So Trump was able to get Carrier to hold on to some jobs in Indiana. That’s truly great for those people who might have been unemployed. But with anything from a great deal on a car loan to “join free for a month!”, there are always some hidden traps that take the joy out of it and make you wonder if it was worth it.
Steve Benen has the details:
1. Carrier jobs are still moving to Mexico. While the company will receive $7 million in taxpayer money to keep roughly 800 jobs in Indiana, the Wall Street Journalreports that Carrier “still plans to move 600 jobs from the Carrier plant to Mexico,” plus moving another 700 other jobs that will be lost when it closes a separate plant in Huntington, Ind. In other words, under Trump’s alleged triumph, the one that will teach a valuable lesson to American companies, Carrier is shipping 1,300 jobs from Indiana to Mexico, even as receives millions of dollars from the state.
2. This is the exact opposite of what Trump said he’d do. As a presidential candidate, Trump mocked government efforts to keep employers stateside with grants, tax incentives, and low-interest loans. Candidate Trump said that approach “doesn’t work,” which is why he’d use a stick rather than a carrot: “What you do is you tell them, ‘You move to Mexico, you`re going to pay a 35 percent tax bringing these products that you make in Mexico back into the country.’”
Except, with Carrier, Trump’s doing exactly what he promised not to do, ignoring the solution he assured voters would work “easily.”
3. Moral hazard exists. As we discussed yesterday, paying off companies that threaten to ship jobs out of the country is not the basis for a sustainable, national manufacturing strategy. On the contrary, it creates a problematic set of incentives: if companies are led to believe the government will give them money to stay in the United States, every employer, whether they have outsourcing plans or not, will have a strong incentive to routinely call up the Trump White House and say, “Give us a sweet, taxpayer-financed deal or we’re out of here.”
4. Beware of unknown incentives. We know about the $7 million. We don’t know for certain whether there are any as-yet-unreported parts of the deal. The Wall Street Journalpiece added the federal government is an important customer for Carrier’s corporate parent, United Technologies: “The U.S. military accounts for about 10% of United Technologies’ $56 billion in annual sales, for products like the engine for the F-35 Joint Strike Fighter.”
Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, said he would be asking more about the Carrier deal and said he would inquire whether there were promises about defense contracts.
“I want to know whether the president-elect promised special federal tax breaks for a single company,” Mr. Wyden said Thursday. “I want to do everything I can to keep jobs in the United States, but there are some questions here.”
5. Conservatives should be howling: I’m so old, I remember when conservatives were disgusted with the idea of politicians using government money to pick “winners and losers.” Apparently, the right didn’t mean it.
The people who really got the fuzzy end of this lollipop are, in the long run, the American taxpayers and especially those in Indiana who are basically making up the difference to Carrier/United Technologies for what they would have saved if they had moved to Mexico. Seven million dollars in “tax incentives” means either the taxpayers will pony up the difference somehow to balance the loss, or they will just go without whatever the $7 million was going to pay for in the first place, be it an infrastructure project or school funding or perhaps even a “tax incentive” to the taxpayers themselves. But math is math; you cut something from one line, you’ve got to add it back somewhere else.
But apparently the good people of Indiana and Carrier were so taken with the idea that hey, Trump is coming to our town and saving us they really don’t notice — or care — that they’re the ones who will end up losing. Will Trump come back and save them? I wouldn’t count on it.