Ingalls subsidies debate is global
One man’s “crony capitalism” is another man’s prudent investment in both the economy of a state and region or the defense of a nation. We saw that debate play out in the final days of the 2016 regular session of the Mississippi Legislature
State Sen. Chris McDaniel, R-Ellisville, sharply criticized the majority of the Mississippi Legislature over their overwhelming approval of the $250 million “bond bill” – the mechanism whereby lawmakers authorize bonded indebtedness to pay for specific public infrastructure projects.
During the recent bond bill debate in Jackson, McDaniel strongly questioned the wisdom of state taxpayers providing $45 million in capital improvements at the company’s Pascagoula facility, which is located on state-owned property: “We’re borrowing $45 million to give to a Fortune 500 company (the parent Huntington Ingalls Industries).”
Legislative records show that 2016 isn’t the first time Mississippi taxpayers have invested in support for the giant shipbuilding company. Since 2004, those records show that the taxpayers have pumped at least $172 million into Ingalls – which last year did $7 billion in sales and a lot of that with U.S. Navy contracts that are also taxpayer-funded.
So, does McDaniel have a valid point? Despite being on the losing end of the bond bill vote in the Senate by a margin of 46-6, are his complaints about government subsidies for the shipbuilding company responsible?
In an email exchange, I asked McDaniel to explain his position on the Ingalls support in the bond bill. He offered a lengthy, thoughtful explanation based primarily on two points – a belief that the taxpayers shouldn’t underwrite a Fortune 500 company and sharp disagreement with what he calls “crony capitalism” and “our state’s poorly-executed long-term economic plans, which is evidenced by irrational spending in many of our bond bills, not to mention a lack of reform in our overall business climate.”
McDaniel’s says his grandfather was actually employed at Ingalls in the 1940s. He prefaces his indictment of the bond bill help for Ingalls with this: “Ingalls is an instrumental part of the state’s economy and plays a vital role on the Mississippi Gulf Coast.
While it was enlightening to digest McDaniel’s defense of his vote and his rhetoric, I strongly disagree with McDaniel’s assessment of the wisdom of state taxpayers helping Ingalls.
Ingalls was lured to Mississippi in 1938 to locate their shipyard in Pascagoula under Gov. Hugh White’s “Balance Agriculture with Industry” program. Spurred by World War II, Ingalls had built 70 ships by June, 1945. Today, Ingalls employs 11,000 workers and for decades has been among Mississippi’s largest employers. When one considers the propriety of public investment in private enterprises, perhaps a look at the rest of the U.S. shipbuilding industry is in order. Mississippi is far from alone in taxpayer subsidy for shipbuilding concerns.
Maine taxpayers gave Maine’s Bath Iron Works (a key Ingalls competitor) $198 million in infrastructure money — and that was almost 20 years ago in 1997. Local and state governments have consistently subsidized U.S. shipbuilding efforts in every state as a means to protect high quality jobs.
A respected recent report from Brookings Institution economic studies fellow Aaron Klein offers a more definitive assessment. Klein documents that from the end of World War II until the 1970s, the U.S. shipbuilding industry built most of the world’s shipping fleets during a time when countries around the world subsidized their national shipbuilding industries. The U.S. stopped that practice in 1981. Global competitors continued the practice and continue to this day.
The result? Klein writes: “America ranks 19th in the world in commercial shipbuilding…only one-third of one percent of new commercial shipbuilding occurs in the U.S. despite the fact that we are the world’s largest economy.” Today, South Korea has 37 percent of the global shipbuilding market, Japan 27 percent, and China 21 percent.
More than protecting 11,000 jobs in Pascagoula, what about future U.S. military interests and U.S. economic interests? Are we to be dependent on South Korea and Japan to build our warships? Are we to depend on foreign-flagged ships to import and export our goods in time of war or instability?
For a those concerns, I see the $45 million in state taxpayer subsidy to Ingalls as a truly wise investment – both for our state and for our nation.
Sid Salter is a syndicated columnist. Contact him at email@example.com.