Why Crony Capitalism Like Trump’s Carrier Deal Is a Problem
As Jay Caruso noted earlier today, the Carrier deal touted by Donald Trump is based in part on a corporate tax break offered by Indiana (Mike Pence’s state, remember?). And Jim Jamitis will have more soon about the fact that Carrier’s parent company, United Technologies, has far more to lose from its deals with the federal government. I’d like to talk here, not about the newsy part of this, but why the economics is bad.
After all, it seems reasonable to say, as a correspondent told me on Twitter: why complain about crony capitalism, which seems like an abstract notion, when 1000 more families are going to have a Christmas where the breadwinner has a job?
It’s a fair question. And convincing you that it’s a problem is not something I’m likely to succeed in doing in one blog post. If you’re a fan of the deal, I’m not looking to change your mind in a few paragraphs. All I want to do is make you wonder whether maybe — just maybe! — there is another side.
First of all, let’s look at basic fairness. Carrier has competitors, right? And they’re not all foreign. I counted 14 air conditioning manufacturers or suppliers in Indiana in this list, and only one of them is Carrier. Are all of these companies going to get the same tax breaks? If not, what would you tell the employees of the competing companies, who maybe have their salaries cut or employees get laid off because they are now having a tougher time competing against another company that got a tax break so Donald Trump could get a headline?
And if all the Indiana air conditioning manufacturers get tax breaks, what then? Well, imagine you’re a consumer who has a few thousand dollars to spend on home repair. Your air conditioning system is getting older, but so is your roof. But hey! it looks like the air conditioning manufacturers, who all got tax breaks, are offering better deals these days on new A/C systems. Meanwhile roofers, who don’t get tax breaks, are offering nothing. You, and hundreds of other homeowners like you, decide to purchase new A/C systems rather than spend your money elsewhere.
So if A/C manufacturers get tax breaks, but other businesses don’t, this too hurts other businesses and their employees.
The bottom line is this: When government picks winners, it is also picking losers. But if you see only the winners, you may conclude that there is no problem.
The thing is, government intervention is usually popular. It’s also usually counterproductive. But the counterproductive parts are harder to see until the government intervention becomes widespread. Then, when the stores go empty, and the lines for supplies get long, you can finally see it — but then it’s too late. A lot of people in Russia loved Communism, which is just government intervention to the nth degree — until millions starved. The folks in Venezuela loved them some government intervention. Ask them how they like it now.
I’m not saying one tax break is Communism, of course. It’s just an example of government interference in the economy on a small scale, while Communism is an example of government interference on a huge scale. But the unintended consequences of government interference are not abstract. They are very real. Just ask Carrier’s competitors, who didn’t get a tax break because they haven’t threatened to move anything to Mexico.
Yet.
But they will, if they’re smart. That’s the other thing about intervention. One act of intervention encourages more. Welfare encourages people to seek benefits from government rather than by earning money through providing value to society. Corporate welfare does the same.
What I have done is an exercise in looking at the seen and unseen — a concept I have written about before. Government policy is often popular because there are obvious good effects that can be seen. But there are other effects that are unseen, and they exist too.
P.S. If you’re interested in discussions about free markets, liberty, and the Constitution, please join my group the Constitutional Vanguard here.
[Cross-posted at RedState.]
i dunno
if you give x number of tax breaks you have a useful set of data what says hey maybe your tax regime is stupid
and as a feedback mechanism it’s far better than counting up how many jobs fled the country in the past year or so
once the failmerican government and the state governments over-encroach into the private sector to where they drive jobs overseas, there’s no super good way to remedy this
but if you shine a spotlight on it like how President Trump is doing, that’s all to the good i think
happyfeet (a037ad) — 12/1/2016 @ 12:22 pmI’ll go further in a few more posts, but I think you mis-read the list in your link to air conditioning companies in Indiana — I see one. The remainder of the list is companies in nearby states — those companies would not get the tax breaks offered by the State of Indiana to Carrier.
shipwreckedcrew (56b591) — 12/1/2016 @ 12:23 pmThe list includes companies that supply air conditioners manufacturers and suppliers in Indiana, but almost all of them are headquartered in other states.
shipwreckedcrew (56b591) — 12/1/2016 @ 12:25 pmYour tilting at windmills by suggesting problems that can’t be addressed.
If Texas and Florida have no state income taxes, they can pay lower wages rates because after-tax income for workers is still the same or better than high income tax states like California.
In response to being able to pay lower wages in those states, companies relocate their low-skilled job centers to those states, and thereby attract a migration of the work force who move to take advantage of those job opportunities.
As a result, home builders in California suffer due to a migration of potential home buyers from California to Texas (which has been happening for 2 decades). The decline in new home construction in California costs jobs and income in industries such as real estate sales, construction, landscaping, hone improvement, blah, blah, blah.
There’s always a push-pull in the market place, that push-pull is influenced by taxation, and there will always be taxation. Just about any government policy, if you drill down deep enough, is going to have impacts, both positive and negative, on the portion of the population its intended to regulate.
shipwreckedcrew (56b591) — 12/1/2016 @ 12:32 pmEnd all welfare. Personal, corporate, farm. All of it. Help the helpless, turn away the shiftless. I know, I know, it’ll never happen.
windbag (eec4b7) — 12/1/2016 @ 12:37 pmSo choosing NOT to do something (no income tax) is INTERVENING? What a foolhardy thing to say.
John Hitchcock (3e6e9b) — 12/1/2016 @ 12:38 pmThis is a good post; I endorse and associate myself with these remarks.
To a statistician or a POTUS, 1000 jobs is peanuts. To a guy who’s just been fired, one job is everything. But in terms of its impact on the national economy, Carrier’s decision — either to “move jobs” to Mexico or not — is spectacularly trivial. So does this event have any other significance, beyond its effect on those Carrier employees?
It could, if it were symbolic of something much bigger. If Carrier’s decision had come after the next Congress passes and Pres. Trump signs a law making permanent and across-the-board changes to the corporate tax laws, that would have been a wonderful symbol of something that can be anticipated to benefit the entire country — with the number of lives impacted measuring in the tens of millions, rather than approximating the number of people at an average high school football game in rural west Texas.
But as our host points out, this celebration is about a one-off — and it’s not being celebrated as an improvement in the system for everyone, nor really even so much about the 1000 or so U.S. citizens who may keep their Carrier jobs as a result, so much as it’s being celebrated as the first sign of some sort of mystical economic magic being worked by Trump. It’s certainly not sustainable or capable of being up-scaled, as our host points out. And this sort of celebration encourages people to put their faith in magical princes rather than in economic realities.
Beldar (fa637a) — 12/1/2016 @ 12:42 pmWe can’t all get special breaks. If we did, the costs to us, for the special breaks we’re paying for, would be balanced by the special breaks we get, and in the best case scenario the net benefit would be zero (actually negative because administering the system would cost something; we can give each other net zero benefit right now by just not doing anything).
Since we can’t all get special breaks, someone has to be picked out as especially special, and the rest of the not-so-special get to pay the bill. As Bastiat said, the State is not a breast that fills itself with milk.
Men naturally rebel against the injustice of which they are victims. Thus, when plunder is organized by law for the profit of those who make the law, all the plundered classes try somehow to enter — by peaceful or revolutionary means — into the making of laws. According to their degree of enlightenment, these plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.
Woe to the nation when this latter purpose prevails among the mass victims of lawful plunder when they, in turn, seize the power to make laws! Until that happens, the few practice lawful plunder upon the many, a common practice where the right to participate in the making of law is limited to a few persons. But then, participation in the making of law becomes universal. And then, men seek to balance their conflicting interests by universal plunder. Instead of rooting out the injustices found in society, they make these injustices general. As soon as the plundered classes gain political power, they establish a system of reprisals against other classes. They do not abolish legal plunder. (This objective would demand more enlightenment than they possess.) Instead, they emulate their evil predecessors by participating in this legal plunder, even though it is against their own interests.
It is as if it were necessary, before a reign of justice appears, for everyone to suffer a cruel retribution — some for their evilness, and some for their lack of understanding.
Bastiat, “The Law”
Gabriel Hanna (64d4e1) — 12/1/2016 @ 12:50 pmPoliticians can’t resist grandstanding – even the ones we adore. How is Trumps deal with Carrier substantively different from Reagan’s tariffs protecting Harley Davidson?
As a symbolic gesture, the Carrier deal is masterful and will work to advance the Trump agenda. The question is, will the Carrier deal be the norm or an exception? It’s hard to know. For Reagan, the motorcycle tariff was an exception which provided him political cover among the all-important Reagan Democrats. The Carrier deal may work similarly for Trump.
What I do know is that Trump has more of a feel for popular culture than I do. If Andrew Breitbart was correct that politics are downstream from culture, then Trump is the perfect politician. Trump is a cultural icon who, at some visceral level, connects with and understands our culture. That’s why he out-maneuvers the MSM, as well as other pols, who are cultural lightweights by comparison.
Perhaps anti-Trumpers – and I have been no fan of the man myself – have simply missed the cultural boat and are holding the messenger, Mr. Trump, accountable for cultural change we find distasteful.
ThOR (c9324e) — 12/1/2016 @ 12:56 pm@ThoR:accountable for cultural change we find distasteful.
What change? Crony capitalism is no change. Our culture has never been free of the taint. It is, “the same old serpent that says you work and I eat, you toil and I will enjoy the fruits of it.”
Gabriel Hanna (64d4e1) — 12/1/2016 @ 1:02 pmI think the truth of the Carrier deal is that United Technologies realized the improved margins from its Carrier subsidiary by moving the manufacturing to Mexico, were trivial when compared to the the antagonism it MIGHT subsequently endure with regard to its billions in contracts with the Defense Department.
Its a rational economic decision by the corporation, without regard to the $7 million in tax incentives being offered by Indiana — which didn’t move carrier when it previously rejected them — but they’re happy to tax Indiana’s money.
Simple maxim applies under Occam’s Razor — “Don’t bite the hand that feeds you.”
shipwreckedcrew (56b591) — 12/1/2016 @ 1:06 pmAnd, of course, individuals employed as home builders in California are physically incapable of following the migration of potential home buyers from California to Texas, because they feed on the psychic energies that emanate from the San Andreas fault.
CayleyGraph (353727) — 12/1/2016 @ 1:07 pmWhen will the propagandists start performing the rather simple task of noting the frequency with which Trump adhered to a ‘Buy American!’ policy regarding his own building projects? It’s not as if checking out the major structural and finish components is an arduous task.
The award of a subsidy is very rarely cause for celebration and this instance doesn’t qualify at all.
Rick Ballard (d17095) — 12/1/2016 @ 1:08 pmMore significant news out today in terms of politics and the Trump Admin is that Joe Manchin is under consideration for Sec. of Energy. That would take a Dem Senator out.
But West Virginia, which went for Trump 69-27, also elected a Dem businessman as Governor over the sitting Pres. of the W.Va. Senate, a Rep., 49-43.
So its likely that the new W.Va. Gov would appoint a Dem to take Manchin’s seat until there was a special election.
All 3 House members from W.Va are GOP. The other W.Va. Senator is GOP. The obvious leader for the Dems to run would be whoever the new Gov. appoints.
But if Trump campaigned for the GOP candidate, I’m guessing that the GOP could take that seat.
shipwreckedcrew (56b591) — 12/1/2016 @ 1:17 pmBetter the Dept of Energy than FDA or HHS given his daughter. Gen. Mattis is fait accompli for DOD.
urbanleftbehind (5eecdb) — 12/1/2016 @ 1:22 pmI don’t like this deal either. So I listened to Trump’s speech today. He said he is doing it because employees took him literally on the campaign trail when he said he would not allow Carrier to leave. So he felt he had to do it.
On the positive side, he promised a general tax cut for all businesses, not just Carrier, so yes, they were a symbol. Indiana is giving Carrier big tax breaks, but this is not the first or last time that will happen in the US. Also, I don’t think this deal is illegal or circumvents a law in the same way the GM deal did. That was clearly wrong and a straight giveaway to the unions.
Patricia (5fc097) — 12/1/2016 @ 1:25 pmWaPo reporting that Mattis is going to be the next Def. Sec.
shipwreckedcrew (56b591) — 12/1/2016 @ 1:26 pmJohn Hitchcock @6 — You think Alaska and Florida forego tax revenue??? LOL. Oh, they get theirs. They just get it in forms other than direct income taxation.
So it is a choice they make as a policy, no different from Indiana’s choice to bestow some tax favor on Carrier.
shipwreckedcrew (56b591) — 12/1/2016 @ 1:31 pmThat should be Texas and Florida.
shipwreckedcrew (56b591) — 12/1/2016 @ 1:31 pmIt’s a baby step to address regulatory, labor, social, and fiscal arbitrage and practices that have undermined the function of the market and enabled establishment of monopolistic practices. It is not crony capitalism, but rather its reversal. It is a future-looking testimony of Trump’s administration. Only time will tell if it will be equally applied.
n.n (9d2f6c) — 12/1/2016 @ 1:33 pm@n.n. If it is applied selectively, it is crony.
Gabriel Hanna (64d4e1) — 12/1/2016 @ 1:46 pm11… yes!
Colonel Haiku (fa3dba) — 12/1/2016 @ 1:50 pmNow Heidi Heitkamp is coming in for a meeting with Trump.
If he appointed Manchin and Heitkamp, that’s 2 votes Chuckie Schumer would lose.
Any surprise that this is coming out after Schumer followed the call of the Berniacs in the party to resist Trump at every turn??
shipwreckedcrew (56b591) — 12/1/2016 @ 2:04 pmI think this has more to do with macro-economics than it does politics. But I’m surprised that you [Patterico] didn’t take this one small step further and explain that this is also a good reason to not impose tariffs. If a business is artificially propped up by artificial means by imposing tariffs or special tax breaks, it’s not sustainable in the end. It’s natural state is dead (to put it bluntly). In that case, it’s not even a profitable business anyway.
What we’re not talking about and should be is: how can anyone here in the US compete with people elsewhere who are willing to work for about a dollar an hour or so (or its equivalent)? No one seems to have an answer for that. I don’t think tech. solves it since automation removes so many jobs – kind of defeating the purpose.
Tillman (a95660) — 12/1/2016 @ 2:18 pmCome on. You have to admit that this was better than the smartest man ever to be President who surrounded himself with the most intelligent and knowledgeable cabinet and economic advisors.
Geniuses all. Their opening gambit? Print $5 Billion and then roll out Cash for Clunkers.
I’d be less than thrilled if Trump held the big
steveg (5508fb) — 12/1/2016 @ 2:18 pm“hey, look at me” show at every plant.
the thing I want to see is Trump leveling the field on taxes, cutting ridiculous and expensive regulation… and then getting out of the way.
Right now the government has to be involved in unf****** the economy, because it was the one who f***** it up in the first place. A lot of laws have been made and since we can’t or shouldn’t just ignore the rule of law, we have to rid ourselves of them first.
The Carrier deal is insignificant with respect to the total number of jobs saved and is impossible (and economically inadvisable) to replicate in the scale that would be needed to get America working again. Most of us understand that. But the symbolism with respect to this new administration reaching out especially to heartland voters, is so important right now. (And note, I purposely used the term “symbolism” instead of “PR” or “grandstanding”.) There is a difference.
—ThOR (c9324e) —2/1/2016 @ 12:56 pm —your excellent comment captured a very interesting observation which is worth us pursuing both as individuals and as a community, I think.
elissa (2eabb4) — 12/1/2016 @ 2:28 pm@Tillman:how can anyone here in the US compete with people elsewhere who are willing to work for about a dollar an hour or so (or its equivalent)? No one seems to have an answer for that.
Actually, a lot of us do. The answer is to do something that we can do, that the dollar-an-hour people in the rest of the world are not able to do competitively with us.
We can’t compete on making, say, flip-flops, but certainly we are good at many other things.
Gabriel Hanna (64d4e1) — 12/1/2016 @ 2:30 pmFor example, Tillman, you can’t offshore your overflowing toilet to China or India, you will have to hire a plumber who can come to your house, and you will have the satisfaction of paying an American resident $400.
Gabriel Hanna (64d4e1) — 12/1/2016 @ 2:31 pm@swc:Any surprise that this is coming out after Schumer followed the call of the Berniacs in the party to resist Trump at every turn??
Putting Red State Democratic Senators in the Cabinet is truly diabolical.
Gabriel Hanna (64d4e1) — 12/1/2016 @ 2:32 pmTillman, now you’re blaming the rest of the world for only paying their employees (the U.S. equivalent of) a dollar an hour? When will you lefties ever begin to respect the ways of life among other cultures? (LOL)
Cruz Supporter (102c9a) — 12/1/2016 @ 2:35 pmTrue Gabriel, service jobs can’t be outsourced easily. But that’s one reason that a lot of businesses don’t mind Mexicans coming in (and W didn’t mind much), because we were (and still are) importing cheap laborers.
Tillman (a95660) — 12/1/2016 @ 2:35 pmHear, hear Hanna.
It’s great fun to follow the remarkable cleverness of the appointment process. Sadly, cleverness is not a quality I associate with the GOP. What a change!
ThOR (c9324e) — 12/1/2016 @ 2:39 pm@Tillman:True Gabriel, service jobs can’t be outsourced easily
A couple of things here:
Some service jobs can, like financial services. In addition, a lot of people don’t know that doctors and investment bankers have “service” jobs.
Second, there is a lot of high-end manufacturing done in the US because cheap labor countries can’t do it. Once those countries start to be able to do it, they cease to be cheap labor, which is one reason Nissan and Toyota make cars in the US.
But that’s one reason that a lot of businesses don’t mind Mexicans coming in
Right, you can offshore your own population, so to speak, or dissolve the people and elect another. Which is why I describe my political philosophy as “libertarianism in one country”.
Gabriel Hanna (64d4e1) — 12/1/2016 @ 2:40 pmCrony socialism lies at the heart of medellin crash, a chavista aitlinr.
narciso (d1f714) — 12/1/2016 @ 2:41 pmTillman
Depends on what you are calling a tax break.
A tax reduction from 35% down to 15% still leaves you paying 15%, and the government is gambling that this would make an already attractive place to live and work even better. In the end the Government is saying that (for example) it would rather have 15% of $3Trillion than 35% of $1Trillion.
Cheap labor is tough to overcome though and I hope we don’t see Carrier and Ford quietly moving to Mexico in a couple of years, but it is fairly likely they will.
Trump and Obama both talked about infrastructure and China and the oil states. They never mentioned that they can get even skilled labor like crane operators, for $12 a day, 12 hour shifts, 6-7 days a week, no overtime, no sick leave, no retirement plan.
Robotics and automation need design, prototype building and testing, manufacturing, technicians to keep them running. If you used robots for building freeway bridges, it would be cheaper than todays methods, but then replacement of bridges could be accelerated and so would the time between replacement. Imagine maybe every 10 years. (there is some pipeline in LA that DWP has on a 100 years schedule) that would mean lots of jobs building, maintaining, innovating robots.
I’m old enough to remember back when the invention of the vacuum and the dishwasher meant housewives would only need to work 2 hours a day to keep a tidy home. Those two items plus the rapid adoption of the television meant she’d be sitting in your chair eating handfuls of chocolates while watching the soap operas. You’d get a frozen TV Dinner and a Coke for supper
That did not happen.
Cars were better made and soon Moms were driving kids to school instead of having the kids walk or take the bus. Then there were activities etc. to drive to.
Mom might get a job from 9-2:30 to earn some extra bucks, maybe move further out into the suburbs
I have great faith in the adaptability of a majority of Americans. Humans are very adaptive and have the ability to be quite productive when challenged.
steveg (5508fb) — 12/1/2016 @ 2:52 pmBesides, I’ll probably be dead before the apocalypse, so all I can do is teach the kids well and then let them handle it.
There’s been much written about why good people do bad things.
What we’re struggling with now is that the bad man Trump seems to be doing good things.
There’s probably a book in it.
ThOR (c9324e) — 12/1/2016 @ 2:56 pmAmong other faults with this deal, it affirms a subsidy for union workers who refused to accept market realities. The same thing was done with the auto unions. In that deal, many, many, thousands of workers for suppliers (many of whom were located in Indiana) lost jobs and pensions.
What I am just not getting is that UT said they expected a savings of ~$47K/employee, which works out to $65 million EACH YEAR, by moving to Mexico. Indiana is offering them a cash saving of $700K per annum.
Now, that’s some kind of economics!
Ed from SFV (3400a5) — 12/1/2016 @ 2:57 pmBeldar (fa637a) — 12/1/2016 @ 12:42 pm
Which is why this is completely stupid.
They are acting like this is the beginning of a trend, and the media is eitehr ignoring that or playing along, but not treating as stupid the idea of giving this any kind of significance.
Carrier is being paid to keep some people, about one third of the number they had at the start, employed at high wages. In general, this has to make the economy a bit poorer.
You could argue this kind of economic inefficiency and irrationality is worth doing, and an investor making a mistake could do the same thing.
It does help some people who could not get similar jobs, and who stood to lose the jobs they had now, and helps them maintain their standard of living and it’s a very dignified form of charity.
They stood to lose their jobs, not because the business was unprofitable, but because the price differential between producing at a unionized plant in Indiana and a non-unionized plant in Mexico got to be so high that as to cause the manufacturer to undertake the risk of moving the manufacturing,.
You could think of a few things to make closing down such plants, or not replacing them if they do close, less likely.
1) Promote local ownership in various ways,
2) Exempt a privately held company from the estate tax if it stays private and small for X number of years.
3) Encourage banks to lend in communities with one or a few major employers.
This thing however, is a complete one-off. Even if there are a few other cases like this. It is crony capitalism, what else could it be?
Sammy Finkelman (a1f34f) — 12/1/2016 @ 2:57 pmPatricia (5fc097) — 12/1/2016 @ 1:25 pm
Which is about what it is. A campaign promise. He didn’t promise other people, so he won’t do rhe same thing elsewhere. It’s a form of favoritism or crony capitalism, but it’s not the end of the world.
Why these people got so privileged? The Indiana primary was important, and the union had a good PR team. People holding union positions are among those helped most, because some 2/3 of the people employed theer still lose their jobs – but the union is happy.
Sammy Finkelman (a1f34f) — 12/1/2016 @ 3:08 pmTrump sticks finger in Obamas eye
via Drudge
https://news.grabien.com/story-flashback-obama-mocks-trump-promising-keep-carrier-plant-us
steveg (5508fb) — 12/1/2016 @ 3:10 pmIts a complex question, high corporate tax rates’ new regulations, 50 just this year, affect that plant.
narciso (d1f714) — 12/1/2016 @ 3:12 pmCrony socialism.
Rev. Hoagie® (785e38) — 12/1/2016 @ 3:13 pmWhy Crony Capitalism Like Trump’s Carrier Deal Is a Problem
Except it’s not.
Merry Christmas, Indianpolis, Indiana, U.S. of A.
DCSCA (797bc0) — 12/1/2016 @ 3:25 pmI agree with Gabriel that crony capitalism is nothing new, but I think ThOR is talking about more than that. Trump has a handle on the part of American culture that wants instant gratification, preferably in 140 characters or less, and needs something new every hour. Just as CNN changed us as a nation so we needed a constant news feed, the internet has changed us, too.
But Trump’s brand of gratification won’t satisfy us forever, anymore than CNN’s did. The will be a newer, better version come along, especially when the current version lies or is corrupt.
DRJ (15874d) — 12/1/2016 @ 3:34 pmOnce upon a time, a huge media company, which shall go nameless but has the same initials as the National Biscuit Company, was planning to leave the sophisticated scene of socialist Midtown Manhattan and it’s long time rent and tax-dealed digs in Rockefeller Center for the wilds of a desolate, low browed locale across the ‘border line’ that was cheaper to operate from: New Jersey.
The city and he state wer not going to lose this gem– especially to…. New Jersey. So the mayor wheeled. The governor dealed. And NBC was happy to announce it was staying put at 30 Rock. And they all lived happily after.
Except for… New Jersey. The end.
Such a pretty tree this year, too.
DCSCA (797bc0) — 12/1/2016 @ 3:43 pmThe country is criss-crossed by subsidies to Boeing, homeowners, the service business which can send out bills w/o an added tax, and even booksellers have a postal subsidy.
Now Blue Collar guys in the non-auto industry have one. And that one alone is supposed to be bad?
Harcourt Fenton Mudd (5e0a82) — 12/1/2016 @ 3:48 pmGratification, well that’s one interpretation, now letting a whole way of life, to be eliminated replaces with what, promises of retraining.
narciso (d1f714) — 12/1/2016 @ 4:01 pmgood job Mr. Trump
this is a good thing what you did for America and for them workers
now about Mr. P’s pony
happyfeet (28a91b) — 12/1/2016 @ 4:04 pmWell jersey has to take one for the team.
narciso (d1f714) — 12/1/2016 @ 4:08 pm@47- not to mention the ‘collateral’ damages… the lunch counters, grocery stores, car dealers, repair shops, strip mall stores, bars, gas stations, dry cleaners, Dairy Queens, McDonalds, 7-11’s and so forth. Outside Indy, for instance, most of those suburbian communities are no much more than ranch styled houses, two story apartments near crossroads with a traffic light, a gas station a diner and a watering hole and a road sign on how to get to the interstate.
DCSCA (797bc0) — 12/1/2016 @ 4:08 pmSo its a first step, but a more comprehensive policy is required, tax and regulations included.
narciso (d1f714) — 12/1/2016 @ 4:11 pm@51. Yep.
DCSCA (797bc0) — 12/1/2016 @ 4:15 pmIt did, that’s why it’s Jersey.
My mother always used to say the reason God made New Jersey is so we don’t have to take a ferry from Philly to New York. (And we had a vacation home in Ocean City and she still hated Jersey).
Rev. Hoagie® (785e38) — 12/1/2016 @ 4:17 pm@53- LOL!!
The folks had a place bayside on Long Beach Island for 30 years. Once south of Perth Amboy toward the Pine Barrens it’s actually not too bad.
DCSCA (797bc0) — 12/1/2016 @ 4:20 pmIf Trump won Indiana by promising to keep Carrier, he had to try and keep his promise, even if the ghost of Bestiat makes a disdainful moue and sneers “Sacre bleu! T’as fait n’importe quoi!”
nk (dbc370) — 12/1/2016 @ 4:23 pm@7. See #50. In reality, it is more than being about just ‘1,000 jobs’ at Carrier.
DCSCA (797bc0) — 12/1/2016 @ 4:36 pmI kid I grew up there, and like luke in tattoine, was glad to be out of there, lol.
https://panampost.com/sabrina-martin/2016/11/29/chavismo-corruption-dark-past-lamia-airlines/
narciso (d1f714) — 12/1/2016 @ 4:39 pmGreetings:
As opposed to “Crony Capitalism” like Obama’s. Or perhaps former next President Hillarity’s … ???
11B40 (6abb5c) — 12/1/2016 @ 4:56 pmCarrier could be regarded as an educible moment. It is an anecdote at this point, but the electorate responds to anecdotes. To Trump’s credit he is speaking this evening to 18,000 supporters in Kasich territory, and he is hammering on the problems that we have created for ourselves with feckless regulations and punishing taxes. Trump has already crossed bridges that Obama didn’t appear to know existed. Or perhaps the bridges that Obama needed to cross only existed in the fevered brains of American academics, and Obama recognized that the less said about the delusions underlying progressive policies, the better.
Trump has already done more to advance conservative causes in the public mind with this event than either Bush 41 or Bush 43. But this creates a commitment. The question is whether Trump will continue down this path, or whether he will lose interest and follow his instincts to exploit the next gaping wound in our society for a few moments of glory. If he chooses the former, to advocate tax reform for every business, he will soon realize that our soft socialism is an expensive habit, and the tax system represents a series of tradeoffs that allows us to pretend to support the welfare state, at least for another two years. Will he travel back to Ohio six months from now and talk about welfare and social security reform? That will be the real test, and the first opportunity for Trump to distance himself from the Bush presidencies.
BobStewartatHome (c24491) — 12/1/2016 @ 5:50 pmHe should use taxpayer money to save any failing business before Christmas.
So many Christmases would be saved!
Patterico (115b1f) — 12/1/2016 @ 5:56 pmOh darn he can’t yet. Maybe next Christmas?
Patterico (115b1f) — 12/1/2016 @ 5:57 pmsomeone needs to explain this deal
how much does this cost Indiana in actual outlays as opposed to foregoing dirty tax money
and how much has Carrier agreed to expand or invest in the state
i would like a link to a dispassionate analysis please
happyfeet (28a91b) — 12/1/2016 @ 6:01 pmOff topic but best wishes for a speedy recovery to Buzz Aldrin, 86 years young, plowing around the magnificent desolation of Antarctica.
We should all hope to have that level of energy an vigor at that age.
DCSCA (797bc0) — 12/1/2016 @ 6:01 pmoh whatever
happyfeet (28a91b) — 12/1/2016 @ 6:03 pmI’m waiting for all the federal
workeer, employees who threatened to quit theirjobssinecures if Trump were elected to make good on their commitments.Now that would be awesome.
Colonel Haiku (2601c0) — 12/1/2016 @ 6:10 pmHe’s just one of those guys who has a talent for pissing off all the right people.
Give him a chance. We’ll all know if he’s up to the task within 6 months.
Colonel Haiku (2601c0) — 12/1/2016 @ 6:16 pmHe should use taxpayer money to save any failing business before Christmas.
That might not be a bad idea. A tax refund of all money spent at American retailers by taxpayers in December not to exceed 1/12th of the taxes they would otherwise have to pay. Any kind of spending as long as the money goes into a cash register on American soil. Some can spend it on Christmas presents, some on new boots and coats, others on tasty fish tacos with sriracha sauce.
nk (dbc370) — 12/1/2016 @ 6:16 pmPat @ 60:
Except he didn’t spend a dime of taxpayer money.
The tax breaks came from Indiana.
They were offered to Carrier months ago, and Carrier declined. So the fact that the Indiana Gov. is VP-Elect is immaterial. The tax breaks were offered before the election.
Carrier did it because its in Carrier’s overall best interest — or should I say United Technologies best interest — to do it.
shipwreckedcrew (56b591) — 12/1/2016 @ 6:19 pmThat may be — I composed the post in a hurry — but it doesn’t affect the general point I was making.
Patterico (115b1f) — 12/1/2016 @ 6:22 pmCould you provide a link and a quote to support that? I am not aware of that. Here is what I saw in, for example, the Washington Post (follow the first link above to another link):
Of course, if what you’re saying is true, Trump didn’t do a thing.
But please show how you know it.
Patterico (115b1f) — 12/1/2016 @ 6:25 pmIt was a fun rally, and even more fun to watch the pundits on CNN enjoying it! Dana Bash is this close to boarding the Trump train, lol.
It made me realize what a huge swindle the Obama years have been. What people want is pretty simple: prosperity and security. Only an Obama, twisted completely out of rationality by critical theory and multi-culturalism and Marxism could make it hard. Obama could not have cared less about the people in that rally; all he wanted was to take their money and their spirit to curry favor from our enemies, or “enemies” as he might term them.
Hamlet, finally, has left the building.
Patricia (5fc097) — 12/1/2016 @ 6:26 pmyup tricia nailed it
happyfeet (28a91b) — 12/1/2016 @ 6:27 pmyes, but you don’t know either, most likely they were debating whether to do this before the election, the fact is we don’t live in a static world, there is a package of disencentives that
narciso (d1f714) — 12/1/2016 @ 6:28 pmconditioned the relocation to mexico, and those have consequences on the tax base in that city and state,
Via Politico:
DRJ (15874d) — 12/1/2016 @ 6:38 pmWas it the same offer, or is the new one more generous?
Patterico (115b1f) — 12/1/2016 @ 6:39 pmIf you define “ensuring companies stay in America” as ‘crony capitalism’, on ANY assumption that it’s unfair to the overseas businesses, not sure there’s much hope for you.
At some level of scale(are the other local A/C manufacturers even operationally capable of meeting the demand?), relocating major business operations to whatever foreign country has the most easily cowed workers at the moment seems like an attractive option. It’s the job of state and federal governments to ensure that companies-and the community-centric activities that their salaries, experience, culture, and organizations provide, operate within their own jurisdiction at the very least.
There are plenty of carrots to do so. But the use of the stick should never be far behind. Managing a community hit hard by job losses always, always, always, ALWAYS costs way more and induces far more government dependency than giving 7 million in tax breaks to ensure that the federal government’s alphabet soup poverty pimps stay out.
TheExcruciationator (65835d) — 12/1/2016 @ 6:44 pmAt a high level of generality, they are the same: government intervention in the economy. Reagan’s tariffs did not help Harley Davidson and in fact were counterproductive.
I agree with this, and have blamed Trump on the electorate that chose him. We are filled increasingly with immoral people who have no values and worship success — I’ll call them the DCSCA crowd — and Trump is their candidate.
As I said in the post, interventions in the economy are generally popular, because economic knowledge is scarce.
My ironically offered proposal of simply using taxpayer dollars to save failing businesses would not be unpopular for the reasons it’s bad (it would prevent bad businesses from failing, preventing scarce resources from being reallocated to more efficient uses) and would probably be popular with many, as would actual communism. To the extent such a proposal might be unpopular, it might be because it “goes too far” or some other kind of vapid nonsense.
It’s important to have a grounding in basic economic principles to get this stuff. Most people don’t.
Patterico (115b1f) — 12/1/2016 @ 6:51 pmmutz is an interesting fellow, he was lieutenant governor back in the 80s, now is president of the lilly foundation and the largest utility psi energy,
narciso (d1f714) — 12/1/2016 @ 6:51 pmWhat’s not to like?
“You go into Afghanistan, you got guys who slap women around for five years because they didn’t wear a veil. You know, guys like that ain’t got no manhood left anyway. So it’s a hell of a lot of fun to shoot them. Actually it’s quite fun to fight them, you know. It’s a hell of a hoot. It’s fun to shoot some people. I’ll be right up there with you. I like brawling.”
“The first time you blow someone away is not an insignificant event. That said, there are some assh*les in the world that just need to be shot.”
“I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fu*k with me, I’ll kill you all.”
“Find the enemy that wants to end this experiment (in American democracy) and kill every one of them until they’re so sick of the killing that they leave us and our freedoms intact.”
http://freebeacon.com/national-security/the-best-from-mad-dog-mattis/
Colonel Haiku (2601c0) — 12/1/2016 @ 6:53 pmThe political risk assessment, particularly wrt the regulatory environment, changed rather radically when Trump won. The nickel and dime cash subsidy vanishes in comparison to lightening the choking regulations driving costs up with no compensatory benefit to companies. UT knows how and where their bread is buttered in the Great Swamp, as does every other multinational.
A broad reduced regulatory burden is much closer to a tax cut than it is to a subsidy and UT’s deferral of moving the plant can be easily canceled should the reduced regulatory burden not be accomplished.
Rick Ballard (d17095) — 12/1/2016 @ 6:54 pmbut as always it’s interesting to see the other side of the ledger,
http://www.indianarenew.org/mutz-says-lugar-plan-outshines-other-energy-bills/
narciso (d1f714) — 12/1/2016 @ 6:58 pmMy only recent experience of New Jersey included driving from the George Washington Bridge to the Turnpike and points south. It was May, but Spring had not yet sprung. The dreariest industrial wasteland I have ever seen. It was easy to think of the Sopranos being there.
Your mother was right.
Kishnevi (c5227a) — 12/1/2016 @ 7:03 pmMy comment at 83 was replying to Rev H back at 53.
Kishnevi (c5227a) — 12/1/2016 @ 7:07 pmPatterico’s references show the vacuity of tariff-hawks in one sentence:
“And it wasn’t necessarily because Harley had become so profitable and strong that it requested the tariffs be lifted. Because Honda and Kawasaki had manufacturing plants here, they also enjoyed trade protection from their overseas rivals.”
TARIFFS DON’T SAVE AMERICA’S JOBS ALL THEY DO IS CAUSE OVERSEAS BUSINESSES TO BUILD NEW FACTORIES IN AMERICA TO TAKE ADVANTAGE OF LOCAL MARKET INEFFICIENCIES LISTEN TO ME I’M AN ECONOMIST!!!
TheExcruciationator (65835d) — 12/1/2016 @ 7:07 pmThe wonderful thing about federalism is that it enables individual states to govern themselves.
Indiana chose to move a few chess pieces in order to help keep Carrier in-state. Maybe the 49 other states wouldn’t. But maybe some of them would.
Sometimes the public relations value is worth it on the back end.
Businesses do it all the time … they refund money to an obnoxious customer because they determine that the customer will probably spend the next two years bad-mouthing their business to anyone who will listen. So they eat the $250, even if the customer’s complaints are over-the-top.
Trump can claim a public relations victory as a dealmaker while Barack is entertaining celebrities at the White House and complaining to Rolling Stone magazine about how every bar and restaurant in America is watching that Hannity guy say bad things about him! (LOL)
Most voters aren’t sitting around reading Von Mises or Hayek. They only heard that Carrier isn’t going to move to Mexico because Trump worked a deal to keep American jobs in Indiana. That’s going to be worth some votes in 2020. And that might help keep a left wing lunatic from defeating Trump. Look at the margin of victory in Wisconsin, Michigan, and Pennsylvania. Trump needs to play to the voters who elected him.
Von Mises and Hayek may object to Trump’s deal with Carrier, but they’re not voting in 2020.
Cruz Supporter (102c9a) — 12/1/2016 @ 7:14 pmHow is Trump’s deal with Carrier substantively different from Reagan’s tariffs protecting Harley Davidson?
Unless the Reagan tariffs were designed to offset to a small degree the government which through prior action had outlawed gasoline and oil, the very life blood of a motorcycle, then they have no relation to the tidal wave of government attacks on the very lifeblood of the air conditioning industry, beginning with the Montreal protocols imposed by the first Bush administration.
papertiger (c8116c) — 12/1/2016 @ 7:20 pmRemember when #41 sold us out to the climate zealots in training?
Remember when they made believe that a natural consequence of Antarctica being a continent sized plateau situated over the planet’s axis, the polar vortex, was a scary man made thing called the “ozone hole”?
Same people who buldozed that crap through are now pushing the global warming lie.
Wrong both times, and probably wrong about every other thing, large and small, in their misbegotten lives.
papertiger (c8116c) — 12/1/2016 @ 7:36 pmWe are filled increasingly with immoral people who have no values and worship success — I’ll call them the DCSCA crowd — and Trump is their candidate.
I’ll just call them what they are: Americans.
“I’m a Yankee Doodle Dandy; Yankee Doodle do or die…” – George M. Cohan [James Cagney] ‘Yankee Doodle Dandy, 1942
DCSCA (797bc0) — 12/1/2016 @ 7:40 pmThe very points I have been making. Voters are ignorant of economics. I deplore it. As best as I can tell, you praise it, or at a minimum mock it.
Patterico (115b1f) — 12/1/2016 @ 7:47 pmhope is not a strategy, seeing how many other companies have abandoned that corner of Indiana, with promises of what, why assume they are immoral, I’m figuring that’s bitter clinger territory,
narciso (d1f714) — 12/1/2016 @ 7:53 pm“The very points I have been making. Voters are ignorant of economics. I deplore it. As best as I can tell, you praise it, or at a minimum mock it.”
‘Economics’ is ignored because the most prominent economists are seen as amoral rat-faced men at best or crazed power-worshipers using ‘economic laws’ as a cudgel for whatever the power narratives are at the moment at worst.
‘let nature take it’s course’ is a policy only preferentially taken at the end of life.
TheExcruciationator (65835d) — 12/1/2016 @ 8:23 pmwell take paul Krugman, and stuff him under a bridge where he belongs, put goolsbee, romer, and alan blinder there to, while you’re at it,
what modern economists have really tackled this question?
narciso (d1f714) — 12/1/2016 @ 8:29 pmCarrier did it because its in Carrier’s overall best interest — or should I say United Technologies best interest — to do it.
Precisely– as any DoD contractor would.
DCSCA (797bc0) — 12/1/2016 @ 8:32 pm“what modern economists have really tackled this question?”
The question was always too big and paid the answerer too little to answer to any satisfaction.
TheExcruciationator (65835d) — 12/1/2016 @ 8:35 pmI rephrase, among recent nobel laureates, worthy of the prize,
narciso (d1f714) — 12/1/2016 @ 8:37 pmPatrick @ 70:
Carrier announced it was closing the factory and moving production to Mexico in January.
Someone else noted above that Carrier estimated that it would save $65 million a year in labor costs by moving the factory to Mexico. The tax incentives offered by Indiana to stay amount to only $7 million.
Indianapolis Star article today notes that Carrier expected to pay and average wage of $3 an hour in Monterrey Mexico, whereas the workers in Indiana received and average wage of $26 an hour.
But UT has about $56 billion a year in revenue, about $6 billion of which comes from contracts with the federal government.
I’ve spent about 20 minutes looking for any link which goes over the entire episode, but with so many stories being published today on the announcement, every google page is full of stories about Trump’s involvement, and none come up that were published in the spring when Indiana tried to save the jobs on its own.
But its couldn’t be more obvious that $7 million in tax incentives isn’t driving Carrier’s decision, since by its own estimates, it would have realized 9x more than that by following through with their plan.
shipwreckedcrew (56b591) — 12/1/2016 @ 8:44 pm@74 — thank you DRJ. It was the Politico story, now that I read it again, because that’s where I first learned that Carrier was a subsidiary of UT.
shipwreckedcrew (56b591) — 12/1/2016 @ 8:48 pmyes, one source tied to the lugar gang, btw, isn’t definitive on what motivated them, they were looking long term,
narciso (d1f714) — 12/1/2016 @ 8:49 pmNo surprise here, but
http://www.msnbc.com/rachel-maddow-show/the-parts-the-carrier-deal-trump-doesnt-want-talk-about
Tillman (a95660) — 12/1/2016 @ 9:14 pmWatching Rachel Maddow will lower your IQ.
You threaten the stick and offer a carrot when you are trying to motivate.
shipwreckedcrew (56b591) — 12/1/2016 @ 9:29 pmseriously, there is punishment which he laid out and reward which he demonstrated.
narciso (d1f714) — 12/1/2016 @ 9:36 pmThere is no good reason for a company to remain in the US if they can relocate elsewhere for cheaper labor and cheaper taxes while still being able to sell their product in the US while being able to sell it for cheaper than their competition that remained in the US. Not only did they remove those initial jobs from the US but then they put the remaining US workers in that field out of work.
There is no silent magic hand that prevents that. You’ll need to lower the wages of US workers to compete with third world hut dwellers if you want free trade. It will be difficult for Americans to live on pennies a day.
Jcurtis (ffd2d8) — 12/2/2016 @ 4:31 am@Jcurtis:ot only did they remove those initial jobs from the US but then they put the remaining US workers in that field out of work.
Then those American workers will be free to do something else, or make something else, that Americans want that can’t be done as well elsewhere.
As long as any human want or need goes unfilled this will be true; and if all human needs and wants WERE filled no one would need to work in any event.
Gabriel Hanna (64d4e1) — 12/2/2016 @ 8:22 amJust to add a little more “meat to the bones” of Carrier/United Technologies decision:
United Technologies expected to save $65 million from moving the factory to Mexico.
United Technologies also owns Pratt & Witney.
P&W has the contract to produce jet turbine engines for the F-35 Joint Strike Fighter.
The engine for the “A” version of the fighter has a contract price of $18 million each.
The engine for the “B” version of the fighter has a contract price of $38 million each.
The first 38 engines to come off the assembly line had a combined price of $1.1 billion, as much of the R&D expense was built into that contract. Later production comes at a reduced cost per engine.
Congress has continued to fund development of an alternative engine being designed by GE/Rolls Royce, though DOD hasn’t ordered production of any engines from GE/RR.
shipwreckedcrew (56b591) — 12/2/2016 @ 8:27 amI don’t expect to see an announcement from UT on cancellation of the Mexican plant. The Carrier closing announcement was predicated upon regulatory and union contract requirements concerning notice of intent to close. Those requirements have been met and UT remains free to end assembly operations at the Indiana plant as it sees fit. The actual cost to UT of giving Trump his photo-op is going to be quite small. It would be clever of UT to establish a logistics center at the current site to cover attrition losses of assembly workers but I don’t know if they’ll bother to do so.
Rick Ballard (d17095) — 12/2/2016 @ 8:55 am@swc: F-35 Joint Strike Fighter.
Oh, well THERE’S money well spent.
Gabriel Hanna (64d4e1) — 12/2/2016 @ 9:39 amShooting from the hip ???
Now, don’t get me wrong, I understand the principles of why this may not be the best thing to do, but, for the sake of those workers, and some feel good news, after all the bad stuff thrown at us relentlessly, I say this one time I can overlook this deal. Now, if it becomes a standard, well then, I’ll let my opinion be heard load and clear. Let’s face it, many businesses are offered tax breaks, just to get them to move to a certain state. This goes on all the time. So for that reason, it’s not completely out of line. Where you Patterico, went off the rails, is by telling us there are 14 other manufacturers near by, that information is WRONG. Fact is, those are dealers, or elsewhere, wholesalers,etc. The vast majority of AC equipment is already made in China, or Mexico. And the Mexican manufacturing of said equipment is growing by 25% a year. Now, another consideration, the main parts used to build these AC units like compressor, fans, and coils (Carrier already makes coils in Mexico) are all, mostly made in China and Mexico. So any companies that still build here, are using all foreign made parts. Carrier has a new deal to by compressors from South Korea. So, saving these positions here in the US, is a good thing in many respects. Perhaps next year, others may consider moving back, and you can bet your bottom dollar, what ever state they choose, it will be after a bidding wAr by several States, who have offered the best tax breaks. Condemning Trump for doing what others have been doing as a matter of course is a bit harsh.
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aleena (766b83) — 12/3/2016 @ 7:44 pm