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The bad economics of Trump's Carrier deal
The Week ^ | 12/01/2016 | James Pethokoukis

Posted on 12/01/2016 1:04:51 PM PST by SeekAndFind

There's no doubt Team Trump is delighted by Carrier's decision to keep in Indiana roughly half of the 2,100 jobs that the maker of heating and air conditioning equipment had planned to shift to Mexico. As Steven Mnuchin, Trump's pick for treasury secretary, told CNBC yesterday, "This is a great first win without us even having to take the job."

Actually, it's their second win. Trump also lobbied/nudged/cajoled Ford into changing its mind about shifting a sport utility vehicle production line to Mexico from Kentucky, not that doing so actually would have cost American jobs. But Carrier, especially, had become a potent symbol of Trump's economic nationalism after video of Carrier's initial offshoring decision went viral. And in response to Carrier's reversal, Trump took a victory lap on Twitter: "Big day on Thursday for Indiana and the great workers of that wonderful state. We will keep our companies and jobs in the U.S. Thanks Carrier."

But how many Trump "wins" can the American economy afford? By themselves, the moves by Ford and Carrier are inconsequential — maybe even to Carrier's workers over the longer term. It's hardly an uncommon practice at the state level to offer incentives to lure corporate relocations or to keep firms from leaving. But the practice has mixed results. For instance, Dell closed a North Carolina plant in 2009 just five years after receiving millions in state tax incentives to open it. Production then moved to Mexico.

But more broadly, this is all terrible for a nation's economic vitality if businesses make decisions to please politicians rather than customers and shareholders. Yet America's private sector has just been sent a strong signal that playing ball with Trump might be part of what it now means to run an American company. Imagine business after business, year after year, making decisions based partly on pleasing the Trump White House. In addition, Trump's hectoring on trade and offshoring distracts from the economic reality that automation poses the critical challenge for the American workforce going forward.

To be fair, exactly why Carrier reversed course is still something of a mystery. Carrier says state "incentives" were an "important consideration," along with Trump's commitment to creating a more pro-business climate in the country. Those would be the carrots. Then there are potential sticks, which may have been far more critical than tax incentives or other potential subsidies. Carrier's parent company, United Technologies, is a large federal government contractor and perhaps views the potential costs of keeping those factory jobs — a small fraction of the company's 200,000 employee workforce — in America as the price of doing business with Trump's "America First" administration. Indeed, one Indiana official, Politico reports, thinks the deal was driven by concerns United Technologies "could lose a portion of its roughly $6.7 billion in federal contracts."

Of course it wasn't so long ago that Republicans were attacking the Obama White House for its "crony capitalism," including the auto bailouts and clean energy investments in firms like Solyndra. Republicans, on the other hand, were supposedly stalwarts for competitive capitalism and vehemently against government "picking winners and losers." Some even said they were "pro-market" rather than "pro-business."

Now, not so much. Which makes you wonder if either party is willing to strongly fight for free enterprise and market-driven economic policy anymore. In her 1998 book, The Future and Its Enemies, Virginia Postrel saw the major dividing line in American politics as less left vs. right than the "dynamists" vs. the "stasists." The former values change and experimentation, as messy as those things can be. Dynamists live in anticipation of the future because they just know it will be a great place. The stasists often are nostalgia-ridden and willing to use top-down control to keep things as they are or try to shape them into familiar forms. Today they fight globalization, tomorrow it might be robots and artificial intelligence in order to "save jobs."

This time, at least, score one for the stasists and the cronyists.


TOPICS: Business/Economy; Editorial; Government; News/Current Events; US: Indiana
KEYWORDS: carrier; indiana; jobs; trumpeconomy; trumptransition
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To: central_va

Here’s what i know. 1100 jobs still going to Mexico. Do you think Carrier agreed to keep 1000 here if there will be a 35% tariff imposed. My money said, Trump let it go.


61 posted on 12/01/2016 1:54:09 PM PST by morphing libertarian
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To: elhombrelibre

Here are unFree people living in Communist hell hole but damn we gave them MFN so all is good. I guess Freedom needs to take a back seat to lung cancer.

62 posted on 12/01/2016 1:58:30 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: HiTech RedNeck

No, I know what satism is. I think state-preserving is a new idea, perhaps you’re the author. We are not endanger of the state being preserved in the USA. We are, I think running the risk of flipping one gang of statists for another. I hope I am wrong.


63 posted on 12/01/2016 1:58:57 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: SeekAndFind

“Dell closed a North Carolina plant in 2009 just five years after receiving millions in state tax incentives to open it. Production then moved to Mexico.”

So, Dell was not taxed as highly and employed people at this location for 5 years....and that is a BAD thing? I think Trump would continue incentives to avoid them from leaving at the 5 year mark.

Not sure of this author’s ability to think things through...


64 posted on 12/01/2016 1:59:06 PM PST by griffin
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To: griffin

Companies move for dirt cheap labor. All this regulation tax talk is a dodge, a red herring.


65 posted on 12/01/2016 2:01:33 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: elhombrelibre

Does everything have to be deemed nonsense that isn’t echoed by an echo chamber of thousands of pundits?

There is always risk in life; any principle can be carried into realms where it is harmful. Concern trolling for concern trolling sake does not behoove anyone, though.


66 posted on 12/01/2016 2:02:07 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: griffin

The incentives would be different in a Trump vision. He would like to see less governmental load on such a company in general.

I don’t know how this can be concern-trolled unless the troll is a lefty.


67 posted on 12/01/2016 2:03:18 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: central_va

Thanks for putting the picture in its proper context with your opinion. I might have thought the lady was stuck in fog or smog. Nope, she happens to fit your propaganda needs and purpose. Oh, but I am happy to say that you’re less nasty, vulgar, insulting and vile towards me in open forum than in the private messages you send. I guess that’s one good thing with you and your comments. Maybe here you feel some sense of a need not to be profane, irrational, mean spirited.


68 posted on 12/01/2016 2:04:31 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: SeekAndFind
To be fair, exactly why Carrier reversed course is still something of a mystery.

This guy knows nothing about the details of the deal, but is somehow able to slam it anyway for being so bad for the country. Amazing how that works.

69 posted on 12/01/2016 2:05:42 PM PST by Cementjungle
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To: HiTech RedNeck

I’m sorry. I don’t understand your point.


70 posted on 12/01/2016 2:06:12 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: elhombrelibre

But what’s the smog from?

Anyhow, it’s not all about just you.


71 posted on 12/01/2016 2:06:43 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: elhombrelibre

At some point I cease trying, knowing that others do get it, even though it is a reply to you.


72 posted on 12/01/2016 2:07:12 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: HiTech RedNeck
Pollution, I suppose.

Most things are certainly not just about me.

73 posted on 12/01/2016 2:09:23 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: elhombrelibre

Oh shut up you loon.


74 posted on 12/01/2016 2:09:33 PM PST by central_va (I won't be reconstructed and I do not give a damn.)
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To: HiTech RedNeck

Okay, I guess it’s good that others get your reply. I wonder how you know that they do....but it’s all good.


75 posted on 12/01/2016 2:11:32 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: elhombrelibre

Because it makes sense and because you have a demonstrated lacuna in your vision.


76 posted on 12/01/2016 2:11:56 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: HiTech RedNeck

The lacuna occurs because I and, possibly others, miss your point?


77 posted on 12/01/2016 2:14:44 PM PST by elhombrelibre (Against Obama. Against Putin. Pro-freedom. Pro-US Constitution.)
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To: elhombrelibre

Now YOU are the one beginning to presume on the others. That’s a lacuna for you.


78 posted on 12/01/2016 2:15:25 PM PST by HiTech RedNeck (Embrace the Lion of Judah and He will roar for you and teach you to roar too. See my page.)
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To: SeekAndFind

If you are a U.S. company you produce from the U.S.-period.


79 posted on 12/01/2016 2:15:25 PM PST by fortheDeclaration (Pr 14:34 Righteousness exalteth a nation:but sin is a reproach to any people)
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To: ExTxMarine

So, according to this jackass...


He’s just a Trump hater having a tantrum. No rationality at all.


80 posted on 12/01/2016 2:16:47 PM PST by lodi90 (President Trump - Has a nice ring to it!)
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