President-Elect Trump took an important step towards uniting our country last Thursday as he negotiated with the CEO of United Technologies, a major defense contractor and the parent company of furnace-maker Carrier. Appearing to fulfill a campaign promise to keep Carrier from shipping jobs to Mexico (but which Trump later explained he didn’t remember saying and which wasn’t to be taken literally), Trump “saved” the jobs of roughly 800 Indiana workers through an opaque combination of threats and rewards that is likely to have taken major steps towards advancing a precedent-setting agenda that isn’t much of a favor for American workers. When spectrum-bracketing politicians as diverse as Bernie Sanders and Sarah Palin unite in opposition to a deal like this, it gives me hope that Trump can help bridge the widening gap between our red and blue political factions.
The terms of the deal show a lack of transparency that seems characteristic of the incoming administration. It is known that the deal included $7 million in tax incentives from the state of Indiana where the factory is located, and, perhaps not coincidentally, where Vice President-elect Mike Pence is still governor. Carrier had previously rejected similar packages, since their move to Mexico was projected to save $65 million annually, a much larger prize than the citizens of Indiana would likely subsidize through tax incentives. The deal may also have been affected by an implied threat that Carrier’s parent company, United Technologies, would not be awarded further defense contracts, which currently comprise 10% of its total revenue. The loss of $5.6 billion in government spending should certainly give Carrier pause, although Mackenzie Eaglen, a defense analyst at the American Enterprise Institute, told the Washington Post that it would be “highly illegal” to use defense contracts as an incentive in this way. (If Trump also makes good on his threat to charge a high tariff on goods imported from specific American companies who moved production out of the country, that would also require a completely new way of interpreting and implementing current laws as well as treaties like NAFTA.)
Then there’s the matter of just how many American jobs were spared as part of the Carrier deal. Trump has been claiming that he saved 1,100 jobs, but the real number is more like 800. The higher number includes 300 administrative jobs that were never in danger of being sent to Mexico. Perhaps more importantly, the total does not include 600 other jobs making fan coils that Carrier is still planning to move to Mexico, and an additional 700 jobs in a United Technologies factory in Indiana that will also be lost to Mexico. Saving 800 jobs while losing 1300 positions doesn’t sound quite as worthy of the $7 million that Indiana will forego in tax revenue nor the $200,000 it will receive in cash annually to retrain workers, let alone any other pot-sweetenings that we don’t know about.
Another metric: Trump would have to do one Carrier-sized deal a week for 30 years to save as many jobs as Obama's auto bailout
— Paul Krugman (@paulkrugman) November 30, 2016
Economist Paul Krugman, a critic of the deal, points out that the jobs saved by Trump’s drive-by deal are actually small potatoes. Considering that only 800 jobs were saved, Krugman’s estimate is on the low side.
Critics of the deal note that it’s symbolic at best, since Presidents cannot fritter their time away making micro deals with every company that wants something. However, what it symbolizes, even more than keeping a token number of American jobs intact and making Trump look like a big damn hero, is a widening of economic inequality and consolidation of power among those who already have too much of it. A company with $7.6 billion in profits annually, and for whom the government pays an additional $1.5 billion in research and development, is talking about relative nickels and dimes here, whether it’s saving $65 million by paying Mexicans a few dollars an hour or receiving a tax break of $7 million (over several years) from the people of Indiana.
Which brings us, finally, to the punch line. This deal is about corporate America being able to name its price by making threats. It’s about government capitulating to corporate demands when they should be representing the People. It’s about gutting “inconvenient” regulations that are there for a reason. It’s about taking money from the pockets of workers and taxpayers and putting it in already overflowing corporate pockets, enabling them to exploit an even larger power differential in the body politic.
Fact-checking Donald Trump’s Carrier campaign promise, courtesy of RTV6, The Indy Channel