Friday, December 02, 2016

How Much Of A Scam Was Trump's Carrier Announcement Yesterday?


"Trump, who lost the popular vote, has now sent the message it is open season for massive corporations to seek specialized tax breaks from the incoming Administration. This is crony capitalism at its worst. Trump is not only failing to drain the swamp, he is fertilizing the swamp."
-Rep. Ted Lieu (D-CA)
In reference to what Gaius was talking about this morning, let's look at some of the fallout from Trump's Carrier announcement. The first time I ever heard about Carrier announcing they would move their plant from Indiana to Mexico was when Bernie started campaigning on it-- loudly. Trump saw that too and quickly started parroting Bernie's complaints on the the campaign trail. Yesterday Bernie penned an OpEd for the Washington Post, Carrier just showed corporations how to beat Donald Trump, warning that American workers have a lot to be worried about because of the nature of the deal Trump cut with United Technologies, Carrier's parent company (in which Trump holds an immense financial stake personally). The deal, he writes, "keeps less than 1,000 of the 2100 jobs in America that were previously scheduled to be transferred to Mexico. Let’s be clear: It is not good enough to save some of these jobs. Trump made a promise that he would save all of these jobs, and we cannot rest until an ironclad contract is signed to ensure that all of these workers are able to continue working in Indiana without having their pay or benefits slashed."

In exchange for allowing United Technologies to continue to offshore more than 1,000 jobs, Trump will reportedly give the company tax and regulatory favors that the corporation has sought. Just a short few months ago, Trump was pledging to force United Technologies to “pay a damn tax.” He was insisting on very steep tariffs for companies like Carrier that left the United States and wanted to sell their foreign-made products back in the United States. 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?

In essence, United Technologies took Trump hostage and won. And that should send a shock wave of fear through all workers across the country.

Trump scores publicity win after Carrier keeps jobs in Indiana. Now will other companies take advantage?

...Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be re-evaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America.

Let’s be clear. United Technologies is not going broke. Last year, it made a profit of $7.6 billion and received more than $6 billion in defense contracts. It has also received more than $50 million from the Export-Import Bank and very generous tax breaks. In 2014, United Technologies gave its former chief executive Louis Chenevert a golden parachute worth more than $172 million. Last year, the company’s five highest-paid executives made more than $50 million. The firm also spent $12 billion to inflate its stock price instead of using that money to invest in new plants and workers.

Does that sound like a company that deserves more corporate welfare from our government? Trump’s Band-Aid solution is only making the problem of wealth inequality in America even worse.

I said I would work with Trump if he was serious about the promises he made to members of the working class. But after running a campaign pledging to be tough on corporate America, Trump has hypocritically decided to do the exact opposite. He wants to treat corporate irresponsibility with kid gloves. The problem with our rigged economy is not that our policies have been too tough on corporations; it’s that we haven’t been tough enough.

We need to re-instill an ethic of corporate patriotism. We need to send a very loud and clear message to corporate America: The era of outsourcing is over. Instead of offshoring jobs, the time has come for you to start bringing good-paying jobs back to America.

If United Technologies or any other company wants to keep outsourcing decent-paying American jobs, those companies must pay an outsourcing tax equal to the amount of money it expects to save by moving factories to Mexico or other low-wage countries.  They should not receive federal contracts or other forms of corporate welfare. They must pay back all of the tax breaks and other corporate welfare they have received from the federal government. And they must not be allowed to reward their executives with stock options, bonuses or golden parachutes for outsourcing jobs to low-wage countries. I will soon be introducing the Outsourcing Prevention Act, which will address exactly that.

If Donald Trump won’t stand up for America’s working class, we must.
As Joshua Holland pointed out at The Nation this week, whenTrump promised to get tough with companies that offshore jobs, he never said anything about buying them off with our tax dollars. And this isn't just about Carrier air conditioners, which Trump sued in 2007 because of air-conditioner malfunctions in one of his hotels. The single biggest customer for United Technology's $56 billion business is the U.S. government. Trump may have saved a few hundred jobs-- it won't even be a thousand-- but at what cost? Yesterday's Indie Star's headline told the whole story: Federal access likely biggest factor in Carrier deal.

State Rep. Kaniela Saito Ing (D-Maui) is certainly the most progressive political leader in Hawaii-- and the only progressive elected official in the whole state to back Bernie's hugely successful primary campaign-- and he saw right through the little ploy. "Trump," he told us after the announcement in Indiana yesterday, "is setting a dangerously low standard for corporate handouts. Threaten your workers with offshoring, exploit them as pawns, then watch the business-friendly corporate tax breaks roll in. The Carrier charade is an anti-worker moral hazard, that voids corporate bosses of all accountability. A true pro-worker agenda starts from the ground up through living and prevailing wage laws, collective bargaining, paid leave, and putting an end to Trump's union-busting agenda."

Retired Marine Colonel Doug Applegate, who nearly toppled predatory multimillionaire Darrell Issa this month in the suburbs north of San Diego-- and who is Blue America's first endorsed candidate for 2018-- took one look at Trump's "deal" and mentioned that "the annual tax rebates to Carrier from the State of Indiana in the amount of $700,000... Sounds like Republican corporate welfare checks to me!"

Even today's Wall Street Journal, a bastion of neo-liberalism with a screwed up but internally consistent way of analyzing this whole thing, looked askance at the clumsy, ineffective way Trump went about this.
[R]eal job security depends on the profitability of the business. Carrier wanted to move the production line to Mexico to stay competitive in the market for gas furnaces. If the extra costs of staying in Indianapolis erode that business, those workers will lose their jobs eventually in any case.

This isn’t to fault Mr. Hayes’s decision, since Mr. Trump made him an offer he couldn’t refuse. The state of Indiana threw in $7 million in tax incentives, but those weren’t decisive. Mr. Trump’s real hammer is his threat to impose a tariff on Carrier imports to the U.S. Carrier has a 30% share of the U.S. gas-furnace market, and a 35% tariff could kill the business. That’s the same sword Mr. Trump previously held over Ford Motor Co.

United Technologies also gets about 10% of its revenue from sales to the Pentagon, another source of government leverage. Then there’s the potential damage to the Carrier brand, especially its consumer air conditioner sales, if Mr. Trump decided to blast it from the bully-- and we mean bully-- pulpit. So United Technologies decided to take the small cost against earnings and invest to make the Indiana plant more competitive.

...A mercantilist Trump trade policy that jeopardized those exports would throw far more Americans out of work than the relatively low-paying jobs he’s preserved for now in Indianapolis. Mr. Trump’s Carrier squeeze might even cost more U.S. jobs if it makes CEOs more reluctant to build plants in the U.S. because it would be politically difficult to close them.

Mr. Trump has now muscled his way into at least two corporate decisions about where and how to do business. But who would you rather have making a decision about where to make furnaces or cars? A company whose profitability depends on making good decisions, or a branding executive turned politician who wants to claim political credit?

The larger point is that America won’t become more prosperous by forcing companies to make noneconomic investments. A nation gets rich when individuals and business are allowed to take risks as they see fit in a competitive economy. Politicians are rotten investors. Mr. Trump would help the economy, and his Presidency, far more if he focuses on getting the pro-growth parts of his agenda through Congress.

Like the Nixon Administration, Donald Trump’s unpredictable, non-ideological policy-making will sometimes be disorienting for those who claim to believe in free markets. Some conservatives will be tempted to tolerate bad policies that appear to be popular that they’d never accept from President Obama. Many Republicans stayed silent or supported Nixon as he imposed wage-and-price controls and created the EPA, only to regret it later. They shouldn’t make the same mistake with Mr. Trump.

The better strategy is to support him when his policies promote growth and try to block him when he veers into big-government cul-de-sacs. In that spirit, his Carrier shakedown is a short-term political victory that will hurt workers and the economy if it becomes the norm for the next four years.
Even Palin-- currently sucking around for a Cabinet appointment-- slapped Trump around today over the Carrier nonsense, calling it crony capitalism. "When government steps in arbitrarily with individual subsidies," she wrote, "favoring one business over others, it sets inconsistent, unfair, illogical precedent. Meanwhile, the invisible hand that best orchestrates a free people’s free enterprise system gets amputated. Then, special interests creep in and manipulate markets. Republicans oppose this, remember? Instead, we support competition on a level playing field, remember? Because we know special interest crony capitalism is one big fail... [F]undamentally, political intrusion using a stick or carrot to bribe or force one individual business to do what politicians insist, versus establishing policy incentivizing our ENTIRE ethical economic engine to roar back to life, isn’t the answer. Cajole only chosen ones on Main St or Wall St and watch lines stretch from Washington to Alaska full of businesses threatening to bail unless taxpayers pony up. The lines strangle competition and really, really, dispiritingly screw with workers’ lives. It’s beyond unacceptable, so let’s anticipate equal incentivizes and positive reform all across the field-- to make the economy great again."

Scott Paul, president of the Alliance for American Manufacturing, is happy for the workers who will get to keep their jobs-- fewer than half-- but pointed out that "the Carrier deal is only a bandage on the economic wounds in our industrial heartland. Over the past 16 years, America has lost more than 60,000 manufacturing facilities, and 5.5 million manufacturing jobs since 2000. Not all of those jobs can be reclaimed, but smarter policies will give factory workers a brighter future. A tougher trade policy, a tax code that incentivizes reshoring jobs and production, investments in infrastructure, research, and training are all urgently needed. America has manufacturing know-how, abundant energy resources, a culture of entrepreneurship, a strong homegrown consumer market, and access to amazing innovation. Smarter policies will help us compete. We know these issues enjoy bipartisan support among voters, and they should be the focus of Congress and the Trump administration in 2017."

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