How did Donald Trump save 1,000 jobs at a Carrier plant in Indianapolis?
As the president-elect flies to Indianapolis Thursday to take a victory lap about the company’s decision to no longer move the plant to Mexico, details of the deal that got the company to change its plans have yet to be disclosed.
The biggest question — how much of it was incentives, and how much was threat, implied or explicit?
Carrier said state “incentives” from Indiana were a key to its decision to stay put.
“The incentives offered by the state were an important consideration,” the company said Wednesday. It also talked about promises from Trump to “create an improved, more competitive U.S. business climate.”
A source familiar with the negotiations told CNN that the state incentives come to $7 million over 10 years. That doesn’t do much to offset the $65 million that the union said the company would have saved annually if it moved all the jobs to low-wage Mexico.
Experts say the state incentives are more likely window dressing than a reason for Carrier to have changed its decision.
“Most research points to economic development incentives rarely changing the behavior of firms,” said Nathan Jensen, a professor at the University of Texas. “They are a subsidy to a company with little value to society. Our research shows that offering incentives is a great way for politicians to take credit, or minimize blame, for company decisions.”
Carrier parent United Technologies is a major defense contractor, with $5.6 billion in revenue from federal government contracts, or 10% of its total revenue. The government also pays for $1.5 billion of its research and development costs. It’s not yet clear what role if any the government business played in the talks between Trump and United Technologies.
Trump had also threatened to impose steep tariffs on goods made in Mexico that are exported back to the U.S. And he has vowed to renegotiate NAFTA, the free trade agreement between the U.S., Mexico and Canada. The uncertainty about the future of NAFTA could also have caused Carrier to reconsider the move.
Whatever the reason for the change of heart, members of the Trump team were thrilled with the credit he is getting for saving the Carrier jobs.
“The President-elect and the Vice President(-elect) picked up the phone and called the CEO of the United Technologies and told them we want to keep jobs here. Can’t remember the last time a president did that,” Steven Mnuchin, Trump’s pick to be Treasury secretary, told reporters in the Trump Tower lobby Wednesday.
The deal was receiving criticism from some officials on both the right and the left. Sen. Bernie Sanders wrote in the Washington Post that U.S. workers’ jobs are less secure because of the deal, since companies can simply threaten to move to Mexico in order to get tax breaks from the government.
“In essence, United Technologies took Trump hostage and won. And that should send a shock wave of fear through all workers across the country,” Sanders wrote Thursday.
But even some conservatives said they didn’t like the idea of an incoming administration becoming this involved in negotiations to save one company, especially one with such a minimal impact on the overall economy. They say it smacks of government interference in the marketplace, which they think is a bad idea.
“It makes sense for a president and his team to change a tax code, change the regulatory environment to help businesses,” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative Washington think tank, told CNN. “I’m not a big fan of this kind of negotiation. I think the more limited it is the better.”