Thursday, December 1, 2016

The promise and perils of Trump's 'deal' to keep some Carrier jobs in the U.S.

Posted By on Thu, Dec 1, 2016 at 4:05 PM

click to enlarge MIKE PENCE: Corporate welfare from a conservative governor. - WIKI COMMONS
  • MIKE PENCE: Corporate welfare from a conservative governor.

By now, you've likely heard of President-elect Donald Trump's intervention in the planned outsourcing of two Carrier factories to Mexico, which would have moved some 2,000 good-paying manufacturing jobs out of Indiana.

About half of those jobs are now staying put, thanks to a combination of $7 million in state tax breaks offered by Indiana Gov. Mike Pence — the incoming vice-president — and, perhaps, the threat that Trump might possibly take away billions of dollars worth of federal contracts from Carrier's parent company, United Technologies, after he assumes office. The news is a symbolic victory for Trump, who specifically referenced Carrier's planned outsourcing on the campaign trail and promised to personally intervene to keep the jobs in the U.S.

Is it also a victory for American workers?

For the 1,000 Carrier employees whose jobs will be preserved, there's no question that it is. Not quite as much for the other 1,000 workers who will still lose their jobs — or for Indiana taxpayers, most of them working people, who will be the ones to pay for this and any other corporate welfare package doled out to restive companies that forestall their travels in pursuit of cheaper labor, at least for the time being.

Still, it would be foolish for liberals to dismiss or ignore the Carrier deal. At the Intercept, David Dayen argues that Barack Obama could have been using the leverage of federal contracts to help preserve American manufacturing jobs throughout his presidency. It's not an entirely fair critique, given that one of Obama's first acts in office was to intervene dramatically to save the U.S. automobile industry. (Paul Krugman tweeted yesterday that "Trump would have to do one Carrier-sized deal a week for 30 years to save as many jobs as Obama's auto bailout.")

But the larger point is what Obama didn't do. Dayen says that the president both has failed to communicate a willingness to fight for jobs — ever the cool realist, he's told the harsh truth that some jobs "just aren't going to come back" — and has simply avoided taking aggressive executive action to curtail outsourcing. Trump, on the other hand, threatened a 35 percent tariff against Carrier's heaters and air conditioners entering the U.S. if the company relocated its plants to Mexico. Under Obama, the U.S. Treasury Department has gone after "inversions," or corporate maneuvering in which firms nominally shift their headquarters overseas to avoid paying federal taxes. That's good, important policy, but it suggests "more willingness ... to protect U.S. tax revenues than U.S. jobs," as Dayen puts it. He continues:
Labor unions have criticized Obama virtually his entire presidency for lax attention to outsourcing, citing actions he could have taken without congressional input. These include declaring China a currency manipulator to reduce the attractiveness of Chinese goods and ending trade deals that hurt American workers rather than promoting them. Critics point out that the head of Obama’s Jobs and Competitiveness Council was GE CEO Jeffrey Immelt, whose company has a legacy of outsourcing stretching back decades.

Some observers argue that a president of 320 million shouldn’t involve himself in individual situations involving just a couple thousand jobs. But the bully pulpit can have effects on other companies as well. And local politicians routinely work with companies in their backyards to encourage them to stay put, typically by offering them tax incentives. Trump appears to be doing something similar with Carrier, discussing a massive tax cut that would allow major corporations to bring back money held overseas at a low rate. Carrier’s has $6 billion stashed abroad.
However, this is where the trouble begins. Dayen acknowledges that "such a massive tax amnesty as a carrot for keeping a handful of jobs in America is obviously disproportionate." That's putting it mildly. As  Sen. Bernie Sanders of Vermont framed it in an op-ed in the Washington Post today, giveaways to Carrier amount to an extraction of ransom, paid for by the public.

Trump wants voters to read the Carrier deal as a sign of his tough-guy dealmaking prowess: He twisted arms and the jobs stayed put. There may be some truth to that, if the talk of tariffs and yanking federal contracts actually swayed minds in the company. But the only concrete part of the deal that we know of was the $7 million in corporate welfare from Pence's government (and that's not mentioning the potential federal tax incentives Dayen mentions).

That's not playing tough with corporate bosses. It's rewarding them. Sanders writes:
Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be reevaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America.

Let’s be clear. United Technologies is not going broke. Last year, it made a profit of $7.6 billion and received more than $6 billion in defense contracts. It has also received more than $50 million from the Export-Import Bank and very generous tax breaks. In 2014, United Technologies gave its former chief executive Louis Chenevert a golden parachute worth more than $172 million. Last year, the company’s five highest-paid executives made more than $50 million. The firm also spent $12 billion to inflate its stock price instead of using that money to invest in new plants and workers.

Does that sound like a company that deserves more corporate welfare from our government? Trump’s Band-Aid solution is only making the problem of wealth inequality in America even worse.
Thank you, Bernie Sanders.

Note, by the way, that there are many conservatives disturbed by the Carrier deal, such as Republican U.S. Rep. Justin Amash of Michigan, who tweeted "Not the president(elect)'s job. We live in a constitutional republic, not an autocracy. Business-specific meddling shouldn't be normalized."

I'm not bothered in principle by government "meddling" in business affairs at times. Personally, I think it's part of government's job to intervene in the private sector to help workers. I just object to it being done with lucrative giveaways to the already wealthy — and suspect that that indeed will be normalized in a Trump presidency, in a very big way.

Another must-read on the Carrier situation: the New York Times' excellent longform story, written post-election but before Trump's deal was announced.

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