Defense Giant Boeing Thinks Aerospace Needs a $60 Billion Bailout
Apparently the multi-billion dollar annual defense contracts from Uncle Sam aren't enough see them through the coronavirus.
As Main Street America struggled with the shaky recovery since the 2008 recession, one sector of the economy bounced back with vigor: the arms industry. In fact, U.S. arms and military hardware sales went up 23 percent between 2015 to 2019 compared to the same period of time between 2010 to 2014. This growth has mainly been boosted by exports to Gulf States in the Middle East. It’s no exaggeration to say American defense contractors have been making a killing.
However, over the last several weeks, the market panic over coronavirus has been hitting some defense companies hard. The proposed solution: corporate extortion, also known as a “bailout.”
(Faulty) airplane manufacturer and defense industry giant Boeing—whose recent stock chart looks like the trajectory of a gold-medal Olympic diver—-has just asked for a minimum $60 billion bailout that will include “public and private liquidity, including loan guarantees” to the aerospace industry. President Trump said he supports the measure, stating “we have to help Boeing.” It is curious that news reports on the proposed bailout have focused on Boeing’s commercial aviation manufacturing and not on the fact that it also makes up 21 percent of the Defense Department’s procurement budget. In fact, it scored the biggest federal contract last year—$14.8 billion—to support and upgrade the B-1B Lancer and B-52 Stratofortress aircraft for the Air Force.
Furthermore, what about Boeing’s past stiffing of its shareholders with using free cash flow for reckless share buybacks and its manufacture of the fatal MAX 737 airplanes?
Considering Boeing’s eminence as the largest U.S. exporter and the fact its overall supply chain keeps 1.5 million jobs alive, however, it is in a position to extort the government despite its years of mistakes and overwhelming greed.
Bailouts are also being considered for hotels, casinos, the oil and gas industry and airlines: how long until other defense industry leaders also ask for a hand as the stock market tumbles? While Americans may reportedly receive modest checks of $1,000 in the coming weeks to offset the potentially catastrophic economic impact of the coronavirus, it is nice to know that the government is also able to spare a thought for profitable corporations so that they do not have to dip too far into their savings to survive. With interest rates near zero, maybe Boeing should take out a loan, or scale back on executive bonuses and raises?
Boeing alone has a market cap of over $73 billion. That’s not exactly chump change. Boeing’s ousted CEO Denis Muilenberg left the company with $62 million in pension benefits and compensation after the 737 MAX crashes killed 346 people.
Being too-big-to-fail gives you certain privileges that the little guy just doesn’t get. But this time around the model of corporate socialism for the few, free market scrounging for the many may prove to be less tolerated than the last round of bailouts for the ultra-rich. Even if defense titans like to claim what they do is for national security and patriotism the endless boondoggles and conflicts of interest where profits are prioritized over military readiness show that the actions of the military-industrial complex are actually much more motivated by collecting the world’s biggest collection of small Benjamin Franklin portraits to use as wallpaper on executives’ yachts. As Twitter user Anthony Milani noted, “boat shoes don’t have bootstraps.”
In his 2012 book Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex, William D. Hartung noted that seeking to write your own rules and to enjoy an endless win-win scenario in the defense industry is nothing new. Since World War One, the defense industry benefited from “cost-plus contracts” where expenses were paid back by the government and automatic profit minimums were established. As Hartung writes, “these generous deals were compounded by a lack of effective oversight and minimal accountability for any malfeasance or misfeasance carried out with the taxpayers’ money.”
General Dynamics, Northrop Grumman, Raytheon, BAE Systems, Boeing, Lockheed Martin are among the most profitable among those names. They roll around in the profits as the world goes up in flames from Yemen to Venezuela. Reckless arms sales also often counter to U.S. national interests and amplify unforeseen blowback.
Vince Calio and Alexander Hess noted for Time, “Arms sales have remained concentrated among the same small number of companies for more than a decade. The top 10 companies have largely remained in place because industry consolidation in the 1990s made them dominant players, even through fluctuations in government military spending.”
It is worth noting that a major past government bailout went to Lockheed Martin in 1971, mainly because many jobs would have been lost in California if not. A 2009 argument in favor of bailing out the defense industry from Thomas Donnelly argued that increased defense spending is a balm to a hurting economy and that “defense should comprise a vital component of any stimulus package.”
Trump’s April, 2019 withdrawal from the 2013 Arms Trade Treaty which was aimed at stopping weapons sales to human rights abusers, provides clear evidence of the dominant thinking in the Trump Administration: arms exports are a projection of American strength and alliance-building and an obvious domestic economic leg up. The domestic economic argument is tenuous to say the least and significant evidence exists to the contrary.
Each year American taxpayers are indirectly subsidizing already massively profitable US arms corporations to the tune of billions of dollars. Taxpayers are also having tens of billions in recovered cost on weapons research and development withheld from them. Defense giants and their Pentagon allies have no shame devouring funding from the public trough even as talking heads on the news—whose shows are sometimes partly sponsored or even owned by companies deeply involved in key defense contracts—offer faux sympathy to the millions in danger of losing their jobs from coronavirus.
Treasury Secretary Steve Mnuchin has acknowledged the United States could see up to 20 percent unemployment as a result of the coronavirus. Should bailout money really be going to Boeing?
Paul Brian is a freelance journalist. He has reported for the BBC, Reuters, and Foreign Policy, and contributed to The Week, The Federalist, and others. You can follow him on Twitter @paulrbrian or visit his website www.paulrbrian.com.