The Palmetto Insider

The State posted an interesting article today in which Boeing CEO Jim Albaugh acknowledged that the real reason Boeing chose to expand operations in South Carolina, instead of Washington state, had to do with the cost of its union commitments – in particular, “the cost of the strike at its Puget Sound operations in fall 2008.”

Continues the article: “Boeing didn’t pick South Carolina for expansion last year because of Washington’s tax rates or regulatory system. Nor was it a question of chasing low wages. ‘The overriding factor was not the business climate. And it was not the wages we are paying today. It was that we can’t afford to have a work stoppage every three years. And we can’t afford to continue the rate of escalation of wages.’”

In other words, Albaugh is admitting that the tax incentive package the company received from South Carolina is not what really convinced Boeing to expand in North Charleston. But this is what SCPC has been saying from the very beginning.

Thus we wrote in October 2009:

“What lawmakers in South Carolina have not told us is that Boeing was thinking of expanding its current operation in Charleston anyway. This past summer, Boeing purchased a 787 components plant that already employs 900 workers. The cost: $1 billion. Boeing also owns half of a neighboring plant that employs 1,600 workers. In addition, talks between Boeing and union representatives at its Everett plant in Washington state have stalled. A 52-day strike last summer cost the company billions, with analysts projecting the cost of the work stoppage at $100 million a day or $5.2 billion in deferred revenue. Meanwhile, employees in Charleston voted in early September of this year to disband their union.

“Thus when we describe this incentives package as a bailout what we really mean is not so much a financial one, as a bailout from Boeing’s union commitments in Washington state. Add to this that Boeing has long wanted to expand its operations on the east coast and it becomes clear the company was already very interested in building a second assembly line in South Carolina.”

Do the math. If strikes are costing Boeing $100 million a day, they are going to be looking to relocate to a non-union state. Add the fact that Boeing was already in Charleston and wanted to expand its east coast presence, and you see why Boeing came to South Carolina.

Note that Boeing admits that tax rates had little to do with its decision. But that also means the General Assembly’s multimillion dollar tax break for Boeing had little to do with the decision. To paraphrase Senators Glenn McConnell and Hugh Leatherman, the reason Boeing actually came to South Carolina can be quickly and decisively dismissed in a single elegant phrase – “right to work.”

This is to say, of course, that reforming general business conditions – especially as they relate to fundamental free market principles, such as the right to work – are far more important to growing South Carolina’s economy than are targeted tax breaks and backroom deals.

But, of course, that’s what we’ve also been saying from the very beginning as well.