Business Columns & Blogs

Subsidies? It's matter of perspective

The spinning by Washington politicians on the latest World Trade Organization ruling in the running Boeing-Airbus subsidies spat was of such velocity that, properly aimed, they could have augured themselves right through the Earth’s crust to Toulouse or Geneva to deliver their objections in person.

“We don’t subsidize. … Okay, we subsidize, but not as much as those other guys. … Well, all right, we subsidize, but ours are the good kinds of subsidies. … Fine, we subsidize, but our subsidies didn’t really make that much difference, not like the harmful subsidies those Europeans pay.”

It was a lot of sound and fury for a ruling that everyone claims to understand and have analyzed even though hardly anyone has seen the thing. A lot of the energy put into faux outrage could have been saved by taking the quotes from the Europeans when the WTO issued its ruling on their subsidies awhile back, crossing out the references to “Airbus” and substituting “Boeing,” then be done with it.

The posturing won’t have any impact on the dispute that seems to have been a part of the aviation industry since the days of the Wright Brothers. The WTO will eventually craft some sort of compromise in which both parties swear they’ve never subsidized before and promise never to do it again. The biggest question is whether the fracas will be settled before the awarding of the Air Force tanker contract, another golden opportunity for howls of unhappiness from aggrieved parties.

But this latest exercise in political theater did serve a purpose beyond allowing officeholders to play to their home constituencies. It helped illustrate the knotty and thorny issue of subsidies generally, an issue that underlies much of the contentiousness of the current election and will only get more heated once the various legislative bodies convene in January and figure out how to pay the bills.

Subsidies abound in American life. Justified by national security or global competition or job protection or political spoils or promotion of some perceived social good, subsidies have grown in size and complexity to the point that no one knows what anything actually costs.

The government bailouts of Wall Street, big banks and the auto industry aren’t just a flash point for the tea party movement, they’re illustrative of the political, financial and economic mess we’ve created for ourselves.

Does it really affect your life if General Motors collapses? Maybe if you work for one of the GM-brand dealerships. But this region isn’t an auto manufacturing center or even a significant supplier to the domestic automakers. People in the Pacific Northwest can comfortably make the case that the Detroit 3 should make it or fail without their support.

Conversely, if you live in the heart of the domestic auto industry – Michigan, Ohio, Indiana, Illinois, Wisconsin – the subsidies in the form of federal aid are crucial. But aid to Boeing? That part of the Midwest isn’t a big aerospace center. As long as it’s got two wings, a tail and engines that turn, one plane is as good as another, and you’re indifferent to the manufacturer’s name on it. (If you’re in Alabama, you’re not indifferent to Boeing subsidies, you’re against them, since Airbus has promised a tanker assembly plant in your state).

But autos and aviation are just two small corners of the subsidies universe. We subsidize agriculture. That’s partly out of force of habit, and partly because of jobs (not so much on the farms themselves, but in all the related and supporting businesses). But it’s also because whatever problems this country has, food shortages and debilitating inflation in food prices aren’t among them. Would the farm sector and our food supply collapse if the system of subsidies disappeared? No politician wants to be the one to find out.

We shuttle huge piles of money around in health care to the point that we have no idea what procedures and services cost. The regulated utility business operated for years with cross-subsidies between classes of customers and types of service, which has proven to be a problem in telecom with so many customers bailing out completely.

The financial industry has for years enjoyed all manner of subsidies, including the implicit promise that the government will step in to clean up whatever debacles the industry has created.

What would happen if that tangle of subsidies were unwound? Sure, voters, citizens, employees, business owners, whoever, will take handouts when they’re offered, but will they really object or miss them if the subsidies are gone? Maybe we’re not as attached to subsidies as politicians would like us to believe.

Then again, maybe the politicians know us all too well. If that’s the case, this is going to get even uglier, as regions, industries and groups defend their subsidized turf (and maybe even grab a little more).

Those that have some want to keep it. Those that don’t want to get some. Problem is, thanks to the recession, there’s not much “some” left for anyone.

Bill Virgin’s column on business and economics appears Sunday in The News Tribune. He is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at bill.virgin@yahoo.com.

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