The parts of the Carrier deal that Trump doesn’t want to talk about:
December 1, 2016 – In Indiana today, Donald Trump declared that “Companies are not going to leave the United States without consequences.”
In the case of Carrier, the “consequences” include the company accepting $7 million in incentives.
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.
While the agreement is obviously good news for the workers who’ll keep their jobs, there are relevant details Donald Trump doesn’t want to talk about.
- Carrier jobs are still moving to Mexico. The company will keep roughly 800 jobs in Indiana, but 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 it 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.”
- Moral hazard exists. 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.”
- 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.
- 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.
United Technologies is not going broke. In 2015, 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.
Sarah Palin Calls Out Trump’s Carrier Deal, Warns Against ‘Crony Capitalism’
December 2, 2016 – Former Republican vice presidential nominee Sarah Palin in an op-ed for the Young Conservatives website called the deal, which was reportedly negotiated by Vice President-elect Mike Pence, an example of government intervention that could lead to “crony capitalism.”
Palin said in the op-ed “I am ecstatic for Carrier employees!” But she wrote that while she didn’t yet know the full terms of the deal, the negotiation could signal an abandonment of fiscal conservatism and stimulus packages that, if pursued, would mean the country is “doomed.”