As
promised, Donald Trump is in Indiana today, celebrating himself for his role in an agreement with Carrier to keep some jobs in Indiana. "Companies are not going to leave the United States without consequences," the Republican president-elect declared this afternoon.It's a nice little line, which happens to be ridiculous. In the case of Carrier, the "consequences" include the company accepting
a ton of taxpayer money.
A source with knowledge of the state's negotiation with Carrier's parent company, United Technologies, said the deal would grant the parent company of Carrier Corp. $7 million in financial incentives over 10 years in exchange for a guarantee that the air and heating conditioning company would retain at least 1,000 jobs and invest $16 million into its Indiana operation.Carrier confirmed Thursday that "the state of Indiana has offered Carrier a $7 million package over multiple years, contingent upon factors including employment, job retention and capital investment."
While the agreement is obviously good news for the workers who'll keep their jobs, let's not lose sight of the relevant details Donald Trump doesn't want to talk about.
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 Journal reports 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 Journal piece 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.
Again, I'm happy for those Hoosiers who'll keep their jobs. I also understand the benefits of a political p.r. campaign in which Trump hails himself as a hero for effectively bribing Carrier to only lay off some of its Indiana workforce.But the details shouldn't be swept under the rug because they're politically inconvenient for Donald Trump.
