“Has Donald Trump kept one of his campaign promises to Indiana?” asked WRTV in Indianapolis last night after word broke that Carrier would keep 1,000 jobs in place rather than send them to Monterrey, Mexico. The major manufacturer had planned to close out 1,400 positions, and workers had hoped that Trump and his running mate Mike Pence could act quickly to save as many of them as possible. They managed to accomplish it even before taking office — but just how they managed that is still unclear.
Don’t expect these workers and the people of Indiana to worry too much about how the sausage got made:
This morning, those questions still remain:
Carrier was in the middle of negotiating with the White House, the New York Times reported last week, when Trump took up the issue directly with Carrier:
Officials familiar with the situation, who insisted on anonymity because talks were still underway, described the discussion on Friday as a two-way negotiation, with both sides seeking a compromise.
Carrier and its corporate parent, United Technologies, confirmed on Thursday that executives were in discussions about the fate of two factories in Indiana scheduled to shut down, not long after Mr. Trump posted on Twitter that he was “working hard, even on Thanksgiving,” to get Carrier to stay. “Making progress,” he added, in all capital letters.
Carrier makes a wide range of products, mainly (but not entirely) oriented to the consumer market. United Technology, however, is a major defense contractor. Even last week, questions began percolating as to whether Trump might be leveraging the power of the federal government to pick winners and losers by using some carrots and sticks to manipulate the situation. If so, he’s not the only person to suggest using that leverage in some fashion:
United Technologies is among the country’s biggest military contractors, producing engines for the Pentagon’s most advanced fighter jets and receiving more than $5 billion annually from the federal government. That equals 10 percent of the company’s revenue.
The size of the federal government’s dealings with United Technologies has also caught the eye of legislators on Capitol Hill, like Senator Joe Donnelly, Democrat of Indiana.
“It’s unfair to ask the same workers who have been laid off to pay tax dollars that will go to the company that fired them,” he said. “We’re in this together as Americans. When our workers succeed, our economy succeeds and our defense contractors succeed.”
Senator Donnelly is pushing for the government to consider outsourcing as a factor in deciding which companies receive federal contracts.
Washington Post reporter Jim Tankersley noted the lack of detail in the announcements, and wondered whether Trump had engaged in the kind of top-down meddling that Republicans ripped Barack Obama for doing, especially in the 2009 stimulus and green-tech investment bets like Solyndra:
This is a sliding scale of government interference in the market.
At one end of it, Trump would be acting like a lot of governors, who throw state subsidies at companies that announce plans to skip the state. That’s typically not a great strategy for states in the aggregate – as the group Good Jobs First has relentlessly documented, corporate subsidies tend to under-deliver on jobs promises, and they often advantage big corporations over small businesses and start-ups. It would immediately create some perverse incentives for multinational companies, as the economist Justin Wolfers noted on Twitter:
Every savvy CEO will now threaten to ship jobs to Mexico, and demand a payment to stay. Great economic policy. https://t.co/t2WAJOgh8F
— Justin Wolfers (@JustinWolfers) November 30, 2016
The other end of the scale is much more involved, in a way that might particularly alarm conservatives. In it, Trump would be heavily involved in picking economic winners and losers. …
If these arguments sound familiar, it’s because Republicans raised them time and again through the early years of the Obama administration – particularly the debate over the president’s signature economic stimulus bill, and his accompanying move to bail out the U.S. auto industry.
According to CNBC, the deal is a blend of both. The incentives came through Mike Pence, who is still governor of Indiana and able to cut the kind of deals that Tankersley puts at the near end of the spectrum:
While terms of the deal are not yet clear, the sources indicated there were new incentives on offer from the state of Indiana, where Pence is governor, that helped clear a path for the agreement.
However, the threat of action at the far end of the spectrum certainly caught the attention of executives at United Technology, too:
While UTX was seeking the savings that would come from moving some production to Mexico, people familiar with the situation indicated that the savings were not worth incurring the wrath of the incoming administration, including the potential threat to the significant business that UTX currently conducts with the U.S. government, largely in the form of orders for jet engines and other defense-related equipment.
Needless to say, that kind of government pressure on the private sector will not have free-market conservatives cheering. If CNBC has this correct, it’s the kind of cronyist, insider-dealing economics that has tilted the field away from start-ups and small businesses, and that has created an overabundance of consolidation in major industries (especially in defense contracting).
That won’t matter to the people who will still have jobs in Indiana. As Lakeisha Austin tells WRTV, the deal is “truly a blessing” from her perspective. Austin wants to meet with Trump to say, “Thank you for doing what you said you were going to do.” Austin will have a job, and Trump will have a victory to claim and a priceless photo op if his team can get it arranged with Austin before tomorrow. Those are the reasons that sausage keeps getting made, and why most don’t want to see how that happens.
Addendum: Let’s not fail to point out, too, that Trump succeeded where the Obama administration failed. That might have something to do with the long-term implications of that far end of the spectrum and United Technology’s business plans for the next four years, but it still counts.