A fur-lined tough time
by Tom Sullivan
President-elect Donald Trump won the news cycle again with his deal with Carrier. Or rather, with Indiana’s Carrier deal. As Rachel Maddow speculated last night, that is why Indiana Gov. Mike Pence is still Indiana Gov. Mike Pence. He wasn’t going to step down to focus on the Trump transition before giving the state a parting gift: $700,000 a year in state taxpayer-funded incentives to Carrier (United Technologies) to go with promises from Trump of a reduction in the corporate tax rate.
If incentives deals — what Republicans during Democratic administrations derisively call “picking winners and losers” — are what Trump calls sticking it to the fat cats, American business is in for a fur-lined tough time. When Trump shouted at manufacturers threatening to move offshore, “you’re going to pay a damn tax,” you thought he meant a higher one. Caveat emptor.
The Carrier deal promises to save 800 jobs at the Indianapolis plant. Another 1,300 are still headed to Mexico according to Fortune. Some dealmaker.
Henry Grabar writes at Slate:
And subsidies were probably not the biggest factor in Carrier’s decision. Once we do find out what Pence offered, the terms will likely not save Carrier the $65 million that a move would have.
Instead, the deal may have important immaterial benefits. It puts United Technologies in the good graces of the administration, which may be key to its future business. About ten percent of the company’s $56 billion in revenue comes from the federal government, especially military contracts. The implication that Trump made some kind of backroom threat in Naptown over Defense Department contracts is worrisome, but for the moment, unfounded. For now let’s just say that Carrier has an interest in keeping Trump happy.
Still, what happened in Indiana represents exactly the problem, not the solution, in America’s approach to corporate negotiation. There is literally another factory across town from Carrier waiting for the same kind of attention. It’s not good that the geography of large offices and factories is a function of public money doled out by cities, states and in Washington. It’s been a great boon to companies with the size and flexibility to uproot or locate their operations at will, or at least make a convincing threat they’ll do so. And a big loss for the rest of us.
“Use your leverage,” Trump wrote in “The Art of the Deal.” Carrier did.
But the optics work for Trump. No one will remember the details.