President-elect Donald Trump promised to punish U.S. companies that ship manufacturing jobs out of the country. Instead, judging from the way he has handled Carrier, he plans to reward them. Quite handsomely, in fact.
As should be standard practice with Trump, pay attention to the substance, not the theater. United Technologies, the parent company of air-conditioner maker Carrier, has been threatening to move more than 2,000 jobs from Indiana to Mexico. Trump addressed this specifically during his campaign, vowing to hit the company with a punitive tariff.
“If they’re going to fire all their people, move their plant to Mexico, build air conditioners, and think they’re going to sell those air conditioners to the United States – there’s going to be a tax,” Trump said on “Meet the Press” in the summer. “It could be 25 percent, it could be 35 percent, it could be 15 percent, I haven’t determined.”
As it turns out, how about zero percent?
In fact, how about giving United Technologies state tax breaks worth about $7 million over the next decade, in exchange for moving only 1,300 jobs to Mexico? That’s basically the deal offered by Trump and Vice President-elect Mike Pence, who happens to be governor of Indiana (and thus in a position to offer the tax relief).
For the roughly 850 workers who thought they were losing their jobs to Mexico but now will keep them, this is great news. I am happy for them and their families, and I understand why they would feel grateful to Trump. But I don’t understand why anyone else would consider this a good deal – except, of course, the leadership team at United Technologies, which must have sore knuckles from all the fist-bumping.
The company still gets to lay off most of the targeted Indiana workers and replace them with much cheaper Mexican labor. It gets partial compensation from the state government. And instead of worrying about a potential tariff, United Technologies can anticipate a major reduction in the federal corporate tax rate. That’s something Trump promised on the campaign trail – and also, reportedly, in a recent phone call with United Technologies CEO Greg Hayes.
Writing in a Washington Post op-ed, Sen. Bernie Sanders of Vermont put it this way: “Just a short few months ago, Trump was pledging to force United Technologies to ‘pay a damn tax.’ … Instead of a damn tax, the company will be rewarded with a damn tax cut. Wow! How’s that for standing up to corporate greed? How’s that for punishing corporations that shut down in the United States and move abroad?”
So imagine you’re a CEO who wants to send, say, 5,000 manufacturing jobs overseas. Having learned from the Carrier example, you might begin by announcing that unfortunately you are forced to eliminate 10,000 jobs because of the crushing tax burden. Even if you really want to move the jobs to Vietnam or Kenya, just say you’re looking at possible sites for a new plant in Mexico. That’s sure to get Trump’s attention.
When Trump calls offering tax breaks or enterprise zone incentives or free rounds of golf in Scotland, whatever goodies he tosses in, hold out for a while – then reluctantly, in the spirit of patriotism and Making America Great Again, announce you’ve agreed to cancel half of the 10,000 job cuts. You’d still be meeting your original goal of eliminating 5,000 jobs, only now you’d also have a lower corporate tax bill and a tee time at Turnberry.
The Carrier deal is just the latest piece of evidence suggesting that Trump’s populist rhetoric about championing the working stiff and cracking down on greedy globalist corporations was all a bunch of hooey. His administration is shaping up to be a government of, by and for corporate America.
His nominee for treasury secretary is Steven Mnuchin, a former Goldman Sachs executive and hedge fund tycoon. His nominee for commerce secretary is Wilbur Ross, a billionaire industrialist. His pick to serve as Ross’s deputy is Todd Ricketts, the son of a billionaire and the co-owner of the Chicago Cubs. His choice as education secretary is Betsy DeVos, the billionaire daughter-in-law of the co-founder of Amway.
When he holds meetings of his Cabinet, Trump may not end up being the richest person at the table.
We should pay less attention to what he says, or tweets, and more to what he actually does. So far, this is not a team of rivals but a team of plutocrats. Trickle-down economics isn’t what Trump’s supporters voted for, but it looks like what they'll get.
Washington Post Writers Group