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Big, Bad Boeing
The merger of Boeing and McDonnell Douglas, announced last December and likely to be approved by the Federal Trade Commission (FTC), will create a company with annual sales of about $50 billion, making it roughly the seventy-fifth largest economy in the world. Boeing will become the only domestic manufacturer of commercial aircraft and will control a two-thirds share of the international market. The rest is held by its only competitor, Airbus, the four-nation European consortium.
Just as daunting as Boeing's economic force is the company's political power. Filings with the lobbying disclosure office in Congress show that the company has no less than 70 lobbyists registered to do its bidding -- 37 working directly on the company's payroll and 33 more retained at outside firms. The latter include powerhouses such as Hill and Knowlton, and Patton, Boggs.
Boeing quite naturally pays close attention to aviation issues, meaning everything from aircraft safety regulations to NASA's budget. But the company's interests extend far beyond such obvious matters. Between January and June of last year, Boeing spent more than $3 million to influence federal policy, with the company's minions lobbying on a broad range of issues that included tax policy, the budget, telecommunications, health care, land use, utilities, environmental policy, labor law and China.
Jacking up the military budget is a task to which Boeing devotes considerable energy, an understandable concern as the company receives $2 billion in annual contracts from the Pentagon. McDonnell Douglas gets four times that amount and the merger will vault the new Boeing into the position of the nation's second largest weapons contractor, behind Lockheed.
The merger will strengthen Boeing's ability to win money from the Pentagon, an ominous development for taxpayers. The company already has a large role in several big boondoggles, most egregiously the Air Force's F-22 fighter, which Boeing and Lockheed are jointly developing at a cost of $1 billion per plane. That figure will likely rise as the Pentagon grimly announces almost every year that unforeseen developments require appropriation of several billion more dollars to cover the plane's research and development (R&D) costs.
The F-22 was initially promoted as a means of penetrating deep into Soviet airspace but since Soviet airspace no longer exists the fighter serves no purpose. In order to keep the money flowing, Lockheed and Boeing now invoke the menace posed by Canada, South Korea and other mortal enemies to which Lockheed has previously sold its F-18. It is for reasons like this that one Pentagon insider describes the F-22 as a "money sinkhole."
In 1995, Boeing not only avoided paying any federal taxes but received a $33 million rebate from the U.S. treasury, making its effective tax rate minus 9 percent. This was achieved by judicious use of the Foreign Sales Corporate Tax Credit and via hefty deductions for R&D costs. Boeing hopes to win even bigger rebates in the future; disclosure records reveal that several of its lobbyists are feverishly working in the areas of "tax mitigation" and "tax avoidance."
Another motherlode tapped by Boeing is the Export-Import Bank, which offers below-market loans to countries purchasing U.S. goods and services. Ex-Im has disbursed large sums -- more than $1 billion for deals with China alone -- to underwrite the company's foreign commercial agreements.
Boeing is now pushing to ease rules that allow Ex-Im to finance only deals involving 15 percent or less foreign-made content. Since Boeing is increasingly shipping work overseas -- such as the 737 tail sections previously made by workers in Wichita, Kansas and now manufactured by Chinese employees earning about $50 per month -- the company is lobbying to have the foreign-content figure raised to 50 percent.
Boeing's lobbyists are also active in the area of foreign policy, most notably in pushing for better relations with China, where the company sold one in 10 of its planes between 1993 and 1995. To help maintain warm Washington-Beijing ties, Boeing retains no less than seven lobby shops in Washington, paying those companies hundreds of thousands of dollars annually. During last year's crucial vote on maintaining most favored nation trade status for China, Boeing and its hired guns convinced eight of nine House members from Washington State to vote its way, including liberal Representative Jim McDermott.
Boeing also spends freely to influence environmental policy, with company lobbyists seeking weaker regulations on clean air, especially in regard to ozone pollution from jet engines and smoke stack emissions from factories. Another major area of concern is hazardous waste disposal policy. As of 1994, Boeing was responsible for the clean-up of 40 Superfund sites on the national priorities list, with a potential cost to the company of hundreds of millions of dollars.
Boeing directly employs 125,000 people and McDonnell Douglas has another 65,000 workers. The two companies have employees in some 40 states -- all 50 when including contractors -- and are especially heavily represented in California. There, Boeing calculates that it spends $2 billion annually and employs, directly and indirectly, 67,000 people.
To minimize the company's labor costs, Boeing's lobbyists have sought to hold down rates for unemployment insurance and backed Clinton administration workplace initiatives that undercut unions. At the state level, Boeing has joined with other big companies in pressing legislatures to hack away at worker's compensation programs. Plans pushed by Boeing would cut the amount of payments to injured workers and diminish the quality and extent of the medical treatment they receive.
Boeing spokespersons did not respond to requests for comment.
- Ken Silverstein