegedly for supporting the unionization effort.126 In September 2019, the National Labor Relations Board overturned the small union organizing success, receiving acclaim from South Carolina’s Republican governor, Henry McMaster: “We have wonderful companies like Boeing in South Carolina that
121. Id. 122. See David Wren, Boeing Produces Worker List for NLRB, POST & COURIER (Mar. 31, 2015), https://www.postandcourier.com/business/boeing-produces-worker-list-for -nlrb/article_f36f637e-7f0f-5286-9b78-6d1ae5b8b978.html. 123. Id. 124. See Michael Hiltzik, Boeing’s Board Shouldn’t Escape Blame in 737 Max Scandal, L.A. TIMES (Jan. 3, 2020, 6:00 AM), https://www.latimes.com/business/story/2020 -01-03/boeing-board-bad-management. Paradoxically, given all she had done for Boeing while governor, Haley resigned in 2020 when Boeing sought federal financial aid in the face of the COVID-19 pandemic. See Douglas MacMillan, Nikki Haley Quits Boeing Board, Citing Disagreement with Company’s Bailout Request, WASH. POST (Mar. 19, 2020, 4:14 PM), https://www.washingtonpost.com/business/2020/03/19/nikki-haley-quits-boeing-board -citing-disagreement-with-companys-bailout-request/. 125. See Noam Scheiber, Boeing Workers Reject a Union in South Carolina, N.Y. TIMES (Feb. 15, 2017), https://www.nytimes.com/2017/02/15/business/boeing-union-south -carolina.html (“In addition to fairer evaluations and more consistent work instructions, the union’s aims included higher wages for production and maintenance workers in South Carolina, who make about $23 per hour on average, versus about $31 per hour for comparable workers in Washington State.”). 126. See David Koenig, Union Wins First Step Against Boeing Over Fired Workers, SEATTLE TIMES (Aug. 19, 2019, 12:31 PM), https://www.seattletimes.com/business/boeing -aerospace/union-wins-first-step-against-boeing-over-fired-workers/ (“A federal official is making Boeing defend itself against charges that it illegally fired workers for supporting a union at its South Carolina assembly plant.”). WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 87 have good, direct relationships with their employees[.] . . . We don’t need unions coming in and ruining that.”127 Boeing’s actions are nothing new as it has consistently tried to subvert the Machinist union’s efforts. It largely funded a group called the Aerospace Futures Alliance, led by a former Machinists political director, Linda Lanham, who, it was reported in 2008, “successfully lobbied in Olympia this year to kill legislation driven by the Machinists that would have limited anti-organizing activities by employers.”128 Lanham admitted attending meetings in 2008 with a slate of candidates challenging the union’s leadership, and allegedly “took a leading role in discussions of the group’s election strategy, and urged them to be less confrontational with Boeing.”129 As the Seattle Times reported, those efforts “failed badly after union officials secretly spied on the group’s meetings and revealed the connection with Lanham, whom then-district President Tom Wroblewski denounced as a ‘corporate lobbyist.’”130 Further, Boeing retorted in response to the head of the engineers union at Boeing: “‘Ray Goforth has a pattern: The problem is that he looks at Boeing (management) and we are breathing in and out. That annoys him. We can’t do anything right,’ said senior vice president Tim Keating.”131
127. David Wren, Union Vows to Keep Fighting for Fired Workers Despite Boeing SC Labor Board Ruling, POST & COURIER (Sept. 10, 2019), https://www.postandcourier.com /business/union-vows-to-keep-fighting-for-fired-workers-despite-boeing-sc-labor-board -ruling/article_e1c2447c-d3ef-11e9-a021-534ab334ba8e.html (The union’s organizing director was quoted stating “I’m sure Boeing and their friends at the labor board are laughing at this right now at the expense of their own workforce.”). In 2020, the first-term Democratic U.S. House member representing Charleston, Rep. Joe Cunningham, also opposed giving unions more organizing rights. See Jamie Lovegrove, SC’s Rep. Joe Cunningham to Vote Against Pro-Union Bill in Break with Democrats, POST & COURIER (Feb. 5, 2020), https://www.postandcourier.com/politics/scs-rep-joe-cunningham-to-vote-against-pro-union -bill-in-break-with-democrats/article (“Business leaders in South Carolina, where Republican lawmakers have long sought to crack down on union organizing, applauded Cunningham for his decision to vote against the union bill.”). 128. Dominic Gates, Spying, Intrigue Surround Election of Machinists at Boeing, SEATTLE TIMES (May 1, 2008, 12:00 AM), https://www.seattletimes.com/seattle-news /spying-intrigue-surround-election-of-machinists-at-boeing/. 129. Id. 130. Dominic Gates, Lanham Retires as Head of Aerospace Group She Founded, SEATTLE TIMES (Aug. 4, 2015, 4:56 PM), https://www.seattletimes.com/business/boeing -aerospace/lanham-retires-as-head-of-aerospace-group-she-founded/. 131. Dominic Gates, Boeing Exec Has Harsh Words for SPEEA Chief, SEATTLE TIMES (Sept. 30, 2014, 11:31 PM), https://www.seattletimes.com/business/boeing-exec-has -harsh-words-for-speea-chief/. WILLIAMS 12/3/2020 1:29 PM
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Boeing’s evolution as corporate bad actor was also influenced by a change in corporate culture. Natasha Frost persuasively argues that Boeing, in acquiring McDonnell Douglas, was subsumed by its acquisition:
In a clash of corporate cultures, where Boeing’s engineers and McDonnell Douglas’s bean-counters went head-to-head, the smaller company won out. The result was a move away from expensive, ground- breaking engineering and toward what some called a more cut-throat culture, devoted to keeping costs down and favoring upgrading older models at the expense of wholesale innovation.132
As Frost notes, “[e]verything seemed to be changing — the leadership, the culture, even the headquarters, with a move from Seattle to Chicago in 2001. The new location seems to have been especially disorienting for Boeing employees.”133 In 2020, Boeing’s new CEO, David Calhoun, reportedly intended “to spend more time early on in the Seattle area, the base for Boeing’s commercial aviation business” amidst criticism that in the 2001 headquarters move to Chicago “the geographic separation put distance between leadership and its businesses.”134 This was not a new criticism. In 2011, it was reported that Boeing’s program to build 787 Dreamliners was “nearly three years behind schedule and, by some estimates, at least several billion dollars over budget.”135 The delays resulted from outsourcing on the cheap, and aviation experts said “Boeing began to put a lower premium on in-house labor after its 1997 merger with rival McDonnell Douglas. That was the same year Boeing posted its first full-year loss as Airbus stole market share.”136 More recently, it was reported that the 737 MAX “crisis has drawn attention to the divide between Boeing’s Seattle-based assembly lines and its Chicago corporate office. In the time between the Oct. 29, 2018, crash in Indonesia and
132. Natasha Frost, The 1997 Merger that Paved the Way for the Boeing 737 Max Crisis, QUARTZ (Jan. 3, 2020), https://qz.com/1776080/how-the-mcdonnell-douglas-boeing -merger-led-to-the-737-max-crisis/. 133. Id. 134. Jena McGregor, New Boeing CEO’s Epic To-Do List: Restart 737 Max Production. Repair FAA Links. And Fix a Culture Where Supervisors Were Called ‘Monkeys.,’ WASH. POST (Jan. 10, 2020, 5:10 AM), http://www.washingtonpost.com /business/2020/01/10/new-boeing-ceo-calhoun/. 135. Kyle Peterson, Special Report: A Wing and a Prayer: Outsourcing at Boeing, REUTERS (Jan. 20, 2011), https://www.reuters.com/article/us-boeing-dreamliner/special -report-a-wing-and-a-prayer-outsourcing-at-boeing- idUSTRE70J2UX20110120. 136. Id. WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 89 the March 10, 2019, crash in Ethiopia, the company increased its stock dividend from $1.71 per share to $2.05 per share.”137 Boeing workers continued to pay the price. Vital software engineering work for the 737 MAX was outsourced to $9-an-hour workers in India instead of using Boeing’s experienced engineers who were laid off around the time of the software’s development.138 The Society of Professional Engineering Employees in Aerospace (SPEEA) complained of a loophole in Washington’s Paid Family and Medical Leave (PFML) law that denied “access to PFML to union- represented employees, including the nearly 18,000 engineers and technical workers represented by SPEEA in Washington. The result is new parents and employees caring for family members are unable to access the state program that provides up to 12 weeks of paid time off.”139 The union asserted that “Boeing used the exemption as leverage to squeeze further concessions from SPEEA” including significant cuts the company sought to make to health care benefits.140 In early 2020, in a rare case of management-engineer labor comity, the situation was remedied with a new contract for the engineering bargaining unit of SPEEA.141
137. Gregg, supra note 14. 138. See Peter Robison, Boeing’s 737 Max Software Outsourced to $9-an-Hour Engineers, BLOOMBERG (June 28, 2019, 1:56 PM), https://www.bloomberg.com/news /articles/2019-06-28/boeing-s-737-max-software-outsourced-to-9-an-hour-engineers. 139. SPEEA Calls on Boeing to Stop Trying to Use Washington’s Paid Family & Medical Leave Law as a Bargaining Chip and Implement It for All Employees, BUSINESSWIRE (Jan. 9, 2020, 10:00 AM), https://www.businesswire.com/news/home /20200109005222/en/SPEEA-Calls-Boeing-Stop-Washingtons-Paid-Family. The Act sets forth a loophole for Boeing because it does not apply to “any party to a collective bargaining agreement in existence on the effective date of this section to reopen negotiations of the agreement or to apply any of the rights and responsibilities under this act unless and until the existing agreement is reopened or renegotiated by the parties or expires.” See Paid Family and Medical Leave Act of 2017, ch. 5, sec. 87, 2017 Wash. Sess. Laws 2044, 2086. This is somewhat extraordinary, inasmuch as state employment law protections should be regarded as a floor, not a ceiling, that simply augment any collective bargaining agreements. 140. Dan Catchpole, Boeing Takes a Friendlier Approach with Latest Union Contract for Engineers, FORTUNE (Feb. 14, 2020), https://fortune.com/2020/02/14/boeing-union -contract-engineers/. The contract, however, was met with mixed reaction by the union’s two bargaining units—engineers very narrowly accepted it, while technical workers rejected it. Dominic Gates, Boeing Engineering Union Splits Over Contract Extension, Producing Two Divergent Contracts, SEATTLE TIMES (Mar. 10, 2020, 12:35 AM), https://www.seattletimes .com/business/boeing-aerospace/boeing-engineering-union-splits-over-contract-extension -producing-two-divergent-contracts/ (“Those most opposed to the proposed contract among the technical staff argued that agreeing to a deal two years ahead of the current contract’s expiration suited management by removing the union’s negotiating leverage.”). 141. See Gates, supra note 140. WILLIAMS 12/3/2020 1:29 PM
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The COVID-19 pandemic created financial pressure for airlines beginning in early 2020, and Boeing adroitly used its lobbying power to secure access to as much as $17 billion in federal bailout funds in an initial federal response bill, despite the company having a $24 billion cash reserve.142
VI. CORRECTING COURSE: A BETTER MODEL OF CORPORATE INDUCEMENT
While Washington has effectively been a vassal state for Boeing, there is evidence that concessions to corporations need not be limitless—and can be conditional. Opposition from activists sunk plans to offer major tax incentives to Amazon to locate a new campus in Long Island, New York, for the promise of up to 25,000 new jobs.143 According to a poll, New Yorkers only narrowly supported, by a margin of 46% to 44%, giving Amazon “roughly 3 billion dollars in tax breaks and other benefits from the state and the city as part of its deal to locate its new headquarters in Long Island City.”144 Democratic Governor Andrew Cuomo blasted fellow Democrats for opposing the deal, while his budget director also blamed union opposition.145 Amazon received a friendlier reception in Virginia, which gave out $750 million in state tax incentives,146 but it is worth noting, as the Wall Street Journal
142. See Nathan Bomey et al., Why Boeing Might Not Need a Bailout Despite Coronavirus, 737 Max Crises, USA TODAY (Apr. 3, 2020, 12:01 AM), https://www.usatoday .com/story/money/2020/04/03/boeing-bailout-737-max-coronavirus-covid-19/2919213001/ (“With seven vaguely written words in the $2 trillion federal stimulus law, Congress carved out a special provision for Boeing, one of the nation’s largest manufacturers.”); Aaron Gregg et al., Senate Aid Package Quietly Carves Out Billions Intended for Boeing, Officials Say, WASH. POST (March 25, 2020, 11:20 A.M.), https://www.washingtonpost.com/business /2020/03/25/boeing-bailout-coronavirus/. The deleterious long-term consequences of the pandemic upon air travel, and aircraft orders, are beyond this article’s ability to forecast. Prior to the pandemic, airlines “boosted revenue by squeezing more people into coach cabins in recent years—shrinking seats and space between rows.” Alison Sider et al., The New Airline Travel: Fewer Flights, More Layovers, Rules for Bathrooms, WALL ST. J. (May 18, 2020), https://www.wsj.com/articles/airline-travel-coronavirus-rules-11589823494. Such crowding compounded air traveler fears of contracting the virus. See id. 143. Corey Kilgannon & Sean Piccoli, ‘Wrong Side of History’: In Queens, Amazon Deal’s Demise Reveals Deep Divisions, N.Y. TIMES (Feb. 14, 2019), https://www.nytimes .com/2019/02/14/nyregion/amazon-long-island-city.html. 144. Id. 145. Vivian Wang, After Days of Silence on Amazon Defeat, Governor Cuomo Vents About the Left, N.Y. TIMES (Feb. 22, 2019), https://www.nytimes.com/2019/02/22/nyregion /amazon-cuomo-gianaris.html. 146. Carlyann Edwards, Amazon Wins Final Incentive Deal for HQ2 in Northern Virginia, BLOOMBERG (Mar. 16, 2019), https://www.bloomberg.com/news/articles/2019-03 -16/amazon-wins-final-incentive-deal-for-hq2-in-northern-virginia# (There was also a local component where the Arlington County Board granted “$23 million in incentives . . . linked WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 91 reported, that “[n]either Virginia nor New York presented the most generous packages during the nationwide competition: Newark, N.J.[,] dangled $7 billion, while officials in Maryland offered $5 billion.”147 Moreover, Virginia did not give out money without reference to job numbers, as Washington has: “The Virginia bill provides for cash grants to Amazon of $22,000 per new full-time job for the first 25,000 jobs, for a maximum of $550 million. After that, grants of $15,564 per new job would be issued for up to 12,850 additional jobs, for a total of $200 million.”148 Pay for these new jobs is to average “$150,000 for calendar year 2019 and escalating at 1.5 percent per year.”149 Is there a lesson here for Washington? It seemed unlikely policymakers would learn it. After Governor Inslee dodged the opportunity to share his newfound criticisms of the 2013 concessions to Boeing before the Washington Citizens Commission for Performance Measurement of Tax Preferences,150 a report was issued in December 2019.151 Legislative auditors noted that “Washington’s loss of 8,800 aerospace jobs from 2013 through 2018 was the largest in the U.S. and nearly four times more than in any other state.”152 They also reported that “[s]ince there is uncertainty as to how the preferences influenced Boeing’s facility location decision, it is not possible to draw a definitive conclusion about whether the preferences resulted in maintaining or growing employment.”153 to Amazon meeting targets for office space occupancy. Funding would come from the local hotel occupancy tax. The board also agreed to spend an estimated $28 million on infrastructure improvements and open space around the Amazon buildings.”). 147. Jimmy Vielkind, New York Dangled Extra Incentives in Initial Bid to Lure Amazon HQ2, WALL ST. J. (Jan. 5, 2020, 12:16 PM), https://www.wsj.com/articles/new-york -dangled-extra-incentives-in-initial-bid-to-lure-amazon-hq2-11578153600. 148. Robert McCartney, Virginia House Approves $750 Million in Amazon Subsidies After 9 Minutes of Debate., WASH. POST (Jan. 28, 1019); see also Danny Westneat, Boeing’s Historic Tax Break from State Even Bigger than Thought, SEATTLE TIMES (May 3, 2016, 7:07 PM), https://www.seattletimes.com/seattle-news/boeings-historic-tax-break-from-state -even-bigger-than-thought/ (In an emergency session, Washington legislators failed to reference any sort of new job conditions upon Boeing’s receipt of its large tax break. However, State Senator Reuven Carlyle supported the giant tax breaks based on the “obvious job benefits.”). 149. VA. CODE ANN. § 59.1-284.31(A) (West 2020); MEMORANDUM OF UNDERSTANDING MAJOR HEADQUARTERS PROGRAM (2018), https://hqnova.com/assets/pdfs /NOVA_MOU_with_Amazon.pdf. 150. Cornfield, supra note 108. 151. WASH. J. LEGIS. AUDIT & REV. COMM., 19-08 FINAL REPORT: AEROSPACE TAX PREFERENCES (2019), http://leg.wa.gov/jlarc/taxReports/2019/Aerospace/f_ii/default.html. 152. Id. at 12. 153. Id. at 19. WILLIAMS 12/3/2020 1:29 PM
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Despite these troubling findings, it does not appear that Washington legislators made real efforts to amend the aerospace tax preferences until Boeing supported it.154 In February 2020, legislators introduced legislation to rescind its tax breaks so that the company could avoid retaliatory European tariffs.155 As introduced, and as finally passed, the legislation provided a restoration of the tax breaks should the threat of tariffs go away.156 A very minor concession was made to organized labor that requires some apprenticeship utilization if the tax breaks are restored.157 The 2020 legislation left in place the major policy concessions, such as the 2003 cut in unemployment insurance benefits and the 2009 sacrifice of workers’
154. See Dominic Gates & Joseph O’Sullivan, Boeing Will Give Up Its Major Washington State Tax Break to Avoid European Tariffs, SEATTLE TIMES (Feb. 20, 2020, 8:04 AM), https://www.seattletimes.com/business/boeing-aerospace/boeing-will-give-up-its -washington-state-tax-breaks-to-avoid-european-tariffs/. In January 2020, Governor Inslee warned that the tax incentives might be revisited if the next Boeing aircraft model is not built in Washington. Carolyn Adolph, Inslee to Boeing: The Next Plane Gets Built in Washington or You Lose, KUOW (Jan. 9, 2020, 1:28 PM), https://www.kuow.org/stories/inslee-to -boeing-the-next-plane-gets-built-here-or-you-lose. But, given Boeing’s challenges with existing aircraft models like the 737 MAX, there is no telling when Boeing might begin work on a new model. See id. 155. Gates & O’Sullivan, supra note 154 (“The dramatic shift in direction will help resolve—to Boeing’s advantage—an international trade dispute at the World Trade Organization (WTO).”). While one editorial board commended Boeing’s action, it also cautioned that “[w]hen one is weaned on a steady diet of corporate welfare, it’s not given up easily or overnight.” Editorial, Boeing’s Tax-Break Giveback to Washington State Is Smart, Proactive - but Not Heroic, NEWS TRIB. (Feb. 21, 2020), https://www.thenewstribune.com /opinion/editorials/article240481021.html. The Seattle Times’ editorial board cheered Boeing’s action, and warned Washington legislators against attaching labor concessions. See Editorial, Legislature Should Take Boeing’s Deal and Honor Its Own, SEATTLE TIMES (Feb. 28, 2020, 1:34 PM), https://www.seattletimes.com/opinion/editorials/legislature-should-take -boeings-deal-and-honor-its-own/ (“The consequences of linking a potential restoration of the tax break to new jobs guarantees—as labor leaders asked—could be disastrous to the state’s business trustworthiness.”). 156. See Act of Mar. 27, 2020, ch. 165, sec. 2, § 1, 2020 Wash. Sess. Laws 1313, 1314 (Wash. 2020) (restoring tax breaks once “[t]he department of commerce verifies with the United States trade representative that the United States and the European Union have entered into a written agreement that resolves any world trade organization disputes involving large civil aircraft.”). It is worth noting that this bill was introduced prior to the COVID-19 outbreak that swept the United States, and therefore the worldwide pandemic’s eventual impact upon air travel was largely unknown. See S.B. 6690, 66th Leg., Reg. Sess. (Wash. 2020); Gregg et al., supra note 142. 157. See Paul Shukovsky, Boeing Tax Break Repealed at Company’s Request in Washington, BLOOMBERG TAX (Mar. 12, 2020, 11:32 AM), https://news.bloombergtax.com /daily-tax-report-state/major-boeing-tax-break-repealed-at-company-request-in-washington. (Boeing must have “at least a three-tenths of one percent aerospace apprenticeship utilization rate of its qualified apprenticeable workforce in Washington.”). WILLIAMS 12/3/2020 1:29 PM
2020/21 BOEING AND WASHINGTON STATE 93 rights.158 And consider the return on investment for Washington: Boeing announced in July 2020 that it would “study consolidating 787 Dreamliner assembly in a single location”—almost certainly Charleston, South Carolina, according to industry experts.159 In October 2020, Boeing confirmed that speculation by announcing it would shift all production of the 787 out of Washington to South Carolina.160 In the early insurance context, “moral hazard” could refer to a temptation to engage in criminality—setting fire to an insured property, for example—or at least negligence (i.e., not abating the fire hazard to an insured property).161 As an article tracing the use of the term notes: “In contrast, the economic literature has focused on moral hazard as a consequence of incentives rather than as a product of criminality.”162 Would Boeing have acted so carelessly—and exhibited such disregard for its workers—if its governmental rewards had not obscured its risks? If history predicts the future, Boeing may again hold the state of Washington hostage in exchange for new concessions, on policy if not taxes (given the tariffs threat), and the state will again effectively bid against itself.163
158. See supra Part II–III. 159. Dominic Gates, Boeing Will Cut Production and Jobs Further, and May Build 787 Only in South Carolina, SEATTLE TIMES (July 29, 2020, 6:55 AM), https://www .seattletimes.com/business/boeing-aerospace/boeing-will-cut-production-and-jobs-further -and-may-build-787-only-in-south-carolina/ (The article also notes that due to the COVID-19 pandemic, according to Boeing CEO David Calhoun, “Boeing now projects it will take about three years for travel to return to 2019 levels, and ‘a few years beyond that for the industry to return to long-term growth trends.’”). 160. See, e.g., Danny Westneat, Jilted Again, the Problem Isn’t Boeing, It’s Us, SEATTLE TIMES (Oct. 2, 2020, 4:30 PM), https://www.seattletimes.com/seattle-news/jilted -again-the-problem-isnt-boeing-its-us/ (finding the decision unsurprising, and noting that, in refusing to attach conditions to the future restoration of tax breaks, the 2020 Washington state legislative debate was “gauzy and sentimental” as senators were even “mooning over how you can still tell a legacy Northwesterner by whether they say ‘Boeings,’ with an ‘s’ on the end.). Governor Jay Inslee responded to Boeing’s announcement with a tepid statement that the decision “necessitates a review of our partnership and the company’s favorable tax treatment.” Press Release, Office of Wash. Gov. Jay Inslee, Inslee statement on Boeing’s decision to move 787 production to South Carolina (Oct. 1, 2020), https://www.governor.wa.gov/news -media/inslee-statement-boeings-decision-move-787-production-south-carolina. 161. See David Rowell & Luke B. Connelly, A History of the Term “Moral Hazard,” 79 J. RISK & INS. 1051, 1061–63 (2012). 162. Id. at 1064. 163. This phenomenon of bidding against oneself is not unique to Washington. In Iowa, for example, a fertilizer plant “was awarded more than $100 million in state tax breaks and has generated 165 permanent jobs.” Erin Murphy, Iowa’s Tax Breaks Come Under Scrutiny, GAZETTE (Oct. 8, 2017), https://www.thegazette.com/subject/news/government/iowas-tax -breaks-come-under-scrutiny-20171008. Yet:
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State economists argue that in many cases, state tax incentives are awarded to companies that would proceed with the projects regardless.
David Swenson, an economist at Iowa State University, said fertilizer plants and pork processing plants, for example, should not require tax incentives because Iowa is the most logical landing spot for their facilities.
Id. An Iowa project that might not have occurred without tax incentives was the construction of two data centers for Apple, but the price, $208 million, was steep for a projected 50 permanent jobs. See id.; Danielle Paquette, Why Iowa Is Giving Apple $208 Million for a Project That Will Create 50 Full-Time Jobs, WASH. POST (Aug. 24, 2017, 12:24 PM), https://www.washingtonpost.com/news/wonk/wp/2017/08/24/why-iowa-is-giving-apple -208-million-for-a-project-that-will-create-50-full-time-jobs/.