Trump's Carrier Deal Doesn't Look So Good If You Read past the Headlines
Kudos to Donald Trump on the PR win of his deal to keep somewhat less than half the jobs Carrier had planned to move to Mexico in the United States. The headlines are great for him, few people will ever know much more than the initial headlines, and … hey, around 1,000 jobs saved is around 1,000 jobs saved. Or maybe the number is only 800. It still sounds really good, and for the workers who will keep their jobs, it is really good. If, however, you are interested in more than PR wins and losses, there are some big questions about the deal.
First, let’s be clear that around 1,300 jobs are still being moved to Mexico. Second, the workers who are not losing their jobs and their union are still waiting to hear if they’re going to be pushed to accept pay cuts. Third, the jobs that are being kept in the U.S. are in part a result of major tax incentives—basically, Indiana is paying Carrier to employ people in Indiana rather than in Mexico, and Mike Pence is the governor of Indiana, so he could have done that part all along. Which makes you wonder why he didn’t—or, more disturbingly, what else Carrier was promised:
In exchange for keeping the factory running in Indianapolis, Mr. Trump and Mr. Pence are expected to reiterate their campaign pledges to be friendlier to businesses by easing regulations and overhauling the corporate tax code, according to a spokeswoman for Mr. Trump.
That could be more specific than it sounds:
Another possibility is Trump is doling out company-specific promises. He'll roll back a specific regulation that affects the company in particular, or muster up some federal loan guarantees or worker training dollars, or maybe, as CNBC reported in the Carrier case, he might cajole a state governor into offering new corporate subsidies.
So Carrier keeps fewer than half the jobs in the United States and gets massive tax incentives, the good will of the president-elect, and possibly a little help down the line with regulations the company finds inconvenient. There are also reports that Carrier’s parent company, a major federal contractor, was concerned about losing its federal contracts. Note, by the way, that when President Obama signed an executive order just saying that violations of existing labor laws would be taken into account when awarding federal contracts, business groups and Republicans were outraged.
If there were threats to federal contracts, it’s … disturbing, but totally in character. If this is a simple (ha!) case of a company responding to a combination of tax incentives and promises of broader changes to the tax code or the regulations affecting the company, then:
As the University of Michigan's Justin Wolfers puts it: "Every savvy CEO will now threaten to ship jobs to Mexico, and demand a payment to stay."
If these nice headlines for Trump were bought at the cost of more companies either getting big money from the government or cutting American jobs, how long will this continue to look like a win?