Economy

The Boeing Debacle Could Shred Economic Growth

JM Ashby
Written by JM Ashby

On Friday I casually opined that behavior uncovered at Boeing appears to be criminal to victims killed in plane crashes and shareholders of the publicly traded company, but could it be even bigger than that?

Treasury Secretary Steve Mnuchin appears to think so. Mnuchin appeared on Fox News yesterday where he said the failure of Boeing's 737 Max program will shave off 0.5 percent of GDP.

“There’s no question that the Boeing situation is going to slow down the GDP numbers,” Mnuchin said Sunday during an interview on Fox News’ “Sunday Morning Futures.” “Boeing is one of the largest exporters, and with the 737 Max, I think that could impact GDP as much as 50 basis points this year.” [...]

Due to the 737 Max fallout, Boeing’s market cap has fallen by about $50 billion over the past year. Boeing shares are down 6.5% over the past year, compared to a 20% gain for the Dow Jones Industrial Average, of which is it a component.

Cutting GDP by 0.5 percent is an extraordinary amount for any single company or even government policy for that matter, although in this case I suppose it's both given that the Trump regime allowed Boeing to police itself leading to the current crisis.

Mnuchin also told Fox News that he believes GDP will reach 2.5 percent this year even if Boeing shaves 0.5 percent off the top and that doesn't pass the laugh test. It's not only far more growth than any economist or even the Federal Reserve is predicting; it's a prediction supported by virtually nothing.

Mnuchin claimed that economic growth would increase to 3 percent (before Boeing) because of "phase one" of Trump's deal with China and the USMCA, but the latter is not significantly different from the North American Free Trade Agreement (NAFTA) and "phase one" won't even fully roll back any of Trump's tariffs that are depressing economic growth.

If the Trump regime actually wanted to reach growth of 3 percent or more, they would need to repeal all of the tariffs.

Boeing's new CEO, Dave Calhoun, officially took control of the company this morning. The outgoing CEO, Dennis A. Muilenburg, departed the company with a $60 million payday.

  • muselet

    I suppose it’s vaguely possible the 737 Max debacle could lop half a percent off GDP, but it’s Steve Mnuchin who said that, and he’s not exactly trustworthy (3% growth, my foot).

    My guess is the Trump administration will use Boeing’s woes to hand-wave away concerns over tariffs and trade wars and other things that really can cripple GDP.

    –alopecia

  • katanahamon

    I wonder that people don’t understand just how damaging Rump is to the economy..think about it..he and the Republicans have rolled back anything resembling regulations, are systematically destroying the EPA, giving corporations unprecedented tax cuts, removing banking restrictions on said corporations, lots of other stuff smarter ppl could mention, and in this atmosphere our economy should be theoretically way, way stronger. However, all the downsides like tariffs and Rump’s other decisions have hobbled us due to the incredible lack of disposable income from healthcare costs, student loan debt, etc. (and think about all the right wing judges that have been forced through, hobbling us even more in the future) Meanwhile our debt goes higher and higher, which will only be mentioned as a problem when or if the second that Dems ever get re-elected. That’s the most depressing thing for me, that the Republicans have no qualms at all about trying to re-elect a criminal, a known criminal and liar, and the media completely normalizes it.

  • gescove

    Plus, Boeing’s troubles are far from over. More lawsuits and canceled orders are coming. The 737 Max is tainted goods. Show of hands – who wants to take a ride on one right now?

  • gescove

    It’s a little hard to wrap my head around how the CEO that oversaw a $50B drop in his company’s value and the complete clusterf*ck roll out of their flagship product could be given a $60M payday as he was shoved out the door.

    • Tony Lavely

      I read elsewhere that he didn’t receive any severance, so (assuming here) I assume this is a contractual thing.

      • gescove

        No doubt you are correct. But you’d think such a contract would say something like “Sure, we’ll pay you $60+M when you leave, but that will be tied to market share and stock value during your tenure. A market cap drop of $50B will adversely affect the payout.”