A choice quote from a news story about Trump “draining the swamp,” relevant to the deal with Carrier:
“If Hillary had won – and you know, she really is a swamp person – she would have had to pay back with favors all these interests that sent her money,” said Mark Ross, 57, in Unionville, Pa., who said he wasn’t a fan of Trump but liked what he said about “flushing out the scum” in Washington.
“Do I think it’s really gonna happen? Nah,” he laughed. “But better Trump’s swamp than Obama’s swamp. At least he’s gonna get us something.”
That’s the Carrier deal, right? Never mind that Indiana had to bribe the company with $7 million in tax breaks not to send 800 jobs to Mexico. (Rush Limbaugh prefers the term “tax relief” but tax relief describes national policy, not a special incentive you’ve carved out for one firm as part of a publicity stunt by the new president.) Never mind that 1,300 Carrier jobs in Indiana are still headed south of the border. Never mind that all of the attention to this arrangement will encourage other companies to threaten outsourcing, whether they’re serious or not, in order to extract similar concessions. And never mind the very strange math in all this, in which Carrier is forgoing $65 million in expected savings from sending those 800 jobs to Mexico in return for $7 million in, er, “tax relief.” The point of the deal, which has demonstrated to businesses in fine cronyist fashion “that playing ball with Trump might be part of what it now means to run an American company,” is to show that this is Trump’s swamp now, a swamp that works for you — sort of. Whatever ill effects the government picking winners and losers among U.S. businesses might have, at least he saved a few jobs. He’s looking out for the little guy.
Let’s get back to that very strange math, though. In which universe is it worth it to give up $65 million in labor savings for $7 million in tax incentives? It’s especially odd since Carrier can count votes in the House and Senate as well as you or I can. Real corporate tax relief is coming next year for American businesses as a matter of national policy courtesy of the new Republican administration. So why is Carrier in a rush to accept Indiana’s piddling offer? There has to be more to the equation. And there is:
John Mutz, a former Indiana lieutenant governor who sits on the agency’s 12-member board, told POLITICO that Carrier turned down a previous offer from IEDC before the election. He said he thinks the choice is driven by concerns from Carrier’s parent company, United Technologies, that it could lose a portion of its roughly $6.7 billion in federal contracts.
“This deal is no different than other deals that we put together at the IEDC to retain jobs, but the fact is that the difference is that United Technologies depends on the federal government for lots of business,” Mutz said.
Team Trump probably leaned on Carrier and United Technologies with a threat not to renew some of their defense contracts if they didn’t give Trump a political win by keeping those 800 jobs in Indiana. When $6.7 billion in taxpayer money is at stake, $65 million in extra labor costs doesn’t seem like a big deal. (Under the circumstances, you would think Trump could have convinced them not to outsource the other 1,300 jobs either. He’s got billions of dollars in leverage over them and most of the jobs are still going to Mexico? That’s not the art of the deal!) The federal government can contract with whomever it likes, of course, but Ben Shapiro’s right that United Technologies presumably had those contracts in the first place because it could do the job needed at a lower cost or at a higher level of skill than the other bidders. Punishing them for outsourcing by freezing them out of future government work would have ended up punishing the public in the form of more expensive and/or lower-quality defense services. Which, actually, is how protectionism tends to shake out for its supporters.
Arguably the worst part of this, though, is how it not-so-subtly sustains the fallacy that outsourcing is the main threat to American manufacturing jobs. Indiana wouldn’t be throwing around millions to solve a big problem unless it really was a big problem, right? In our cooler moments, though, we all (hopefully) know what the actual big problem is:
Since manufacturing employment peaked in 1979 at nearly 20 million, some 8 million of those jobs have been lost to automation and cheaper foreign labor markets. Those losses accelerated after the 2001 recession, when competition from China surged, according to MIT researchers, who estimate some 2.0 million to 2.4 million jobs left for China between 1999 and 2011.
But while the level of U.S. manufacturing employment has fallen by roughly a third, overall manufacturing output has doubled, thanks to a surge in productivity brought by increased automation, better supply chain management and other efficiency improvements. Those upgrades aren’t going away.
You can bring back some of the jobs taken by Mexicans. You’re not going to bring back the jobs taken by robots, and more and more of those jobs will be going away soon. One of the best uses to which Trump could put his communication skills over the next few years is preparing the public for further tectonic labor changes driven by automation, starting with the transportation industry. Instead, the point of the Carrier deal is to signal to low-information voters that keeping Americans employed is a straightforward matter of an ass-kicking can-do making-America-great-again president wielding the right carrots and sticks. The Carrier deal, in the end, is a small Potemkin village designed to distract from the truly wrenching labor upheaval ahead. But it’s great politics. Any incoming president with a lick of retail sense would have done the same thing.
Here are Pence and Trump at the plant today, in front of the Carrier logo. That operates as a sort of commercial for the company. I wonder if a personal appearance by the president-elect was part of the deal too.