Trump makes a deal

Our view: The pres­i­dent-elect and Gov. Pence saved hun­dreds of Car­rier jobs in In­di­ana, but can U.S. tax­pay­ers af­ford to keep bankrolling such ar­range­ments?

Baltimore Sun - - FROM PAGE ONE -

For the hun­dreds of work­ers in In­di­anapo­lis whose fur­nace-build­ing jobs were saved by the Car­rier deal, there was plenty of rea­son to cel­e­brate yes­ter­day. The in­volve­ment of Pres­i­dent-elect Don­ald Trump and Vice Pres­i­den­t­elect (and In­di­ana Gov.) Mike Pence likely ce­mented the com­pany’s will­ing­ness to ac­cept tax in­cen­tives and not send those jobs to Mex­ico.

It’s un­usual for a pres­i­dent-elect to place such a large per­sonal stake in a rel­a­tively small cor­po­rate de­ci­sion, but Mr. Trump had sin­gled out Car­rier dur­ing the cam­paign as a bad ac­tor in out­sourc­ing and eco­nomic glob­al­iza­tion. Whether the de­cid­ing fac­tor was Mr. Trump’s threats of tar­iffs or the fact that its par­ent com­pany, Con­necti­cut-based United Tech­nolo­gies, holds a sig­nif­i­cant num­ber of U.S. mil­i­tary con­tracts is hard to tell.

At the heart of the deal is $7 mil­lion worth of tax­payer-fi­nanced in­cen­tives pro­vided by the host state. And that’s some­thing with which Mary­lan­ders are quite fa­mil­iar — and likely have mixed feel­ings about. Just this week, Gov. Larry Ho­gan and Gen­eral Assem­bly lead­ers struck a deal to pro­vide a com­bined $40 mil­lion in in­cen­tives to re­tain Northrop Grum­man and Mar­riott In­ter­na­tional and keep them from ship­ping their jobs else­where. (Mary­land ap­pears to be get­ting a lot more bang for its buck, with 10,000 jobs at stake in the Northrop deal alone.)

Politi­cians love to trum­pet such ar­range­ments as a win-win-win. The com­pa­nies ben­e­fit, their share­hold­ers and work­ers ben­e­fit, and com­mu­ni­ties that oth­er­wise would have lost well-pay­ing jobs ben­e­fit, too. But some­body is left hold­ing the bag, and that’s usu­ally state and lo­cal tax­pay­ers whoend up shoul­der­ing a greater share of the long-term cost of govern­ment ser­vices.

It’s an eco­nomic war that keeps es­ca­lat­ing. What big em­ployer, par­tic­u­larly one fac­ing the need for ma­jor new in­vest­ments or one that’s eas­ily able to re­lo­cate its fa­cil­i­ties, doesn’t hit up lo­cal govern­ment for a hand­out these days? Un­der the cir­cum­stances, it would be ir­re­spon­si­ble of them not to seek the same ben­e­fits ac­crued by their com­peti­tors. Mean­while, what politi­cian wants to see a ma­jor em­ployer leave town on his or her watch? It would be fool­ish to ig­nore the in­cen­tives other states and cities are all too will­ing to lav­ish.

It’s a trap — and a tricky one at that. Mr. Trump’s in­volve­ment merely rep­re­sents an es­ca­la­tion of this po­ten­tially de­struc­tive pat­tern from state houses to the White House (and be­fore he’s even taken res­i­dence). Now com­pa­nies in a po­si­tion to ship jobs to Mex­ico would be fool­ish not to seek Mr. Trump’s per­sonal in­volve­ment. How­far will the next pres­i­dent go to re­tain jobs, what good­ies might be in­cluded in the in­cen­tives, and what guar­an­tees can he of­fer?

And here’s the re­ally frus­trat­ing part. The Car­rier deal won’t pre­serve those jobs for­ever. The global econ­omy is a far more pow­er­ful force than any one tax deal, and for cer­tain types of Pres­i­dent-elect Don­ald Trump talks with work­ers dur­ing a visit to an In­di­anapo­lis Car­rier fac­tory. man­u­fac­tur­ing, lower la­bor costs avail­able overseas still beckon.

Mary­land has seen the down­side of cor­po­rate tax in­cen­tives of­ten enough. In 1987, Gov.-elect Wil­liam Don­ald Schae­fer, who cam­paigned on a pro-busi­ness plat­form, pieced to­gether mil­lions of dol­lars in tax in­cen­tives to re­tain Kelly-Spring­field Tire Co. head­quar­ters in Cum­ber­land be­fore he even took of­fice. It worked — for a while. The jobs shipped out to Akron 11 years later af­ter a cor­po­rate takeover. All that’s left now is a mu­seum.

There are no easy an­swers to his kind of Catch-22 — play the game and lose or don’t play and lose. We have cer­tainly strongly ad­vo­cated for ex­tend­ing govern­ment help to­ward the re­de­vel­op­ment of Bal­ti­more’s Port Cov­ing­ton cham­pi­oned by Un­der Ar­mour’s Kevin Plank. But at least a much more elab­o­rate bar­gain was struck with a guar­an­tee of lo­cal hir­ing, com­mu­nity aid, af­ford­able hous­ing and the like in ex­change for tax in­cre­ment fi­nanc­ing to be re­paid by prop­erty taxes gen­er­ated by the new con­struc­tion.

Per­haps that’s the best that can be ex­pected — cost-ef­fec­tive deals that make sense un­der the cir­cum­stances. Will Car­rier’s prove worth­while? We don’t know. But we­do­knowit’s far eas­ier to strike such bar­gains and take one’s chances on the fu­ture than to worry about grad­u­ally shift­ing the cost of govern­ment away from big cor­po­ra­tions and on to Joe and Jane Av­er­age Tax­payer. In­ter­est­ingly, Mr. Trump didn’t men­tion the tax­payer hand­out — not one word about it — when he spoke at the Car­rier plant yes­ter­day. In his speech, he also ca­su­ally men­tioned that he doesn’t mind com­pa­nies ne­go­ti­at­ing the best deals pos­si­ble with state gov­ern­ments and that he ex­pects to soon lower cor­po­rate tax rates and roll back reg­u­la­tions. Clearly, good times are ahead for big em­ploy­ers — but maybe not for those left hold­ing the bag.


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