Will America Wake up to Outsourcing, Corporate Bribes and Stock Buybacks?
To paraphrase the famous Claude Raines line from Casablanca, I am shocked—shocked—to find that corporate bribes are going on here!
The $7 million grant by the state of Indiana to induce Carrier to keep 800 jobs from moving to Mexico has set off alarms from left, right and center. (This downward revision comes from the Carrier local Steelworkers union president Chuck Jones who said that Trump included 300 research and development jobs that were never scheduled to leave. Trump hostilely tweeted back that Jones "has done a terrible job.")
Even satirist Andy Borowitz has joined the fray: "If you think you’re going to get away with sending jobs out of the U.S., think again,” Trump said (in the Borowitz satire). “You are about to be bribed, big league.”
Conservative pundits, so lost in their free-market fictions, claim that Trump is interfering with the pristine operation of the free market system. He is picking winners and losers! He will ignite a trade war with his reckless tariffs! He will drive up prices of consumer goods! He will destroy more jobs than he will save!
"This is the sort of package Republicans have traditionally loathed," reports the New York Times.
The "bribe" for Carrier is barely a rounding error in the tens of billions of dollars in public money and tax breaks lavished upon corporations each and every day by Republicans and Democrats alike. Profits deeply depend on the well-honed corporate art of playing states and countries against each other in order to feast at the public trough. The conservatives' beloved free enterprise system has never been free of corporate bribes and corporate job blackmail.
How big is the American corporate welfare trough? Very big
Good Jobs First has developed a corporate welfare tracker that goes back to 1976. Here's their estimate of the top corporate welfare recipients that each have received over $1 billion (not million) in tax breaks and subsidies of the kind Carrier will receive:
Subsidy Total Dollars
Number of Subsidies
Fiat Chrysler Automobiles
Royal Dutch Shell
Advanced Technology Investment Co.
The Alcoa-New York Deal
For just one example among thousands, let's look at Alcoa, #4 on the corporate bribe list. In 2015, the company was scheduled to eliminate 600 jobs at its aluminum facility in upstate New York (500 layoffs and another 100 positions that would not be filled). Lo and behold, Democratic governor Andrew Cuomo and Democratic senator Charles Schumer came to the rescue, with $38.8 million in capital and operation expenses from the state's economic development arm, and another $30 million in energy cost assistance. Alcoa promises to keep the jobs in New York State for at least three years.
"I heard last night Alcoa said they were going to keep the plant open," Schumer, who turned 65 a day earlier said. "That was the best birthday present I could have received."
The War Between the States
Not only do state and local governments worry about jobs evaporating or shifting abroad, they are equally petrified about relocations to other U.S. states. New Jersey and Connecticut, for example, are in a cutthroat war to hold onto their own enterprises, while also luring other corporations to move jobs their way. New Jersey's largesse, under a Republican governor, knows no bounds, reports the Wall Street Journal. In fact, its corporate tax incentives, loans and cash bribes are rising rapidly:
Connecticut Bribes Multibillion-Dollar Hedge Funds
Perhaps the most nauseating examples of corporate welfare are occurring in the Constitution State, the plush exurbia home to many Wall Street hedge funds. Granted it's a stretch to claim any hedge fund contributes positive economic value to society, given that often their goal is simply to siphon wealth away from the rest of the economy and put it into the pockets of the super rich. Also, it's hard to make the case that saving high-paying hedge fund jobs somehow benefits working people and the middle class. But from the state's perspective, hedge funds bring revenues and economic activity to the state and therefore are coveted.
Since hedge funds can operate wherever they place their people and computers, these jobs are mobile. One leafy suburb near New York and the Hamptons is as good as another. Therefore Connecticut is an easy target for some good old corporate blackmail coming from the richest of the rich. Here are two egregious examples, this time under a Democratic governor.
1. Bridgewater Associates LP, the world’s largest hedge fund gets $22 million. Supposedly this package announced in May 2016 was to induce Bridgewater, a $150 billion hedge fund, to keep 1,400 jobs in Connecticut, and then to possibly add 700 more by 2021.
This deal is nothing short of obscene. Ray Dalio, the founder and CEO of Bridgewater, had a reported income of $1.4 billion in 2014. His net worth is $14.1 billion. So the subsidy from the state to his firm amounts to 0.16% of his net worth—about one-tenth of a penny on every wealth dollar.
Worse still is that Dalio gets an enormous tax break called "carried interest." Instead of being liable for a federal tax of 35 percent-- before deductions -- on his $1.4 billion ($490 million), his liability is only 20 percent ($280 million). So this hedge fund mogul takes advantage of a needless $210 million federal tax loophole and then still has the nerve to shake down the state for another $22 million. One wonders how Dalio justifies this level of greed.
2. AQR Capital Management gets a new state subsidy of $35 million. Once you bribe one billionaire hedge fund manager, get ready to do it again and again. On Nov. 16, 2016, Connecticut announced a $35 million package of subsidies to another hedge fund that only has 540 jobs in the state but promises to add 600 more over the next 10 years. Its CEO, Clifford Asness, has a reported net worth of $4 billion.
So let's do the simple math on these corporate bribes:
- 600 Alcoa = $114,667 per job.
- 1,400 Bridgewater jobs = $15,714 per job.
- AQR's 540 jobs = $64,815 per job
- Carrier's $7 million for 800 jobs = $8,750 per job.
I hate to say this, but Trump got a deal.
Faulty Logic, Flagrant Greed
It's not just conservatives who are using faulty logic and wishful thinking to belittle the jobs saved at Carrier (and perhaps Rexnord too).
Obama's press secretary Josh Earnest said, “If he [Trump] is successful in doing that 804 more times, then he will meet the record of manufacturing jobs created in the United States while President Obama was in office.”
Say what? Earnest should know that new jobs created by the Obama administration aren't going to the Carrier workers or to most other workers dislocated due to outsourcing. Economy wide job creation is an entirely different process than stopping jobs from moving to Mexico—something no administration has done since NAFTA. Also, the human experience of losing a decent paying job is one of the most life-wrenching events imaginable, and not comparable to finding a new job. Job insecurity correlates with a significant rise in disease and death. You can't wish that away with macro-statistics.
Unfettered Greed and Stock Buybacks
Steven Rattner, a liberal Wall Streeter with close ties to the Democratic Party, also ignores the unconscionable greed that is fueling the rush to low-wage labor. He argues that losing Carrier jobs is inevitable, and therefore it is folly to try to save them. "The vast preponderance of American job losses," he writes in the New York Times, "has come simply because emerging-market countries have gotten much better at making stuff with workers earning far less."
Further, he argues that working people actually benefit by the export of jobs to low-wage areas because the goods we import from those countries are far cheaper, thereby increasing the standard of living of all Americans. So some people lose their jobs so that the rest of us can purchase cheaper products and make our declining incomes travel further.
Meanwhile Rattner chooses to ignore the prime beneficiaries of moving production abroad: the top executives and their hedge fund partners who drive the process.
For example, United Technologies, the parent company of Carrier, is not worried about foreign competition. Rather, its top executives and hedge fund investors are seeking more cash flow to finance the $10 billion stock buyback plan they instituted last year. Stock buybacks always raise share prices to enrich top executives and hedge funds. They are the key to runaway inequality.
Instead of justifying Carrier-like job loss, all of these pundits should explain to the America public how those same stock buybacks were illegal before 1982. That's because they were considered stock manipulation! (Yes, in free markets, you're not supposed to be able to manipulate the price of anything.) Since the Reagan administration legalized them, stock buybacks jumped from 2% of all corporate profits in 1980 to a whopping 75% of all corporate profits by 2007. There's nothing inevitable about that.
Is Protecting Middle-Class Jobs a Just Cause?
One senses hesitancy within the liberal-left community about the righteousness of saving decent-paying American jobs. After all if Trump is for it, it must be suspect, no?
In a recent Rolling Stone interview, Sen. Bernie Sanders was asked why liberal-minded people should support economic nationalism—a policy of "our jobs first." Instead, isn't it a good thing that jobs from wealthy nations go to raising the standard of living for poor people in Mexico and other developing nations?
Sanders' response is worth noting:
"....I am deeply concerned about poverty in countries around the world, and I believe that the United States and other major countries have got to work to address those issues. But you do not have to sacrifice the American middle class in order to do that.
"I find it ironic that the billionaire class says, 'We're worried about the poor people in Vietnam, and that's why we're sending your job to Vietnam.' That's the billionaire class talking. Clearly we know what that is about. And you have some 'liberals' who echo that point of view....
".... How you create a sustainable global economy that protects the poorest people in the world is a very important issue for me. But you surely do not have to do that by wiping out the middle class of this country.
"I think we have a right in this country to hold corporate America accountable for gaining the benefits of being an American corporation, while at the same time turning their backs on the American working class and the consumers who helped create their profits and their wealth."
Will Trump Ride the Outsourcing Issue into a Second Term?
If Trump continues to prevent jobs from fleeing abroad, he will gain increasing support from working-class voters, and not just from white people. At Carrier, African Americans make up 50% of the workforce. Ten percent are immigrants. Half of the assembly line workers are women. These dues-paying members of the United Steelworkers, are not likely to forget who saved their jobs.
Outsourcing should be a progressive cause. Conservatives and their corporate backers hate any effort to suppress it. Wall Street elites want us to believe job outsourcing is an act of god, while they line their pockets with stock buybacks.
Trump deserves to be attacked for many reasons, but not because he has saved 800 Carrier jobs. We should mobilize around the job outsourcing issue rather than letting him capture it. We should unmask the hypocrites who praise their precious free market while lavishing billions of tax dollars on thousands of corporations. To counter Carrier-like outsourcing, we should be building a movement to again outlaw massive stock buybacks.
While Trump's nasty anti-union Tweets might somewhat undermine his popularity, it would be a grave error to count on that. Instead, we should lead the fight to save decent paying jobs, or we could be facilitating Trump's reelection.