Trump's Carrier Deal: Positive or Dangerous Precedent? | Global Trade Magazine
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  December 9th, 2016 | Written by

Trump’s Carrier Deal: Positive or Dangerous Precedent?

Debate Rages Over Government Influence on Private Sector

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  • Trump Carrier deal: godsend or swindle?
  • House Democrat Adam Schiff called the Carrier deal the smartest thing Trump has ever done.
  • Sarah Palin described the Carrier deal as crony capitalism.

It wasn’t that long ago that Republicans on the campaign trail attacked Democrats for destructive interference in the private sector. They cited President Obama’s support for the Solyndra Corporation as an example of the government picking winners and loser—and not doing it particularly well.

In recent days, many of those same Republicans have praised President-elect Donald Trump for reaching an agreement with United Technologies to keep 730 Carrier Corporation jobs in the U.S., after the company announced plans to move its Indiana manufacturing operations to Mexico.

It seems everyone has an opinion on the deal that has been described as a godsend and a swindle. Not surprisingly, long-time Trump supporters are ecstatic about a bold effort to put America first by a man who hasn’t even been sworn in yet; while those in the #notmypresident camp are questioning everything from the number of jobs saved to the future ramifications.

However, this is one case where party lines don’t tell the whole story. House Democrat Adam Schiff of California called the Carrier deal the smartest thing Trump has ever done. Sarah Palin, one of the candidate’s earliest and most ardent supporters, described it as the kind of crony capitalism that Republicans traditionally oppose.

But voters like it—and, as everyone was reminded in November, theirs is the voice that matters. According to a Politico/Morning Consult poll, six out of 10 voters now see Trump in a more positive light. It was well received by a surprising four out of 10 Democrats surveyed, and about one-third of Hillary Clinton voters.

The President-elect’s popularity is at 50 percent according to Bloomberg, up from 37 percent at the time of the election. Certainly at least some of this can be attributed to the Carrier deal.

A New Normal?

Carrier is just one of thousands of U.S. manufacturing businesses, and the jobs saved are a minuscule percentage of tens of millions. If this were an isolated incident it could be viewed as a feel-good story and nothing more. But Trump seems to have other ideas, and no one will be surprised if he takes direct action again the next time a company threatens to move to foreign shores.

He still has a majority of voters with him; that same Politico/Morning Call survey found that more than half of respondents see nothing wrong with such direct negotiations with private business on a case-by-case basis, and in the offering of tax breaks or other incentives to keep jobs here.

What is not known is how many other companies will seek similar concessions. Former presidential candidate Bernie Sanders stated that United Technologies “took Trump hostage and won.”

Other Democrats were equally dubious, but there was non-partisan concern as well. Robert Atkinson, president of the Information Technology and Innovation Foundation, released a statement warning that the U.S. “can’t just lurch from deal to deal,” and that the Trump administration must “go beyond individual deals and focus on creating an overall economic ecosystem that incentivizes these companies to call the United States home.”

However, Republicans liken the Carrier negotiations to those that happen all the time among state politicians and economic development agencies, as they attempt to lure companies out of states with high tax rates to more favorable locations. That’s how Florida Governor Rick Scott convinced rental car giant Hertz Corp. to move its corporate headquarters from New Jersey to Estero, Florida.

It’s also nothing new for Indiana, which under the leadership of Vice President-elect Mike Pence prided itself on offering targeted tax reductions to attract companies from neighboring Illinois and Ohio. As a result, manufacturing in Indiana has increased 20 percent since 2009.

So was it crony capitalism and overreach, or classic supply-side economics, where tax cuts result in higher tax revenues?

Time will tell whether Trump’s approach to Carrier is sustainable—but if as president he is successful as reducing corporate tax rates, health care costs, and federal regulations, perhaps such deals will no longer be necessary.

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