Carrot or Stick

Trump is milking the Carrier job saving deal for all it is worth. Some say it is the first leg of his 2020 re-election campaign. The actual facts of the deal confirm what will be the Trump Presidential management style when dealing with big business. Though in the campaign he threatened the stick (a 35% import tax for companies which offshore jobs), his first deal is to give them a carrot (a huge tax break). This should not be surprising since Trump is a big businessman and Republicans always believe a big part of the solution to any problem is to give tax breaks to those who are the most affluent.

All the details are coming out and it seems that Carrier is a subsidiary of United Technologies, a huge federal contractor making billions of dollars in profits. There will be about 1000 jobs staying here, but the company will still be moving that many or more jobs to Mexico. The carrot the company got was actually negotiated by Pence, who is still serving as Indiana Governor and who was given authority to offer tax breaks to companies to not move jobs. Carrier is being given about $7,000,000 in tax breaks spread over ten years. The deal may have escape clauses for Carrier down the line. Neither Trump nor Pence, who both have new jobs in Washington DC, has to answer for the taxes being lost; that burden falls on the taxpayers of Indiana.

This is not even a drop in the bucket when it comes to dealing with loss of manufacturing jobs, and it sets a dangerous precedent encouraging companies to jack up the taxpayers like NFL owners threatening to move their teams to different cities unless the taxpayers build them a new stadium. If any more Carrier style deals are announced, we should check whether the company had announced the job move before or after the election, because post-election threats are going to smell fishy.

Many lost manufacturing jobs will not be coming back because of automation and greater efficiency. A long range solution for workers is job training for the new jobs that will be coming available, and this is where the government could offer a legitimate stick to help employers train their own workers for these new jobs. NPR has a good article discussing the hierarchy of American jobs and how the ones in the middle have been more decimated than those at the top and bottom.

There is a stick for Trump and Congress could use in dealing with federal contractors. They can pass a law to tie job outsourcing in with denial of federal contracts. Democrats have proposed such legislation and it will be interesting to see if Trump and the Republican Congress will give it serious consideration.