Mnuchin Says U.S. 2020 Growth to Be Less Than 3% Due to Boeing

Treasury Secretary says officials are closely monitoring the coronavirus, but said they hadn’t yet seen major effect on supply chains

WASHINGTON—Treasury Secretary Steven Mnuchin said Thursday that U.S. officials have reduced their expectations for economic growth in 2020 because of disruptions caused by the grounding of Boeing Co. ’s 737 MAX.

In an interview with Fox Business Network, Mr. Mnuchin said gross domestic product growth may be lower than 3% this year.

Boeing has had a big impact on our exports, being our largest exporter,” Mr. Mnuchin said. “I think that could be 50 basis points if not more.”

A basis point is one one-hundredth of a percentage point. Boeing halted production of its troubled 737 Max jet last month after it was grounded by regulators following two fatal crashes.

Mr. Mnuchin also said officials are closely monitoring the fast-spreading coronavirus, but said they hadn’t yet seen major effect on supply chains.

“There’s no question that the virus will have some impact on global growth and some impact on the U.S.,” he said but added it is too early to tell how significant the effects will be.

Mr. Mnuchin also said the announcement by China early Thursday that it would lift some tariffs on U.S. goods was expected and agreed to as part of the recently signed phase one trade deal.

Mr. Mnuchin said the president is willing to cut tariffs on China as part of a phase two deal, but that U.S. negotiators left tariffs on to incentivize China to continue moving toward the next phase of talks.

Asked if the U.S. planned to impose more tariffs on European goods, Mr. Mnuchin said President Trump was focused on reaching a new trade agreement, but noted that officials had “already seen a tremendous amount of investment by the European auto makers into the U.S. and building factories here. So that’s also part of the agenda and that is working.”

How Buybacks Have Warped the Stock Market & Boeing (w/ Dr. William Lazonick)

Dr. William Lazonick, co-founder and president of The Academic-Industry Research Network, sits down with Real Vision’s Max Wiethe to dissect the evolution of the stock market and the modern American economic system. Citing Boeing as an example, he contends that the stock market is being used to loot previously innovative corporations as insiders and outsiders alike are incentivized to push stock prices higher. He also argues that American competitiveness is being sapped as companies prioritize stock buybacks over investing in research and development, building new infrastructure, and paying off debt. Lazonick explains how this focus on short-term profits has led to unstable employment, sagging productivity growth and a loss of international competitiveness. Filmed on December 6, 2019 in New York.

Airbus’s Lesson for Young Socialists

Its A380 debacle shows how hard it is for state planners to outguess markets.

Years ago, when an editor asked me if Boeing would be around to pay off a 100-year bond it had recently offered, I flippantly replied that 100 years was only two product cycles for the company.

I underestimated the duration of its products. The Boeing 747 first flew in 1969 and a freighter version will continue to be built near Seattle at least through 2022. The Boeing 737, which first flew in 1967, faces an order backlog that extends through 2027. An all-new replacement for the commuter workhorse is unlikely to appear until the 2030s.

Which makes all the more anomalous Airbus’s decision to end production of its impressive and giant A380, which has been flying only since 2005.

Socialism is currently in vogue. If the word means anything in today’s context, it means projects of unusual government ambition, built on our globally shared capitalist technological and commercial base. The A380 was exactly such a project. Underwritten by massive European government subsidies, the plane was an engineering sensation. Passengers loved the roomy jet. Yet now it’s kaput. What went wrong? Or to phrase the question more usefully, what technological and commercial realities would its sponsors have had to overrule to assure its success?

The list is not a short one. They would have had to overrule the desire of passengers to fly direct, bypassing the crowded hub airports (like London’s Heathrow) for which the A380 was built.

They would have had to overrule the preference of business travelers for frequent departures. With 535 seats to fill, the superjumbo was hopelessly matched against operators offering more convenient schedules by using smaller planes.

Most of all, they would have had to overrule the public’s appetite for lower fares. On a per-seat basis, a new generation of super-efficient twin-engine planes such as the Boeing 787 proved cheaper to operate even though the four-engine A380 could accommodate twice as many customers.

In the end, enough socialism could be mobilized to get the plane built, but not enough to make it commercially viable. Europe’s governments would have needed to extend their dominion beyond their own taxpayers who financed it. They would have needed to dictate to the world’s airlines and travelers and even the aerospace industry’s global supplier base, which proved unwilling to develop a new fuel-efficient engine for a plane with a doubtful future.

This should guide us in our thinking about what kind of “socialism” is possible today. Governments can tax their own people until they rebel at the ballot box, refuse to pay, or emigrate. They have no power, in our world, to dictate what kinds of goods and services and technologies (green or otherwise) the global marketplace will accept.