Wednesday, November 30, 2016

Some Facts About the Carrier Deal

President-Elect Trump and Vice President-Elect Pence are taking a victory lap in Indianapolis for a deal that will keep about 1,000 jobs in Indiana that Carrier had planned to move to Mexico. While it's great that a thousand Hoosier workers get to keep their jobs at Carrier, there are some other facets of the deal your Trump-supporting friends may need to hear about.

According to Fortune magazine, "some 1,300 jobs will still go to Mexico, which includes 600 Carrier employees, plus 700 workers from UTEC Controls in Huntington, Ind." From here it looks like net jobs saved for the Indiana and the US is zero.

During the campaign Trump mocked politicians who tried to keep companies from leaving their states with tax incentive packages. What carrot did Trump/Pence offer Carrier to keep jobs here? A $700,000 annual tax break over several years funded by (guess who) Indiana taxpayers via the Indiana Economic Development Corporation.

Ever wonder why Pence continued as governor when he had Trump's transition to run and his hand-picked successor was already in place as lieutenant governor? Now it seems likely that the decision had something to do with the fact that, as governor, Pence is chairman of the board of the Indiana Economic Development Corporation and presumably wields some influence over how they spend their Indiana tax dollars. Rachel Maddow explains this eloquently here.

On the campaign trail Trump bragged that he would use the threat of a 35 percent tariff on the products of companies that left the US. But a primary motivator for Carrier was its fear of losing federal contracts, not tariffs. According to CNN Money United Technologies, Carrier's parent company, does $5.6 billion in federal contract business each year and receives another $1.5 billion in R&D grants. They calculated that the Mexico move would save them $65 million per year. You can do that math. And the $700,000 per year tax abatement was just icing on the cake.

The deal was done by Mike Pence in his role as governor using taxpayer money. It was unrelated to any purported deal-making superpowers of President-elect Trump, nor did it reflect the hard-line strategy he said he would take when companies threaten to leave the US. In fact, it may inspire companies to announce they're leaving so they can score a tax exemption like Carrier got!

You can read more about this deal in Politico.