The Boeing Debacle Could Shred Economic Growth

Written by SK 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.