Skepticism is in order about Donald Trump's "saving" of Carrier factory jobs. The method is one he criticized as a candidate and promises no long-term solution.
Modern air conditioning was invented in 1902 by Willis Carrier in Buffalo, N.Y., an engineer who went on to found the Carrier Corp. in 1915. But since 1979, the company has been owned by United Technologies. This major defense contractor has billions of dollars that have nothing to do with air conditioning and heating riding on friendly relations with the incoming Trump administration.
So it’s not surprising that Carrier appears to have reversed its decision to move more than 1,400 Indiana jobs to Mexico, something specifically criticized by President-elect Trump as a candidate. But it will be doing so on its terms, receiving $7 million in tax breaks over 10 years. And appearances will be deceiving. The deal appears to save 800 carrier workers at the endangered Indianapolis furnace plant. But, according to The Wall Street Journal, the company still intends to send 600 Indy jobs to Mexico and close a factory in Huntington, Ind., relocating another 700 jobs to Mexico.
This is exactly the kind of corporate welfare-blackmail scheme that Trump railed against during the campaign, calling it “dumb” and “crazy.” In Erie, Pa., for example, he said, politicians have been saying, “Here’s a tax abatement of any kind you want. We’ll help your employees. It doesn’t work, folks. That’s not what they need. They have money. They want to go out, they want to move to another country, and because our politicians are so dumb, they want to sell their product to us and not have any retribution, not have any consequence. So all of that’s over.” Trump said he would sanction job-relocators, including with tariffs.
So this is cheap symbolism, not a policy shift, much less a vision about how the nation could rebuild its base of manufacturing jobs (the Hoosier state has lost about 20 percent of its factory jobs since 2000). Indiana coffers will suffer, and hence so will funding for education, infrastructure and building advanced industries — things that would actually help the state’s economy. More companies will get the message that the welfare office is open even longer hours to play desperate states against each other and against countries.
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Trump also has a habit of distracting people. So here’s Carrier “saved.” That way, for example, you can pay no attention to a cabinet with the most billionaires in history, determined to look out for their interests. And don’t forget plans by the Republican Congress to privatize Medicare and Social Security. Look, over here!
Indiana also has a particularly snakebit relationship with corporate giveaways. In the early 1990s, Indianapolis outbid a hundred cities for “the economic development prize of the decade,” a United Airlines heavy maintenance base. The state and city sold bonds to underwrite 60 percent of the project’s costs and United was given tax abatements for the land.
Although the deal promised 7,500 jobs (I was in Denver when that city was a finalist), only about 3,000 materialized. But when United filed for bankruptcy court protection in the industry turmoil after the Sept. 11 attacks, the center closed and the city and state (and workers) were left twisting in the wind. The massive hangar was eventually revived — with yet more incentives — for airframe maintenance and overhaul by a variety of users. But it never lived up to its potential and the wound was deep for the United workers.
As for Washington state, the $9 billion in tax incentives for Boeing are regrettable — we have to play the game as it is, not as we wish it were — but justifiable. Boeing is the foundation of an aerospace cluster with 90,000 well-paid jobs as of September. It’s a net plus.
So be skeptical of the Carrier deal. I suspect more shoes will fall out of the closet. Worst of all, it shows that Trump has no plan to really help the working class. The bluster of a reality television star and the promises of a developer with a checkered history won’t be enough. Of course, he can always blame the “liberals.”
Today’s Econ Haiku:
Goldman’s Mnuchin
Enriched by the great crisis
Gets our Treasury